Oil Markets Face Serious Risk Of New Supply Crunch

11. september 2019: Oil Markets Face Serious Risk Of New Supply Crunch

Weakening global economy and slowing oil demand growth, coupled with growing U.S. shale production, have pushed the oil glut narrative to the top of the media and analyst attention this year.

In a few years’ time, however, the top concern on the oil market could very well be insufficient oil supply that could drive prices higher.

The persistent oversupply led to OPEC rolling over the production cuts into next year and replaced concerns about a looming global oil supply crunch due to chronic underinvestment in replenishing conventional oil reserves.

The stubborn oversupply and faltering demand have depressed oil prices for most of this year. The lower oil prices, however, have also started to challenge the growth pace of the largest source of oil supply increase in the world—U.S. shale.

American oil production is set to increase over the next few years, but it could peak in the early 2020s, Seeking Alpha contributor Rob Pinkerton argues. According to oil industry professional Pinkerton, U.S. shale will have drilled out most of the recoverable reserves by 2024, leaving a gap in global oil supply that only newly discovered conventional offshore resources can—to some extent—fill in. Read more