Oil market heads for supply crunch as exploration fails to meet demand

The oil market has been predicted to be heading for a supply crunch from 2025 onwards as oil exploration fails to keep pace with demand, Occidental Petroleum Chief Executive Vicki Hollub has said.

Hollub, who spoke on the sidelines of the World Economic Forum in Davos, said U.S. WTI crude prices could trade in the $80-$85 a barrel range from 2025 just as prices averaged about $78 a barrel last year.

“In the near term, the markets are not balanced; supply, demand are not balanced,” Hollub said, adding that: “2025 and beyond is when the world is going to be short of oil”.

Hollub said that from the mid-1950s to the late 1970s, oil companies were finding around five times as much oil as was used, a ratio that has steadily declined to about 25 per cent in 2023.

She said that from 2012, U.S. oil companies moved away from exploration and focused on tapping shale oil reserves, which have a much shorter lifespan than conventionally produced oil.

She added that she expected energy transition scenarios will have to be adjusted to accommodate for more oil exploration.

“I think the industry is looking at a scenario where we will be able to do all the things that we need to do as a part of the transition”.

“The market will move from near term oversupply, to a long period when the world is going to need more oil,” she added.