Oil prices are speedily getting close to $50 per barrel, up about 60% from this year’s lows, and a lack of spending on exploration and production that came as a result of weak prices are likely to drive crude prices even higher, a new report shows.
According to Scotland-based analysis group Wood Mackenzie, the global oil market could face a supply shortfall of 4.5 million barrels a day within the next two decades. That’s down from today’s estimated surplus of around 2 million barrels a day.
“Unless exploration results start to improve significantly, continued supply growth will become unsustainable,” Patrick Gibson, director of global oil supply research at Wood Mackenzie, said in a statement.
The global energy consulting firm surveyed the more than 7,000 conventional oil fields discovered since 2000. It noticed that the volume of liquids found each year more than halved in the last decade as wells turned up less crude than anticipated. Volumes dropped from roughly 19 billion barrels in the 2008-11 period to around 8 billion barrels between 2012 and 2015, the report said.
While the situation is sustainable in the short and medium term, the researchers say that long-term there will be problems. Almost 90% of the oil from recent finds has yet to be produced, they say, and the industry continues to find squeeze more supplies from unconventional fields, such as U.S. shale formations and offshore, deep-water developments.
At the same time, the global oil industry slashed more than US$100 billion in spending last year and is in the midst of further cuts this year.
Oil prices have risen throughout April despite the failure of the world’s largest oil producing countries to agree to a deal earlier this month that would have helped the market recover from its chronic oversupply by freezing production.
Crude is now 25% higher than in the first week of April, and almost 70% higher than the 12-year lows of around $28 a barrel seen in late January.