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Execs Fret Over Lagging Investment

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Uncertainties related to the energy transition are threatening global crude supply by amplifying the chronic underinvestment in upstream projects that was happening before the pandemic. While Opec-plus still holds 6 million barrels per day of spare production capacity — excluding Iran — this buffer could be squeezed next year as global demand continues to recover. Benchmark Brent has already risen to around $80 per barrel even though global oil demand remains around 4 million b/d below pre-pandemic levels, notes Vitol's Asia head Mike Muller. Muller and other industry executives expressed concerns about the energy transition's impact on future oil supply at this week's Platts APPEC conference in Singapore. Ben Luckock, Trafigura’s oil trading co-head, said global refining runs should exceed pre-pandemic levels by mid-2022, with Asian runs breaching 2019 levels by the end of this year. Despite global efforts to reduce carbon emissions, global oil demand is not expected to peak until roughly around 2030 or later, APPEC speakers said. With Opec-plus managing supply and US shale not responding significantly to higher prices, just maintaining existing production levels will be an increasingly difficult task, said Eirik Waerness, Equinor’s chief economist. Global spare capacity will likely be challenged next year, especially if US shale investment doesn’t accelerate and additional Iranian barrels do not materialize due to stalled nuclear negotiations, Muller added.

Topics:
Crude Oil, Oil Demand, Oil Supply, Low-Carbon Policy
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