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ExxonMobil Warns of Oil Supply Risks, Prices Could Surge 5X
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Exxon Mobil Corporation (XOM - Free Report) forecasts that global crude oil demand will remain robust, exceeding 100 million barrels per day (bpd) through 2050, per a Reuters report.
This outlook, significantly higher than BP plc's (BP - Free Report) projection, underscores ExxonMobil’s aggressive production strategy, distinguishing it from its European counterparts. ExxonMobil, the largest U.S. oil company, revealed its latest global oil outlook, marking a substantial increase from BP's more conservative estimates.
ExxonMobil’s production plans are the most ambitious among Western oil giants, with the company aiming to produce 4.3 million barrels of oil and gas daily in 2024, which is 30% more than Chevron Corporation's (CVX - Free Report) current output. In contrast, BP is on track to reduce its production to approximately 2 million bpd by 2030, aligning with its strategy to transition to lower-carbon energy sources.
Despite the ongoing global shift toward renewable energy, ExxonMobil remains confident that the impacts of electric vehicles (EVs) on long-term oil demand will be limited. The company argues that even if every new car sold by 2035 were electric, global oil demand would still reach 85 million bpd, the same level seen in 2010. This is in stark contrast to BP’s forecast, which suggests that oil demand will peak in 2025 and decline to 75 million bpd by 2050.
ExxonMobil’s outlook also contrasts sharply with the International Energy Agency’s (“IEA”) net-zero emission scenario, which would require a drastic reduction in crude demand to 24 million bpd by 2050. ExxonMobil projects that by mid-century, oil, natural gas and coal will still account for 67% of the global energy mix, only slightly down from 68% in 2023.
ExxonMobil’s projections reflect a more pessimistic view of global carbon emissions reductions than BP’s, with XOM anticipating that significant technological advancements to reduce emissions will not materialize until after 2029. This differs from BP's more optimistic timeline, which predicts reductions from the middle of this decade.
The company also emphasized the need for continued investment in oil production, particularly in unconventional resources like U.S. shale. These short-cycle assets have a more rapid natural decline, with ExxonMobil estimating the global oil output to decrease 15% annually without new investments. This decline rate is notably steeper than the IEA's 2018 estimate of an 8% annual decline.
XOM’s analysis suggests that without sustained investment, global oil supply could shrink to 30 million bpd as early as 2030, driving oil prices up fivefold. The company highlighted the critical importance of ongoing investment in oil and gas, arguing that demand for these energy sources will continue to grow in the coming years despite the global energy transition.
As the world navigates the complex path toward cleaner energy, ExxonMobil’s forecast underscores the continued importance of oil and gas in the global energy landscape, particularly as the population is expected to rise from 8 billion today to 10 billion by 2050.
Zacks Rank & Key Pick
ExxonMobil currently carries a Zack Rank #3 (Hold).
Precision Drilling Corporation (PDS - Free Report) is Canada’s largest drilling rig contractor. A provider of rentals, wellsite accommodations and snubbing services, Calgary-headquartered Precision Drilling has active operations in the United States, Mexico and Saudi Arabia.
The Zacks Consensus Estimate for PDS’s 2024 EPS is pegged at $6.59. The company has a Zacks Style Score of A for Value, Growth and Momentum. It has witnessed upward earnings estimate revisions for 2024 and 2025 in the past seven days.
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ExxonMobil Warns of Oil Supply Risks, Prices Could Surge 5X
Exxon Mobil Corporation (XOM - Free Report) forecasts that global crude oil demand will remain robust, exceeding 100 million barrels per day (bpd) through 2050, per a Reuters report.
This outlook, significantly higher than BP plc's (BP - Free Report) projection, underscores ExxonMobil’s aggressive production strategy, distinguishing it from its European counterparts. ExxonMobil, the largest U.S. oil company, revealed its latest global oil outlook, marking a substantial increase from BP's more conservative estimates.
ExxonMobil’s production plans are the most ambitious among Western oil giants, with the company aiming to produce 4.3 million barrels of oil and gas daily in 2024, which is 30% more than Chevron Corporation's (CVX - Free Report) current output. In contrast, BP is on track to reduce its production to approximately 2 million bpd by 2030, aligning with its strategy to transition to lower-carbon energy sources.
Despite the ongoing global shift toward renewable energy, ExxonMobil remains confident that the impacts of electric vehicles (EVs) on long-term oil demand will be limited. The company argues that even if every new car sold by 2035 were electric, global oil demand would still reach 85 million bpd, the same level seen in 2010. This is in stark contrast to BP’s forecast, which suggests that oil demand will peak in 2025 and decline to 75 million bpd by 2050.
ExxonMobil’s outlook also contrasts sharply with the International Energy Agency’s (“IEA”) net-zero emission scenario, which would require a drastic reduction in crude demand to 24 million bpd by 2050. ExxonMobil projects that by mid-century, oil, natural gas and coal will still account for 67% of the global energy mix, only slightly down from 68% in 2023.
ExxonMobil’s projections reflect a more pessimistic view of global carbon emissions reductions than BP’s, with XOM anticipating that significant technological advancements to reduce emissions will not materialize until after 2029. This differs from BP's more optimistic timeline, which predicts reductions from the middle of this decade.
The company also emphasized the need for continued investment in oil production, particularly in unconventional resources like U.S. shale. These short-cycle assets have a more rapid natural decline, with ExxonMobil estimating the global oil output to decrease 15% annually without new investments. This decline rate is notably steeper than the IEA's 2018 estimate of an 8% annual decline.
XOM’s analysis suggests that without sustained investment, global oil supply could shrink to 30 million bpd as early as 2030, driving oil prices up fivefold. The company highlighted the critical importance of ongoing investment in oil and gas, arguing that demand for these energy sources will continue to grow in the coming years despite the global energy transition.
As the world navigates the complex path toward cleaner energy, ExxonMobil’s forecast underscores the continued importance of oil and gas in the global energy landscape, particularly as the population is expected to rise from 8 billion today to 10 billion by 2050.
Zacks Rank & Key Pick
ExxonMobil currently carries a Zack Rank #3 (Hold).
Investors interested in the energy sector may look at one better-ranked stock that presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Precision Drilling Corporation (PDS - Free Report) is Canada’s largest drilling rig contractor. A provider of rentals, wellsite accommodations and snubbing services, Calgary-headquartered Precision Drilling has active operations in the United States, Mexico and Saudi Arabia.
The Zacks Consensus Estimate for PDS’s 2024 EPS is pegged at $6.59. The company has a Zacks Style Score of A for Value, Growth and Momentum. It has witnessed upward earnings estimate revisions for 2024 and 2025 in the past seven days.