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Warren Buffett-backed Occidental Petroleum is predicting an oil supply shortage by 2025 due to global failure to replace crude reserves at a fast enough pace.
“We’re in a situation now where in a couple of years’ time we’re going to be very short on supply,” Occidental CEO Vicki Hollub told CNBC at the Smead Investor Oasis Conference in Phoenix, Arizona on Monday.
Noting that some 97% of the oil the world is currently producing is from discoveries made in the 20th century; yet, globally less than 50% of that crude extracted in the last decade has been replaced.
Hollub’s supply warnings come at a time when the market is pricing in oversupply, with oil prices losing 7% last week, and high-level geopolitical tensions failing to move the needle in any significant way.
Even though the U.S., Brazil, Canada and new giant oil venue Guyana are producing record-high volumes of crude presently, and even in the face of lagging Chinese demand, the future is one of shortage, the Occidental CEO said.
“The market is out of balance right now, but again, this is a short-term demand issue,” Hollub said. “But it’s going to be a long-term supply issue,” she said.
Last year, global oil demand grew at a fast clip, with 2023 consumption exceeding the previous year’s by more than 2 million barrels per day. The consensus among energy agencies is that global oil demand will see another uptick in 2024.
Energy Intelligence predicts that global demand this year will be a modest 1.1`mb/d, reflecting the pre-COVID time, while OPEC forecasts a 1.8 million bpd oil demand growth in 2025. These projections are based on China’s economy strengthening.
Occidental’s warning also comes as the Saudis announce they will not be expanding their oil production capacity, as was earlier planned.
By Charles Kennedy for Oilprice.com
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Charles is a writer for Oilprice.com