Crude Oil Expected to Rise to $70-$100 As Supply Growth Remains Constrained

by | Jun 13, 2023 | Crude, News, Oil Prices, Pioneer

Crude oil prices are set to rise to trade in the $70-$100 range over the next 3-5 years as supply growth remains limited & OPEC+ continues to restrict output.

Pioneer’s chief executive Scott Sheffield told the Financial Times earlier this year, “I think the people that are in charge now are three countries — and they’ll be in charge the next 25 years.”

“Saudi first, UAE second, Kuwait third.”

Meanwhile, peak Permian crude oil production is just five or six years away, according to Sheffield, who attributed this forecast from March to expectations that drillers will have exhausted by then the prime drilling acreage in the top shale-producing basin.

Permian production could peak around 2030, Danny Wesson, Diamondback Energy’s executive vice president and chief operating officer, said at Hart Energy‘s Super DUG event last month.

“[By] the end of the decade… plus or minus a couple of years, you might see the Permian peak and start plateauing,” Wesson said.

“The longer it takes us to get there, the longer it will plateau and run flat. But the faster we get there, it will decline faster,” Diamondback’s senor executive added.

“I think end of decade is a good time to think about [flat or declining production], but you can’t count the Permian out.”

The most recent Dallas Fed Energy Survey for Q1 showed at the end of March that oil and gas expansion in Texas, New Mexico, and Louisiana – home to the biggest shale plays, including the Permian – stalled amid surging costs and worsening outlooks.

In comments to the survey, one U.S. executive at an E&P firm noted, “The Energy Information Administration put out its Annual Energy Outlook this week, and it forecasts that oil production from the U.S. will be flat for the next 30 years. We should probably inform them of the collapse in shale production we are going to see in under five years.”

Another executive said,

“The administration’s policies will continue to affect domestic natural gas and oil production negatively. Oil and gas prices will soar in the next few years, and we’ll be at the mercy of nations that hate us.”

By Tsvetana Paraskova for Oilprice.com What is crude oil

Crude oil means a mixture of hydrocarbons that exists in liquid phase in natural underground reservoirs and remains liquid at atmospheric pressure after passing through surface separating facilities.

(1) Depending upon the characteristics of the crude stream, it may also include any of the following:
(i) Small amounts of hydrocarbons that exist in gaseous phase in natural underground reservoirs but are liquid at atmospheric conditions (temperature and pressure) after being recovered from oil well (casing-head) gas in lease separators and are subsequently commingled with the crude stream without being separately measured. Lease condensate recovered as a liquid from natural gas wells in lease or field separation facilities and later mixed into the crude stream is also included.
(ii) Small amounts of nonhydrocarbons, such as sulfur and various metals.
(iii) Drip gases, and liquid hydrocarbons produced from tar sands, oil sands, gilsonite, and oil shale.
(iv) Petroleum products that are received or produced at a refinery and subsequently injected into a crude supply or reservoir by the same refinery owner or operator.

(2) Liquids produced at natural gas processing plants are excluded. Crude oil is refined to produce a wide array of petroleum products, including heating oils; gasoline, diesel and jet fuels; lubricants; asphalt; ethane, propane, and butane; and many other products used for their energy or chemical content.

Source: https://www3.epa.gov/carbon-footprint-calculator/tool/definitions/crude-oil.html

A standard U.S. barrel contains 42 gallons of crude oil which yields about 44 gallons of petroleum products. The additional 2 gallons of petroleum products come from refiner gains which result in an additional 6% of product. As shown in the figure below, a little more than 19 gallons of gasoline and 10 gallons of diesel fuel are produced from a barrel of crude oil by U.S. refiners. Other products such as jet fuel and heating oil make up the remaining one third.

Source: https://www.energy.gov/eere/vehicles/fact-676-may-23-2011-us-refiners-produce-about-19-gallons-gasoline-barrel-oil

experienced operators major operators

Why Qualified Investors Choose Experienced Operators

Get access to your Investment Guide today to learn more about direct participation in oil and gas exploration.

You have Successfully Subscribed!