Oil May Slide to $10 Under This WoodMac Scenario

Wood Mackenzie has highlighted that under its Accelerated Energy Transition Scenario (AET-2), oil demand will drop significantly, and with it, oil prices.

Within the company’s AET-2 scenario, oil demand begins to drop in 2023. Soon after, the company says the decline accelerates to year on year falls of two million barrels per day, reducing demand to about 35 million barrels per day by 2050. Consequently, by 2030 Wood Mackenzie said it would expect Brent crude prices to average $40 per barrel, down from the $60 to $70 per barrel range the industry is experiencing currently. By 2050, Brent may slide to between $10 and $18 per barrel, Wood Mackenzie outlined. 

Under AET-2, OPEC has an oil market share of more than 50 percent by 2050, but less control, Wood Mackenzie highlighted. The steep fall in demand prevents those key oil producers from managing the market and supporting prices in the way it does today, Wood Mackenzie noted. Gas would eventually trade at a premium to oil under Wood Mackenzie’s AET-2 scenario, accelerating the shift of capital investment towards the sector, the company said. Wood Mackenzie stated that its analysis shows Henry Hub prices trading at $3 to $4 per thousand cubic feet, which it highlighted was similar to its base-case view.

“Our Accelerated Energy Transition Scenario – AET-2 – gives an indication of how energy demand, supply and pricing will change if policy and technology are rapidly deployed to cut greenhouse gas emissions in line with the Paris Agreement,” Ann-Louise Hittle, the vice president of macro oils at Wood Mackenzie, said in a company statement.

“Our AET-2 scenario is a scenario, not our base-case forecast. It is one interpretation of how the Paris Agreement could be achieved, based on our fundamental analysis across the natural resource sectors,” Hittle added.

“Even so, the oil and gas industry cannot afford to be complacent. The risks associated with robust climate-change policy and rapidly changing technology are too great,” Hittle went on to state.

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