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2020s oil price: beware black swans

Oil analytics firm OilX sees a gradual evolution of the 2020s market balance, although with both energy transition in demand and Opec renaissance in supply signalling downside

We anticipate that the 2020s—with the energy transition moving into full swing—to be a truly transformative decade for oil, but with demand largely influenced by two opposing forces the market could remain in equilibrium.

On one hand, we see oil demand continuing to grow significantly in developing countries, particularly Asia. On the other hand, we expect the pace of the transition to pick up steam and for a series of environmental policies to be implemented, with a subsequent retarding effect on demand.


We forecast global oil demand to reach 108mn bl/d by 2030, with average yearly growth of more than 0.8mn bl/d. Based on demographic and GDP projections by international organisations, we think that, across the decade, most demand growth will come from emerging markets, particularly in Asia.

Although a swifter than expected implementation of environmental policies could significantly reduce crude oil demand, we remain think this is an unlikely scenario given the global rise in populist governments and lack of policy coordination shown so far. Similarly, we believe that the implementation of new energy technologies will not slow the demand for oil until beyond the scope of this outlook. We see the biggest risk to demand from a cyclical downturn which curtails macro demand in the earlier part of the decade.


On the supply side, our core view is for relatively constrained growth, but with potential gamechangers should changes in circumstance permit. For example, we have a scenario called ‘Opec renaissance’, under which we model a strong revival for some Opec producers.

The next decade could potentially usher in a new regime in Venezuela, a nimbler Nigeria, a unified and more investment-friendly Libya and/or the return of a more reformist Iran to the international market. Given the current geopolitical status quo there appears to be little chance of such a scenario, but it is worth remembering that 2020-29 is a long period.

Florian Thaler is CEO and co-founder of OilX

On the non-Opec front, we see only a handful of countries increasing their crude production, even when accounting for new frontiers such as the upcoming start of production in Guyana. Specifically, we expect the US, Canada and Brazil to remain the main contributors to growth, with US production growth continuing to come out of the shale basins while Brazilian output increases will be powered by its pre-salt fields and further offshore discoveries.

But we anticipate US shale oil growth to peak no later than shortly after the middle of the decade. In Canada, we see the oil sands patch continuing to exhibit steady growth throughout the entire decade although western Canadian oil becoming debottlenecked via new pipeline infrastructure to the west coast is another upside supply scenario to consider.


In line with our demand forecasts, we anticipate new refinery additions to be built mostly in Asia and the Middle East across the next five years. In our opinion, this will cause the market to go from being mostly balanced across the globe to having a generalised processing overcapacity in every region except Latin America. If this overcapacity scenario materialises, any new refinery construction due to deliver in the latter part of the decade could prove unprofitable.

This could be just one of myriad serious challenges the oil industry will face over the next decade, mainly due to deep fundamental changes driven by the energy transition and by policy uncertainty.


It is worth keeping in mind that our central oil demand forecast sees only a marginal slowdown working against a long-term annual growth rate of 1mn bl/d. A key facet of the coming decade will be for the industry to brace itself for the realisation of any potential factors that could significantly change the supply-demand balance outlook, hence at OilX our planning of the ‘Opec renaissance’ scenario and the impact of the return of significant oil production assumed to unavailable to the markets.

Source: OilX
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