Water tight

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A look at oil market supply, demand and development over the next five years

Deloitte MarketPoint insights

The oil and gas industry is in turmoil. A downturn in crude oil markets has taken a bumpy path, resulting in declining oil prices and leading to deep CAPEX spending reductions. What, then, is the future of oil? Although sizeable capital and operational budget cuts could leave a lasting impact, Deloitte MarketPoint analysis delves into that future to provide beneficial insights. From the sources that cover production shortfalls to how current supply and demand could affect future oil prices, discover what the next five years of oil may look like by viewing our report.

​MarketPoint analysis of the future of oil

While current crude oil markets prices reflect a dire situation for much of the industry, sizeable capital and operating budget cuts over the last year are going to leave a lasting impact. Based on our analysis, we could see a supply shortfall of over 1 million b/d as early as 2018 based on canceled or delayed investments and factoring in investment carryovers and excess storage drawdowns. This shortfall should generate a much-needed price increase to around $58/bbl, but not the return of $100+/bbl oil in the near term.

Our analysis suggests sources such as the major US tight oil basins, Iran, Iraq, and possibly Russia could potentially cover the first two years of production shortfall at the $58/bbl price range. Beyond 2019, continued demand growth and production declines will require further price increases to cover full cycle costs for high-cost producers such as Canadian oil sands and deep water, off-shore sources.

The analysis in this paper represents only one of a vast number of possible scenarios for the future of oil. The exercise isn’t meant to predict future prices and flows but more to discuss the impact future fundamentals could have on prices. Deloitte MarketPoint advocates the development of numerous scenarios based on quantitative analysis to develop a range of potential outcomes that can help strategic planning teams develop robust business plans.

Delve into the analysis by downloading our report.

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