Wall Street extends “long-term” oil prices.

as if Alex Longley On 10/24/2021

(Bloomberg) – Can a cheap fuel supply era be wasted for good? This is the conclusion of some of the big commodity tables on Wall Street that banks are raising their long-term forecasts, often by $ 10 or more.

Despite the US Shell Boom’s “low-long-term” mantra, the market is now losing interest in climate change and fossil fuels. Companies have been pressured to limit costs rather than supply, which has prevented structural investment in new products – the argument – which will keep oil prices longer.

Jeff Curry, head of research at Goldman Sachs Group Inc., said: “My advice to customers is that you want to stay overnight until you know where that price is. We haven’t made much of a difference in capitalization and investment.

High Crude

Supply gap thinking is nothing new. A.D. After falling prices in 2014, analysts said, due to lower investment, demand for production could increase. But the energy crisis from Covd-19, coupled with urgent environmental concerns, gives us reason to think this time is different.

The number of oil and gas drilling equipment may have returned to its lowest level last year, but still fell by more than 30% at the beginning of 2020. The current figure is low in 2016. According to Baker Hughes Co

The future

Goldman, one of the longest-running banks in the world, has said it will spend $ 85 billion by 2023. Morgan Stanley downgraded its long-term forecast this week to $ 10 to $ 70, and BNP Paribas predicts a $ 80 deficit by 2023. Other banks, including RBC Capital, say markets are in the throes of a structural bull run.

Such assumptions are becoming more and more structurally costly, an important commodity for the world economy. According to Royal Dutch Shell Plc.

There is also a declining demand for food on the part of investors. Just last week, France’s largest bank said it would suspend its shell oil and gas industry from early next year. Ecuador recently had to double the amount of banks that could lend to it, as financial institutions had banned the collection from Amazon.

Unsustainable

Not everyone supports the idea that prices can stay high. In a report released this month, Citigroup Inc. said that rats below $ 30 and over $ 60 do not appear to be sustainable in the long run. Long-term prices of more than $ 50 could add up to 7 million barrels a day, according to bank analysts, including Ed Morse.

“In the medium term, the cost indicators indicate a fair value between $ 40-55 per barrel,” he said.

But other changes, especially in the US, have seen the wave swing become more effective in recent years.

On the one hand, publicly listed US Shell companies are restricted to developing products. EOG Resources Inc. He announced plans to increase production in February, but the shares fell to the S&P 500 from any company. There have been similar comments from manufacturers for some time.

At the same time, the effects of the field decline are becoming clearer. In November, the Permian Basin was the only coastal area in the United States that showed significant year-round production growth. According to the Energy Information Administration, all the others were either flat or down.

Similarly, while some key OPEC + producers have the potential to grow next year, others, including Nigeria and Angola, are struggling to grow.

“People are very comfortable with the idea that Shell lives there and we are not limited by resources,” said David Martin, head of the BNP Paribas Commodity Desk Strategy. “This is a question mark in my mind.”

And in a world of low-cost fossil fuels, demand is shifting to demand, which is unlikely to be high in the near future.

The International Energy Agency said earlier this month that if current demand continues, oil costs will be lower than needed. With the current policy, it will only see oil demand declining by 2030. However, Morgan Stanley predicts that supply will stop expanding by 2025, leaving a huge gap.

“We are working on net-zero type of caps, at the same time demand does not follow the net-zero direction,” said Martin Rats, the bank’s oil strategist. Demand for the rest of 2020 will be more than 100 million barrels per day, but we do not meet the current level of investment in supply.

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