E&P investment collapses

Goldman Sachs Group Inc. believes that oil availability at $100 per barrel in 2023 cannot be ruled out since supply expansion will be too sluggish to meet historic demand.

Record for the use of gasoline, diesel and plastic will be broken in 2022/23

“While the bank’s baseline forecast for Brent next year and 2023 is about $ 85 per barrel, it might exceed triple digits owing to either substantial cost inflation for drillers or an unexpected supply constraint that would drive prices up.” “High enough to reduce demand,” said Goldman Sachs’ director of energy research Damien Kurvalin.

The upside risks are one of the reasons Goldman is still bullish on oil, even though prices have surged by more than 40% this year. The bank believes the current sell-off was excessive owing to unfounded fears about omicron-related limits, and that after asset managers reallocate money next year, investors will purchase the dip.

Oil production growth will encounter obstacles, in the long run, economists said, including growing production costs and more expensive financing as investors prefer to support ESG-focused sectors. Due to the uncertainties surrounding the energy transition and its influence on fuel usage, investment in long-cycle oil projects has also decreased.

“Demand for everything from gasoline to diesel to plastic is at all-time highs, with consumption anticipated to hit new highs in 2022-23.” Due to travel limitations associated with Covid-19, the consumption of jet fuel will continue to be postponed, although some delayed travel demand is anticipated to arise once the borders open, according to Kurvalin.

Oil prices, he claims, may soar to $ 110 per barrel if supply does not keep up with demand and the market is forced to lower demand to bring the market back into equilibrium.

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