Global crude oil prices could drop to about $60 per barrel by 2027 as demand growth slows, say oil analysts at Rystad Energy, chopping a third off next year's peak price as demand tumbles.
Their outlook is a reassuring message amid recent Wall Street analysts predicting up to $150 per barrel in the next two years. Rystad's long-term forecast calls for prices to peak next year at $91 per barrel before dropping to as much as $50.
"Demand is peaking," Claudio Galimberti, Rystad's head of North America Research, said on Thursday at an event in Houston. "We anticipate prices to taper off in the next three to four years, primarily due to ample supply."
Oil producers' group OPEC+ has succeeded to moving oil prices this year by cutting output, but that strategy can not succeed long term, he said.
Global oil demand growth, which averaged 3.7 million barrels per day (bpd) last year, should decelerate to 2.4 million bpd this year, 1.2 million bpd in 2025, and just 500,000 bpd in 2026, Galimberti said.
Prices beyond 2026 will reflect the pace of the world's energy transition to cleaner energy and the level of investments in new fossil fuel production, he added.
Rystad projects Brent crude could resume moving up after 2027, above $50 per barrel, assuming a base-case scenario where the world's temperature rises by 1.9 degrees Celsius over pre-industrial levels by 2050.
SHALE WINS ON HIGHER PRICES
Rystad predicts that U.S. oil production will climb to 15 million bpd by 2026, up from about 13 million bpd currently, before reaching a plateau.
OPEC's current market strategy has been effective because U.S. supply elasticity is not as high as it was 10 years ago, said the former Shell manager who contributed to the development of the oil giant's Energy Transition Scenarios. But its effectiveness will end if U.S. shale producers drill more.
If Brent oil prices were to remain at an average of $80 per barrel after 2026, shale producers would resume investments, Galimberti said. And when that happens shale could deliver as much as 18 million barrels per day, he estimated, decreasing OPEC's influence over prices.
"This is a strategy OPEC can pursue for one year, but not for seven years," Galimberti said. "If oil prices remain elevated, U.S. shale would be the clear winner," Galimberti said.
MODEST GROWTH
Rystad expects modest growth in the U.S. shale industry in the near-term with 60-70 drilling rigs to be added by next year, bringing the total to 634 rigs.
That would still be 70 rigs short of U.S. peak levels, as companies continue to prioritize shareholder returns through dividends and buybacks, according to the consultancy's head of shale research, Alexandre Ramos-Peon.
"There is no more elasticity at all due to capital discipline," he said on the sidelines, adding that reinvestment rates are rising but still low compared to historical standards.
But U.S. shale growth will still come due to improvements in drilling efficiency, said Supply Chain Research head Justin Mayorga said.
"We are getting better at drilling wells, and quicker," he said. "Modest slow growth is going to be a continuing message."
(Reuters - Reporting by Sabrina Valle; Editing by Lincoln Feast)