Two Worlds of Crude: Oil Companies and Rich Nations Differ in Forecasts | Companies

Two parallel worlds, separated by a stellar distance… and an increasing one. The largest oil colossus in the West and one of the greatest historical culprits of climate change, ExxonMobil, has just predicted that global crude oil consumption will remain virtually stable until 2050: around 100 million barrels per day. A figure very similar to the one proposed just a few months ago by Saudi Aramco, the largest company in the sector in the world, which in almost all of its scenarios reaches triple digits (with six zeros behind it). A horizon that, if reached, would raise the climate emergency to almost unimaginable dimensions.

But official data from rich countries – with the exception of the United States, a net exporter and the largest producer of crude on the planet for many years – suggest a radically different path. The International Energy Agency (IEA, the industry think tank of the OECD) projects a major reduction in global oil consumption: up to 55 million barrels a day just with the greenhouse gas reduction commitments already announced; and up to 24 million if net zero emissions are achieved, which is about the only way to guarantee a habitable planet in the long term.

USA, exception

The U.S. Energy Information Administration shirks this more favorable view, with forecasts more in line with those of oil companies than with the IEA. And all this despite the fact that the world’s leading power is also the undisputed leader of the OECD. The organization from which all Washington energy statistics are based assumes not only a decline in oil levels but also a rise in global crude consumption of 3% to 10% between now and 2030. For mid-century, the growth forecast is even higher: 6% and 42%, with an estimated average production of 120 million barrels per day.

The Organization of the Petroleum Exporting Countries (OPEC) cartel also expects global demand to exceed 100 million barrels per day in two of its three scenarios: non-interferencein which no further significant action is taken to reduce the global increase in fossil fuel consumption and in which it is considered central or “benchmark.” Only in the third, which involves the development of key decarbonization technologies such as batteries, will global crude oil consumption remain below triple-digit levels. But hardly.

“OPEC and EIA forecasts are generally perceived by the industry as very optimistic (for their own sake),” says Jorge Leon, vice president and head of oil market analysis at Norwegian consultancy Rystad Energy. “Their outlooks tend to assume limited penetration of alternative energy and that energy policy will end up being less ambitious than when it was announced.”

Is OPEC Losing Control?

Even though current prices are above the historical average of about $80 a barrel, Saudi Arabia, the world’s largest oil exporter, does not have enough to balance its budget. To do that, the price needs to be around $100, a level that has not been reached since the very turbulent and distant summer of 2022, the worst period of the energy crisis.

The imbalance in Saudi Arabia’s government accounts has recently raised doubts about the ability of OPEC, the cartel of classic oil countries, to continue to control the market. A control that it has maintained virtually without cracks in recent decades and which now threatens to falter to the point that several countries outside the group, such as Brazil, Guyana, Canada or the United States, will take away its share month after month, quarter after quarter and year after year.

The strategy of the expanded version of the cartel (including Russia) is unique to date: artificially cutting oil production in an attempt to support prices and avoid a market flood that would hit them head-on. But its gains have been dubious, to say the least, as there are growing doubts about the direction its undisputed leaders (Riyadh and Moscow) will take when they meet in early October, where they might begin to reverse voluntary supply cuts and thus try to push some of the output outside the cartel: that which has a higher production cost.

“We have to refute the idea that OPEC or OPEC+ have lost their guiding power,” explains Leon, also a former cartel analyst. “Despite the recent decline, the average price of $83 this year is an extremely high price in historical terms. “I wouldn’t say that it is losing its power as an entity that governs and manages the market: the problem (for them) is that both last year and this year there was a big indirect increase in supply in non-OPEC countries.”

Below $80 per barrel

The forecasts of the world’s two largest investment banks, Goldman Sachs and Morgan Stanley, suggest that the price of oil for the coming year will be in a wide range – from 70 to 85 dollars (63-76 euros at the current exchange rate). The first limits its rate: 77 dollars. The second predicts between 75 and 78. In both cases, it is clearly below the slightly more than 80 dollars at which it is quoted today.

The arguments are general. Faced with the current small deficit, they say, the oil market will move into surplus next year, with supply clearly exceeding demand. A dynamic that will hamper any price recovery and should keep inflation in check as central banks accelerate the pace of interest rate cuts.

Goldman Sachs analysts, in fact, believe that Brent crude (the European benchmark) could even fall to around $60 a barrel in the future if Chinese demand remains flat as the unstoppable electrification of its fleet of vehicles gathers pace. Or if OPEC eventually goes ahead and commits to an additional 2.2 million barrels of supply cuts through September 2025. The latter move would cause an earthquake with unpredictable consequences in the always volatile oil market.

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