Global crude oil reserves are running out, and a supply crisis for crude oil is imminent? According to the latest report by Western oil companies, which are heavily invested by Warren Buffett, the stock god, the supply and demand situation in the oil market will reverse by the end of 2025, and oil supply will be very scarce in the coming years.
Vicki Hollub, CEO of Western Oil Company, stated in an interview on Monday (February 5th) that the oil market will face supply shortages by the end of 2025 due to the global inability to update existing crude oil reserves quickly enough.
Hollub pointed out that currently, about 97% of global crude oil is discovered in the 20th century. In the past decade, less than 50% of the crude oil produced globally has been replenished..
She explained the current situation at the Smead Investor Oasis Conference, stating, "Our current situation is that our supply will be very scarce in a few years."
Supply gap
Hollub pointed out that overall, the market is oversupplied, with oil production in the United States, Brazil, Canada, and Guyana reaching historic highs, while economic weakness in some regions is suppressing demand. Therefore, despite ongoing geopolitical conflicts in the Middle East, oil prices have been pushed down, with WTI crude oil futures and Brent crude oil futures falling by over 10% throughout 2023.
However, the decline in crude oil prices has masked a fact that the global crude oil supply gap has reached record levels.
According to the forecast of the Organization of the Petroleum Exporting Countries (OPEC) in January this year, with strong global economic growth, global oil demand will increase by 1.8 million barrels per day in 2025, while crude oil supply from non OPEC countries will increase by 1.3 million barrels per day. This prediction suggests that unless OPEC abandons its current production reduction plan and increases its own production, there will be a global supply shortage.
Hollub also stated that by the end of 2025, the supply and demand outlook will reverse, "the market is losing balance. In the short term, it is a demand issue, but in the long run, it is a supply issue."
This is not the first time Hollub has pointed out the supply and demand issues in the crude oil market. At last month's Davos Economic Forum, Hollub pointed out that due to exploration activities for crude oil lagging behind demand growth, there will be a global shortage of crude oil supply starting from 2025.
Hollub pointed out at the time that for most of the second half of the 20th century, the crude oil reserves discovered by oil companies were about five times the global demand, but in recent decades, this proportion has plummeted to only about 25%.
Hollub has been warning that as old oil fields decline, the world needs new resources, new investments, and new production capacity to maintain current supply levels.
Since the beginning of this year, global benchmark crude oil prices have risen by more than 1%. On Monday (February 5th), WTI closed at $72.78 per barrel and Brent crude oil closed at $77.99 per barrel. Hollub predicted in December last year that the average price of West Texas medium oil would be around $80 by 2024.