Could the era of cheap oil supply be gone for good? Oil prices futures are now being seen!
That’s the conclusion of some of the biggest commodities desks on Wall Street. Banks have been lifting their long-term price forecasts, often by $10 or more.
The U.S. shale boom brought about a “lower-for-longer” mantra. Now, the market is now fixated on climate change and the dwindling appetite to invest in fossil fuels. Instead of growing supply, companies are under pressure to limit their spending. This is causing structural underinvestment in a new production that — the argument goes — will keep oil prices higher for longer.
The notion of a supply gap is nothing new. Since prices crashed in 2014, analysts have talked up the potential for demand to outstrip production as a result of underinvestment. But the rout in energy prices from Covid-19, combined with pressing environmental concerns, offer reason to think this time is different.
The number of oil and gas drilling rigs globally may have recovered from the lows of when oil prices turned negative last year, but they are still down more than 30% on the start of 2020. Current figures are about as low as they were in 2016, according to Baker Hughes Co., despite headline crude prices being near a seven-year high.
Click here to read the full article
Source: Bloomberg
If you have further questions about the topic, feel free to contact us at Ranger Land and Minerals.
