The crude oil “supply gap” risk

The crude oil “supply gap” risk
Photo: Dave Walsh / VW Pics / UIG via Getty Images

A big question among oil experts these days is whether today’s worldwide investments in new supplies are too low to avoid risk of a “supply gap” opening up in the early 2020s as demand grows and existing fields decline.

The big picture: Two competing views presented this week offer a pessimistic and optimistic take on the situation, taking on opposite sides of the investment debate.

Fresh warning: The head of one of the world’s largest oil-and-gas companies says the surge in U.S. crude production is not enough to prevent problems from emerging in a few years.

  • “Even if the U.S. shale oil is dynamic, we do not invest enough in this industry,” Total CEO Patrick Pouyanné says on the new episode of the Columbia Energy Exchange podcast.
  • He says under-investment in recent years is still a problem in 2018.
  • “Post-2020, the price will go high, because we will have a lack of capacity, and even with the shale oil dynamic, the global production of oil will be not enough. We are under-investing,” Pouyanné says.

Don’t worry so much: A research note this week from Barclays analysts, however, suggests that these types of concerns are likely misplaced.

  • They argue that even with declines from mature fields, there has been enough new supply coming online from 2011–2017 even outside OPEC and U.S. shale to nearly offset it. And they don’t see that changing.
  • “In the next couple of years, projects that have already received a green light are coming online and will further mitigate those declines. That means that the ‘mature base’ of non-OPEC non-US supply is flat from now through at least 2022, and it leaves OPEC liquids, US tight oil, Canadian oil sands, and non-crude liquids available to meet incremental demand growth,” they write.

Energy shares in Asia climb as oil prices hold onto gains following US inventory decline


  • Energy stocks in Asia traded higher on Friday.
  • Oil prices touched a two-week high in the last session after data from the U.S. Energy Information Administration showed U.S. crude stocks unexpectedly declined.
  • The S&P/ASX 200 energy sub-index was up 0.68 percent. Gains were also seen in oil-related stocks listed in Japan and Australia.
Pump jacks and wells are seen in an oil field on the Monterey Shale formation, March 23, 2014, near McKittrick, Calif.

Getty Images
Pump jacks and wells are seen in an oil field on the Monterey Shale formation, March 23, 2014, near McKittrick, Calif.

Oil-related stocks in Asia traded higher on Friday as oil prices recorded slight gains after touching two-week highs in the previous session.

Those gains in oil prices had come after U.S. crude stocks unexpectedly declined by 1.6 million barrels in the week ending Feb. 16, Reuters said, citing data from the U.S. Energy Information Administration. That compared to the 1.8 million-barrel rise in inventories forecast by experts.

Woodside Petroleum, Australia’s largest oil and gas company, was up 0.56 percent following those increases in prices. Other oil producers also gained: Santos rose 0.39 percent and Oil Search rose 1.46 percent.

More broadly, the S&P/ASX 200 energy sub-index traded higher by 0.68 percent in the afternoon Sydney time.

Energy stocks in Japan saw sharper gains, with oil producer Inpextrading higher by 2.55 percent and Cosmo Energy gaining 4.59 percent. JXTG Holdings, Japan’s largest refiner, was up 3.58 percent.

Meanwhile, Hong Kong-listed shares of Chinese oil producer CNOOCrose 0.88 percent in late morning trade local time. Oil giant China Petroleum and Chemical Corporation, or Sinopec, added 1.11 percent.

Oil prices were mostly steady on Friday. U.S. West Texas Intermediate crude futures advanced 0.05 percent to trade at $62.80 per barrel and Brent crude futures were off by 0.02 percent at $66.38.

“The unexpected fall in oil inventories in the U.S. should see support for crude oil prices remain strong,” said ANZ Research analysts in a Friday morning note.

“Prices were also supported by comments from UAE Energy Minister Suhail Al Mazrouei, who said the worry is undersupply, not oversupply, as demand remains strong amid the constraints on output,” they added.

Crude oil inventories down 1.6 million barrels

Crude oil inventories down 1.6 million barrels  

Chinese companies agree to develop LNG in Alaska as Trump visits


  • Three major Chinese companies agreed to develop Alaska’s liquefied natural gas sector
  • The deal comes during President Donald Trump’s state visit to Beijing

China’s top state oil major Sinopec, one of the country’s top banks and its sovereign wealth fund have agreed to help develop Alaska’sliquefied natural gas sector as part of President Donald Trump’s visit, the U.S. government said on Thursday.

Alaska Gasline Development, the State of Alaska, Sinopec, China Investment Corp and the Bank of China have signed an agreement to advance LNG in Alaska, the U.S. government said in an email.

A full moon helps illuminate an Alaskan pipeline under the faint glow of the Aurora Borealis on November 19, 2002 near Milne Point, Alaska.

Greg A. Syverson/Getty Images
A full moon helps illuminate an Alaskan pipeline under the faint glow of the Aurora Borealis on November 19, 2002 near Milne Point, Alaska.

The agreement will involve investment of up to $43 billion, create up to 12,000 U.S. jobs during construction, reduce the trade deficit between the United States and Asia by $10 billion a year, and give China clean energy, it said.

There were no other details. AGDC is building a gas treatment plant, an 800-mile (1,287 km) pipeline to south central Alaska for in-state use, and a liquefaction plant in Nikiski to produce up to 20 million tons of LNG per year for export.

China, the world’s third-largest gas buyer, is importing more LNG as the government tries to wean the country off dirty coal as part of its push to clear the skies, while the United States wants to sell more of its excess gas abroad.