Oil Price Forecasts: Navigating Economic Uncertainty

Current Oil Price Trends

Oil prices have remained firm, with Brent crude between $60 and $80 per barrel. Geopolitical tensions and a resilient global economy have pushed prices above $80 per barrel. Increased U.S. oil production has helped reduce gasoline prices, while higher crude and refined product prices have driven up purchase costs.

"Our overall market conditions were softer in the second quarter. Oil prices remained firm. As a reminder, at Brent between $60 and $80 a barrel real and 10-year average refinery and chemical margins, we expect to generate between $80 billion and $140 billion in cumulative surplus cash from 2024 to 2027." --- (XOM, earning call, 2024/Q2)

"Hedge funds appear to be particularly keen on energy stocks right now as a resilient global economy and conflict in the Middle East push crude oil prices above $80 U.S. per barrel." --- (CVX, press release, 2024/07/08)

"The growth of total U.S. oil production to over 13 million barrels of oil per day has contributed to reduced gasoline prices for U.S. consumers." --- (XOM, press release, 2024/05/02)

"Three Months Ended June 30 Six Months Ended June 30 2024 2023 2024 2023 (Millions of dollars) Purchased crude oil and products $ 30,867 $ 28,984 $ 58,608 $ 58,391 Purchased crude oil and products increased for the second quarter primarily due to higher refined product purchases and higher crude and refined product prices, partially offset by lower refinery crude unit inputs." --- (CVX, sec filing, 2024/Q2)

"ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview In the first quarter of 2024 the price of crude oil remained flat relative to fourth quarter 2023 and near the middle of the pre-COVID 10-year range (2010-2019), as markets remained balanced." --- (XOM, sec filing, 2024/Q1)

Supply and Demand Dynamics

Strong demand for natural gas and high-value products, coupled with strategic low-cost supply projects, is driving a tighter supply-demand balance in the oil market. Major players like ExxonMobil and Chevron emphasize the importance of robust operations and alternative supplies to meet increasing demand while addressing environmental challenges.

"We also see long-term demand for natural gas, and so I think as we look at both of those, both the liquids and the gas side of the equation, we see a long-term future there and an opportunity for this company to participate if we have advantaged projects that position us on a low cost of supply, and so that's how we think about that." --- (XOM, earning call, 2024/Q1)

"And what that does is it creates a tighter supply-demand balance, particularly as demand continues to be strong and you need to have strong operations out of that entire system, or you need to bring in supplies from somewhere else if you've got planned or unplanned issues that the system is dealing with." --- (CVX, earning call, 2024/Q1)

"Energy demand models are forward-looking by nature and aim to replicate system dynamics of the global energy system, requiring simplifications." --- (XOM, sec filing, 2024/Q1)

"Lowering greenhouse gas emissions while meeting increasing demand is no easy task." --- (CVX, Twitter, 2024/05/08)

"So we're continuing to see the demand for the high value products that we've invested in, but we're also seeing in our base volume, value in those with respect to how we positioned ourselves, and so it's – and we're seeing advantages in the structural, structural cost reduction." --- (XOM, earning call, 2024/Q1)

Technological Advancements

Technological advancements in the oil industry are driving significant improvements in efficiency, sustainability, and innovation. ExxonMobil aims for net-zero emissions by 2050, Halliburton has enhanced drilling speed and reliability, and Schlumberger is digitalizing operations and integrating new companies to boost energy innovation.

"With advancements in technology and the support of clear and consistent government policies, ExxonMobil aims to achieve net-zero Scope 1 and 2 greenhouse gas emissions from its operated assets by 2050." --- (XOM, press release, 2024/04/12)

"We deployed advancements that improved drilling speed and reliability and set several [general] (ph) records during the quarter." --- (HAL, earning call, 2024/Q2)

"The initiative represents a significant advancement in digitalizing the drilling operations of Pakistan's energy sector to enhance operational efficiency, reduce costs, and promote sustainable oil and gas exploration in the country. Digital Enablement" --- (SLB, press release, 2024/04/19)

"Their talent, technology, innovation and commitment to customer success align with SLB's own culture and commitment to the same.By bringing Champagnext into SLB, we create a step change in value for our customers, our shareholders and our employees as we continue to drive energy innovation for our balanced planet." --- (SLB, event transcript, 2024/04/02)

"Our strategy and the work we do are highly focused around driving our customers' success and creating value for our shareholders.As I think about the ChampionX's strategic priorities we have shared with our shareholders and other stakeholders, I see this combination with SLB helping advance those priorities given SLB's focus on technology and innovation and its deep customer intimacy with upstream and midstream operators around the world in every major energy producing region and operating environment." --- (SLB, event transcript, 2024/04/02)

Alternative Energy Impact

The growth in renewable energy projects, as highlighted by NextEra Energy and Tesla, along with investment in alternative energy technologies by companies like Chevron and ExxonMobil, indicates a significant shift towards sustainable energy. This transition is likely to reduce oil demand, thereby impacting oil prices.

"All other impacts reduced earnings by $0.05 per share. Energy resources had a strong quarter of new renewables and storage origination, adding 3,000 megawatts to the backlog." --- (NEE, earning call, 2024/Q2)

"EnerCom Denver - The Energy Investment Conference will once again include The Energy Transition and Emerging Technology Session featuring quick-pitch investment presentations from promising start-up energy and technology companies focused on innovation and operations in alternative energy, advanced oil and gas technology, environmental sustainability and carbon solutions." --- (CVX, press release, 2024/07/17)

"While our teams are working feverishly to offset these, unfortunately it may have an impact on the cost in the near-term. We previously talked about the potential of the energy business and now feel excited that the foundation that was laid over time is bearing the expected results." --- (TSLA, earning call, 2024/Q2)

"And then what I would say are the energy portfolio, but more specifically the molecules that go into energy, that we expect to become feedstocks of the future like they are today for our Carbon Ventures and Proxxima ventures. On the Upstream side, we've got a lot of, obviously growth potential through the back end of this decade." --- (XOM, earning call, 2024/Q2)

"That makes a big impact with the regulator. And while competitors have come and gone, Energy Resources has built a commanding position as a leading renewable energy developer in America over the last 25 years." --- (NEE, Investor Day, 2024/06/11)

Regulatory and Policy Changes

Chevron and ExxonMobil emphasize the need for flexibility and responsiveness to regulatory changes, with government mandates and stringent policies impacting production levels and investment decisions. Current trends in policy stringency and lower-emission solutions are not aligned with achieving net-zero by 2050, affecting future oil price forecasts.

"The company will continue to maintain flexibility in its portfolio to be responsive to changes in policy, technology, and customer and consumer preferences." --- (CVX, sec filing, 2024/Q1)

"Government Mandates are changes to ExxonMobil's sustainable production levels as a result of production limits or sanctions imposed by governments." --- (XOM, sec filing, 2024/Q1)

"Actual future results, including project plans, schedules, capacities, production rates, and resource recoveries could differ materially due to: changes in market conditions affecting the oil and gas industry or long-term oil and gas price levels; political or regulatory developments including obtaining necessary regulatory permits; reservoir performance; the outcome of future exploration efforts; timely completion of development and construction projects; technical or operating factors; and other factors cited under the caption 'Factors Affecting Future Results' on the Investors page of our website at exxonmobil.com and under Item 1A." --- (XOM, press release, 2024/05/07)

"If you look at expanded disclosure requirements that Europe is looking for, or if you look at regulation around reducing carbon footprint and not necessarily implementing regulation that's technology agnostic and focused on just reducing carbon intensity, that all makes Europe a much tougher investment proposition." --- (XOM, earning call, 2024/Q1)

"Current trends for policy stringency and development of lower-emission solutions are not yet on a pathway to achieve net-zero by 2050." --- (XOM, sec filing, 2024/Q2)

Market Sentiment and Speculation

Market sentiment and speculation around oil prices are heavily influenced by OPEC+ actions, potential production cuts, economic headwinds, and geopolitical tensions. Additionally, political events like upcoming elections and the linkage of LNG markets to oil prices further shape market expectations and sentiment.

"Mr. Sheffield's insights come from having lived through six industry downturns whereby OPEC and OPEC+ have oversupplied the market, causing substantial turmoil for U.S independents, including Pioneer, small private energy companies and other important parts of the U.S. economy – requiring them to significantly curtail drilling activity, lay off employees, refinance debt and/or declare bankruptcy, among other actions." --- (XOM, press release, 2024/05/02)

"I think that the cuts will continue to get delayed or pushed out. Obviously, the market is just giving you the probability that cuts are the most likely next move, which I think no one would disagree with." --- (JPM, conference, 2024/06/12)

"This will continue to evolve and be highly data-dependent. I am also mindful that US equity markets are hovering near-record levels at a time when we see -- when we continue to see headwinds, including concerns around inflation, the commercial real estate market, and escalating geopolitical tensions around the world. This combination could slow growth. But that said, the US economy has" --- (GS, earning call, 2024/Q1)

"And obviously, this September will be one that will be driven in part by sentiment around the upcoming elections." --- (MS, earning call, 2024/Q2)

"And frankly, if you look at the LNG market. And when you're building large LNG projects, you tend to sell those out and sign contracts in advance of the investments, which the market today is linked to oil." --- (XOM, earning call, 2024/Q2)

Economic Scenarios and Future Outlook

ExxonMobil is preparing for various future scenarios, including rapid energy transitions, and is confident in its ability to meet global energy needs. However, their outlook does not fully project future policy and technology advancements. Their upcoming Annual Global Outlook will provide insights into energy demand and supply through 2050.

"And we continue to develop products and build businesses that will enable us to grow properly far into the future across a wide range of scenarios, including a rapid energy transition. With that, we'd be happy to take your questions." --- (XOM, earning call, 2024/Q2)

"However, the Outlook does not attempt to project the degree of required future policy and technology advancement and deployment for the world, or ExxonMobil, to meet net zero by 2050." --- (XOM, sec filing, 2024/Q1)

"Under any future scenario, we're convinced that our company is uniquely positioned to play a leading role, meeting the world's essential needs for energy and high value products. Thanks for the question." --- (XOM, event transcript, 2024/05/29)

"Later this month, we will be issuing our Annual Global Outlook, which includes our latest views on energy demand and supply through 2050, and which forms the basis for our business planning." --- (XOM, earning call, 2024/Q2)

"As we develop that, learn more, we'll put together more longer-term plans, and once we have confidence that we've got a clear line of sight to how this plays itself out going forward in the future, we'll bring that to the community and share that with all of you." --- (XOM, earning call, 2024/Q1)