The strength of the U.S. shale boom and prospects for electric vehicles are stoking fears for the oil industry’s future. But that’ll only make crude more valuable, one analyst says, boosting prices as high as US$80 a barrel by 2022.
With oil producers around the world shying from new investments, benchmark Brent crude could surge in the next five years, S&P Global Platts’ Gary Ross said during a New York news conference Thursday. That would be as much as a 43 per cent jump over current prices for a market that’s struggled to recover this year after an historic three-year slump.
“You’re killing investment,” said Ross, chief energy economist for the market researcher. “With the sentiment killers out there -- electric vehicles and shale are the two big ones -- why would you want to invest?"
Brent for December settlement declined 69 cents to US$56.25 on the London-based ICE Futures Europe exchange Thursday, after the International Energy Agency said crude inventories may remain bloated next year. People familiar with internal forecasts, meanwhile, said the Organization of Petroleum Exporting Countries expects it will take until next year’s third quarter for the oversupply in oil stocks to be wiped out.
S&P Global Platts thinks OPEC is overestimating the surplus, adding more impetus for producers’ cautious approach, Ross said. Contrary to OPEC estimates that stockpiles in developed countries are about 170 million barrels above their five-year average, Platts sees the number as closer to 50 million barrels, and dropping.
OPEC has failed to take into account the effect of increased oil exports from the U.S. and new infrastructure built to handle the shale boom, according to Ross. Both lead to a bump in short-term stockpiles, he said. “The bulk of the global surplus in stocks is gone," Ross said. “We’re not going to see US$30 oil anymore. We’re basically in a US$50, US$60 Brent world for the time being."