Thursday, May 19, 2022

Column-Oil prices are expected to rise with major changes in forecasts: Kemp

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LONDON () – Over the next few years, oil prices will exceed pre-pandemic levels, but where they are located remains very uncertain, as evidenced by my seventh annual survey of energy market experts.

FILE PHOTO: The sun appears behind a crude oil pump outlet in the Perm Basin in Loving County, Texas, USA, November 22, 2019. / Angus Mordant / File photo

Brent oil is expected to average $ 80-85 per barrel by the middle of the decade, up from $ 70 expected in 2020 before the start of the COVID-19 pandemic.

Expected prices will be $ 10-15 per barrel, compared to when futures traded at the time of the January 11-14 survey for a premium of $ 10 or less before the pandemic.

However, the most important change after the pandemic is the large increase in the prevalence of these views, with many respondents forecasting prices to be much higher or much lower than average.

Both the short-term forecasts for 2022-2023 and the long-term forecasts for 2025-2026 are characterized by much higher standard deviations than the comparable forecast horizons before the pandemic.

Concerns about coronavirus, recession, record declines, consolidation in the shale industry, and emissions related to oil and gas investments have left respondents much more uncertain about price prospects.

In the second year of the forecast horizon, the standard deviation of responses will rise from $ 10-11 in pre-pandemic years to $ 17 per barrel.

In the fifth year, the standard deviation will rise from $ 19-20 to $ 26 in surveys by March 2020.

Most responses are based on the quarterly range for responses between 2022 and 2025, with accumulated between $ 70 and $ 90 per barrel over the next four years.

And according to almost all respondents, prices in 2025 will average between $ 60 and $ 110 (10-90 percent) or $ 55-125 (5-95 percent).

But over the next five years, there has been an increase in the number of respondents forecasting prices above $ 120 per barrel, or very high prices above $ 150 on average.

The rising variance points to disagreements over how periodic and reversible the recent rise in prices can be, and how much can be structural and semi-permanent.

The survey is based on an email sent to more than 10,000 energy market experts and others on the “best in energy” mailing list. As in previous years, there were close to 1,000 responses.

Twenty-one percent of respondents are directly involved in oil and gas production (exploration, drilling, production, refining, distribution, marketing, and oilfield services).

The rest work in banking and finance (17%), research (10%), professional services (9%), hedge funds (7%), physical goods sales (6%) and other non-energy corporations (5%). . ) and other energy companies (4%).

There was no significant difference in average projections or prevalence between respondents directly involved in oil and gas production and those working elsewhere.

You can download the full results of this year’s survey and previous polls here: tmsnrt.rs/3fA6gvz

John Kemp is a market analyst. The views expressed are unique

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