It had long been assumed that as conventional oil fields began to age and fall in productivity, the price of crude oil would begin to rise sharply. Indeed, the record price of US$ 147/bbl in 2008 certainly seemed to give that prediction a ring of truth. What was not taken into account however, was the boom in US unconventional production that looks set to potentially become a major contributing factor to global supply.
In a recent survey conducted by Reuters, 20 analysts were asked to predict the likely price of Brent crude oil by 2020. Although the predictions varied from as low as US$ 70/bbl (Capital Economics) to as high as US$ 184/bbl (Barclays Capital), the survey produced a mean valuation of US$ 118/bbl by 2020, a figure not too dissimilar to today's prices.
The main factor behind these stark variations in value is the likely impact of the US shale boom and the spread of unconventional production to fields across the planet. Simply put: there are those that believe that the spread of shale operations will have a significant impact on the price of oil and there are those that believe that this impact is likely heavily exaggerated.
The shale boom has certainly reversed the production trend in the US and there are plenty of potential shale fields around the globe that could prove, in time, to be highly productive. However, many analysts have pointed out that a replication of the success of the US shale industry is unlikely and that “the rest of the non-OPEC countries have clearly underperformed, and output is lower than expected.”
At present however, the trend seems to be favouring those predictions towards the lower end of the spectrum with futures for December 2019 currently valued at around the US$ 91 mark.
Edited from various sources by David Bizley