Could the era of cheap oil supply be gone forever? That’s the conclusion of some of the biggest commodity desks on Wall Street, where banks have raised their long-term price forecasts, often by $10 or more.

While the US shale boom has brought a “lower for longer” mantra, the market is now fixated on climate change and a waning appetite to invest in fossil fuels. Instead of increasing supply, companies are under pressure to limit their spending, causing structural underinvestment in new production that – the argument goes – will keep oil prices higher for longer.

“My advice to clients is that you want to spend a lot of time on oil until you know where this break-even price is” that brings new supplies online, said Jeff Currie, head of commodities research at Goldman Sachs Group Inc. is above these levels because we haven’t had a big increase in capex and investment.”

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The notion of a supply gap is nothing new. Since prices fell in 2014, analysts have been talking about the potential for demand to outstrip production as a result of the underinvestment. But the drop in Covid-19’s energy prices, combined with pressing environmental concerns, offers reason to think this time around is different.

The number of oil and gas drilling rigs globally may have rebounded from the lows of when oil prices turned negative last year, but are still down 30% in early 2020. Current numbers are as low as in 2016 , according to Baker Hughes Co., despite oil prices being near a seven-year high.

Future vision

Among banks that have been holding higher prices for longer, Goldman says $85 for 2023. Morgan Stanley has raised what it calls a long-term forecast by $10 to $70 this week, while BNP Paribas watches the crude oil at nearly $80 in 2023. Other banks, including RBC Capital Markets, have talked about the prospect that oil is at the beginning of a structural rally.

Such estimates imply that a commodity vital to the global economy has become structurally more expensive. Oil price expectations underpin hundreds of billions of dollars in capital valuations for major international oil companies such as Royal Dutch Shell Plc and BP Plc.

There is a dwindling appetite for lending on the part of investors as well. Just last week, the biggest French banks said they would restrict the financing of the shale oil and gas industry from the beginning of next year. Recently, Ecuador had to double the number of banks that could provide credit guarantees as financial institutions avoided crude oil harvested from the Amazon.


Not everyone supports the idea that prices can stay at high levels. Citigroup Inc. said in a report this month that crude oil below $30 and above $60 looks unsustainable in the long term. An extended price above $50 could add 7 million barrels a day of extra supply, bank analysts including Ed Morse wrote in a note.

“In the medium term, cost indicators continue to point to a fair value range between $40 and $55 a barrel,” they said.

But others see a shifting tide, especially given the shifts in the US, which has effectively become a swing producer in recent years.

On one front, publicly listed US shale companies remain constrained to production growth. When EOG Resources Inc. said in February that it planned to increase production, its shares fell to the most in any company in the S&P 500. There have been few, if any, similar comments from producers since then.

Furthermore, the impact of field declines is becoming clearer. In November, the Permian Basin was the only US onshore field to show significant year-over-year production growth. All others were flat or down, according to a report by the Energy Information Administration.

Likewise, while some of the top OPEC+ producers find themselves with spare capacity that could dip next year, others, including Nigeria and Angola, are already showing signs of struggling to raise production even further.

“People were very comfortable with the idea that the shale will be there and we are not resource-limited,” said David Martin, head of commodity strategy desk at BNP Paribas. “That’s a question mark in my mind.”

And in a world spending less money on fossil fuels, the questions then turn to demand, which doesn’t seem to peak any time soon.

The International Energy Agency said earlier this month that spending on fossil fuels is measurable.


Fonte: Wall Street projeta uma era “mais alta por mais tempo” para os preços do petróleo (

- Enovathemes