The oil market is facing a turning point where major oil companies are rethinking their plans. Saudi’s Aramco is planning a long-term strategy, expecting to invest more than $300 billion over the next decade. CEO Amin Nasser said that the company would spend this money to maintain its extra oil supply and continue to look for more natural gas resources. The company is coming out with an IPO in 2018 which could be the biggest ever.
Nasser Hopes for Demand Rebound
Amin Nasser attended the World Petroleum Congress in Istanbul where he talked about changing oil dynamics. He said, “A lack of investment is not helping, so if that continues over the next couple of years there will be an inflection point”. Oil market experts are concerned about the 3-year oil price sabbatical which made prices drop sub-$30 in 2014. The rising dominance of US shale over the traditional oil suppliers has made the demand and supply side lose balance. Shale oil has contributed to global oil oversupply, and this condition has not improved much even after OPEC production cuts.
Nasser said that the oil industry would face another turning point in the coming years. Right now, the industry is focusing on the supply side. In the upcoming years, people will begin to question whether there is enough oil supply to meet the massive demand.
What Is the Oil Outlook?
Oil is one of the most troubled commodities for experts right now. A smaller number of new deposits are being discovered. In fact, $1 trillion worth of investments has been lost since 2014 as oil prices have fallen from about $100 to $26. This has created losses for major oil producers and oil companies alike.
Developed oil fields are facing natural declines as their reserves have been exhausted. New oil fields are also not being discovered faster. However, the global economy will need 20 million barrels per day of additional output in the next 5 years. Oil demand is set to increase at a rapid pace, which could not be fulfilled if new oil is not discovered.
What about alternative energy sources. Nasser said that the there is a looming threat that the world may ‘prematurely disengage’ from traditional sources of energy and move to alternative sources. If investment in oil is not encouraged, then rising demand may not be fulfilled. This could lead to rise in oil prices, which have fallen by 17 percent year to date.