Macro Oils long-term outlook H1 2020 Report

Commodity Market Report 05 June 2020

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Report summary

As the world struggles to recover from the coronavirus outbreak, we face unprecedented uncertainty. When will the pandemic cease globally and how long does it take for the global economy to revive? With a wide array of unpredictable outcomes, for our Macro Oils spring long-term outlook, we made key assumptions on possible outcomes. A return to economic growth in 2021 brings a return to oil demand annual increases from that year. However, starting from a sharply lower base in 2020 means liquids demand does not reach our H2 2019 forecast level until after 2030. World oil supply growth resumes in 2021 at a slower rate. US Lower 48 supply is particularly hit hard in the forecast. Eventual recovery means non-OPEC supply, excluding processing gains and unconventionals, continues to grow until 2032 when it peaks at 66 million b/d. In the previous long-term outlook, non-OPEC production peaked a million b/d higher in 2031.

Supply outlook summary
- Non-OPEC supply: deferred near term production results in substantial downgrades
- North America: remains the key growth area for non-OPEC supply, but suffers largest downward revisions
- US Lower 48: price crash consolidates growth in Permian
- Capital discipline: growth at higher prices?
- Permian operators are best positioned for growth
- Canada: steady growth driven by the oil sands and rising output of condensate/NGL
- Russia and Caspian: near-term downgrades due to OPEC+ deal; long-term potential upgraded
- Non-OPEC growth areas: Brazil, Norway and Guyana key outside of North America
- Emerging producers: further deferral of production, but Suriname upgraded
- Mature producers: mitigating decline following price crash and investment cuts will be challenging
- Key non-OPEC trends post-2030
- OPEC capacity grows steadily across the forecast period despite downgrades to Iraq and Iran
Global demand: Global liquids demand finds a plateau by the late 2030s amid the energy transition
- Assumptions
- Fuel demand from light vehicles
- Oil demand in the fight against air pollution
- Petrochemicals