Energy Prospectus

Marshall Atkins, Managing Director and Head of Energy Investment Banking at Raymond James & Associates gave a presentation last week where he said WTI needs to go to $120/bbl within six months.
Raymond James forecast is that demand for oil-based products will exceed supply by 2.6 million barrels per day in Q3 and 2.9 million bpd in Q4.
OECD Petroleum Inventories could fall to 22 Days of Demand, the lowest inventory level based on Days of Demand EVER.
Higher oil prices will be needed to slow demand and encourage much more capex spending on finding and developing new reserves.

If you'd like to see the slides that he spoke from send an email to me. I will be traveling July 5-7.

BTW his forecast compares to Rystad Energy's forecast that demand will exceed supply by 2.4 million bpd in 2H 2023. They are forecasting $90 WTI by Q4.

If these forecasts come to fruition, there will be a SIGNIFICANT "Paradigm Shift" that will bring a lot of investors back to this sector.

Marshall's Key Points

Why Will Oil Prices Stay High for Years?
• U.S. oil supply growth goes away at current prices
• At current prices, global growth also limited
• The world will need all OPEC oil and more US oil in 2024 to meet demand
• OPEC supply maxed out in 2024
• Oil demand growth will not slow without high prices
• Supply constraints keep oil price high through 2030

Why Are Oil Prices Poised to Surge Soon?
• Global Inventories fall 400+ MMBbls next six months
• “Net” long positioning in market VERY bullish today
• SPR releases stop pressuring prices
• Iranian supply surge has likely maxed out
• Interest rate & refinery de-stocking should end soon
• Recession impact on oil overblown and now fading

Paradigm Shift: Over $5 Trillion in renewables investments over the past decade! and demand for fossil fuels is higher today.
$ Trillions in “green” spending for only a 4% decrease in Hydrocarbon share while overall hydrocarbon demand still increased 45% in past 2 decades

Summary: What Price Slows Oil Demand?
•Many variables: interest rates, global economy strength, US$ strength, duration of price spike,
refining margins, etc.
•Inflation adjusted price says ~$120-$150/Bbl and % of consumer spend says ~$150-$170/Bbl
• That assumes a “normalized” ~$20 crack spread which = $140-$190/Bbl product price needed

Demand must be slowed (rationed by higher prices) because there is very little hope that oil supply response can occur fast enough over the next five years to keep up with demand growth.

Bottom Line on Oil Prices…
• Current damage to oil industry will lead to limited supply growth through 2025
•Inventories are still falling through 2023
• With OPEC maxed out, there is no margin for error on supply disruptions < OPEC only has ~1.5 million bpd they can bring back & sustain thru 2024
• Oil prices must rise to kill demand growth
• Long-dated prices are $40+/Bbl too low!