Oil Market Shift Imminent, Sending Prices Skyrocketing
By April Fowell
- Occidental Petroleum CEO Vicki Hollub predicts a turnaround in the oil market, citing excess supply as the main factor behind price stability.
- Global oil demand is expected to slow in 2024, while output may reach a record 103.5 million barrels per day this year, contributing to recent price declines.
- Analysts warn of a potential oil price surge due to supply shortages and ongoing underinvestment in the sector, with estimates suggesting prices could rise as high as $100 per barrel in a commodities "supercycle."
CEO of Occidental Petroleum Vicki Hollub believes the oil market is ready to turn around.
The CEO of the energy behemoth that Warren Buffett adores identified the excess in the oil market as the primary driver of price stability. The International Energy Agency predicts that the rise in the world's oil demand will slow down in 2024. In the meantime, it is anticipated that this year's global oil output will reach a record 103.5 million barrels per day.
Prices have recently decreased due to this type of supply-demand imbalance, but Hollub cautioned that this dynamic is going to change drastically, with undersupply expected to be the prevailing trend over the next several years.
Short-term demand for petroleum has decreased, but Hollub noted that because producers haven't been able to replace the oil they're now producing, long-term supply difficulties are plaguing the energy markets. She calculated that less than half of the oil generated over the previous ten years had been replenished worldwide.
Analysts Warn of Potential Oil Price Surge
Other analysts of the oil market have issued warnings about a similar scenario, in which the lack of petroleum puts pressure on oil prices to rise.
Due to ongoing underinvestment in the sector, oil and other commodities are also in a "supercycle," which according to prior estimates from Goldman Sachs may drive petroleum prices as high as $100 per barrel.
The energy minister of Saudi Arabia dismissed the recent decline in oil prices as a "ploy" by market speculators who are only pretending that supply is less than demand. OPEC+ has been attempting to raise prices through supply cutbacks.
The oil cartel has pledged to reduce production by 2.2 million barrels per day this quarter in an effort to gain control over the price of crude oil globally. It has already cut output many times. Leaders have indicated that those reductions may be carried out later in the year.
Yet thus far, the impact of the OPEC cutbacks has been little. This is mostly because of the US, which produced a record amount of oil in 2023 and is expected to produce even more in 2024 and 2025, according to estimates from the Energy Information Agency. Production in other countries has also been increasing.