World faces long-term oil supply gap despite COVID demand destruction

Inadequate investment in exploration and new drilling may leave the world without enough oil in 20 to 30 years despite a shift towards renewable power sources, top energy analysts say.

The long-term outlook contrasts with today’s situation where plunging oil demand due to the coronavirus crisis has left the market oversupplied, prompting the Organization of the Petroleum Exporting Countries, Russia and their allies, a group known as OPEC+, to curb output.

For graphic of Oil supply and demand scenarios: https://fingfx.thomsonreuters.com/gfx/mkt/dgkplqxeevb/supplygap.JPG

Weak demand has piled pressure on producers and energy majors as they seek to pivot to low-carbon energy. It has sapped them of funds to invest in new oil assets so they can meet an expected rise in crude demand as the global economy recovers.

The Paris-based International Energy Agency said it was not clear if adequate investment in oil supplies “will come in time and, if it does come, where it will come from.”

Sufficient long-term oil supplies “should not be taken for granted,” it wrote in its annual outlook.