Crude oil prices are likely to skyrocket in 2022 due to underinvestment in the oil sector, experts say.
According to Sanford C. Bernstein & Co., only 408,000 m2 of new oil reserves were discovered in 2021. The coronavirus pandemic and stricter climate policies forced major companies to slash their exploration budgets and decrease production. Shell was forced to suspend some of its oil projects, while Equinor and BP abandoned their shelf leases in Canada. Wintershall Dea closed operations in Argentina and Brazil. As demand for the commodity remains high, prices could rise sharply, similar to the upsurge in 2004-2014. An outlook by Goldman Sachs sees oil prices rise above $100 per barrel. According to the bank’s analysts, increased demand worldwide, OPEC+ production shortfalls, and high industrial activity in China are likely to propel the commodity higher.
“Crude oil markets look set to tighten further in 2022”, Saxo Bank’s head of commodity strategy Ole Hansen commented. “The market will be facing years of likely underinvestment with oil majors losing their appetite for big projects, partly due to an uncertain long-term outlook for oil demand, but also increasingly due to lending restrictions being put on banks and investors owing to a focus on ESG and the green transformation”, he added.
