This February edition of Glenloch Energy's ("GE's") Oil Market Forecast ("OMF") comes directly after winter storm Uri brought freezing temperatures and power cuts across Texas, in some cases for multiple days. Beyond associated gas from oil production, oil doesn’t contribute to the power supply in Texas. However, the events of last week underscore how critical a reliable energy supply is, and how devastating the impact can be when it is interrupted.
Prior to winter storm Uri, there was extensive media coverage of the acceleration in electric vehicle adoption and so in this edition we start by examining forecasts for electric vehicle sales and their impact on oil demand. We then move on to our normal update of global crude oil supply and demand, storage, spot and futures market pricing and US onshore rig activity levels.
A few key points:
- Deloitte has forecast that electrical vehicle sales will grow to 32% of overall vehicle sales by 2030.
- Our model predicts that the installed vehicle base will still consist of 92% internal combustion engine vehicles by 2030.
- Our model predicts that the installed electrical vehicle base will fall short of International Energy Agency (IEA) assumptions by 2030 under both its ‘Stated Policies’ and ‘Sustainable Development’ scenarios. This implies oil demand will be higher than the IEA predicts through the rest of this decade.
- Based on these conclusions, it seems premature to abandon the manufacture of internal combustion engine vehicles, production of crude oil or refining of crude into gasoline and diesel.
- Under current assumptions, the oil market returns to oversupply in the spring of 2021 flips to a supply deficit in 2022 which widens in 2023 and beyond.
- Estimates of global crude stocks in 2021 support a further extension of OPEC+ production curbs through the second half of 2021.
- Brent crude futures are now above $50/bbl through 2028 and WTI futures are above $50/bbl for the rest of the year.
- US land oil rig counts have continued to rise, an increase which is expected to continue, albeit at a slower rate, for the rest of the year.
Access Glenloch Energy's February OMF here.