Occidental CEO Warns of Potential Oil Supply Shortage by 2025

CEO Warns of Potential Oil Supply Shortage by 2025

The CEO of Occidental, Vicki Hollub, has issued a warning that the oil market could face a significant supply shortage by the end of 2025. Hollub expressed concern that the world is not replacing current crude reserves at a sufficient rate, with about 97% of the oil produced today having been discovered in the 20th century. She highlighted that the world has only been able to replace less than 50% of the crude produced over the last decade.

Impending Supply Challenge

During an interview with CNBC at the Smead Investor Oasis Conference in Phoenix, Hollub emphasized, "We're in a situation now where in a couple of years' time we're going to be very short on supply." She noted that despite the current oversupply in the market, driven by record oil production from the U.S., Brazil, Canada, and Guyana, there will be a notable shift in the supply and demand outlook by the end of 2025.

Market Transformation

Hollub explained that while the market is currently out of balance due to a short-term demand issue, it will transform into a long-term supply challenge. According to her, OPEC is anticipating global oil demand to increase by 1.8 million barrels per day in 2025, surpassing crude production growth of 1.3 million barrels per day outside the cartel. This forecast suggests a potential supply deficit unless OPEC opts to abandon current production cuts and elevate its own output.

Market Trends and Projections

The CEO's warning comes amidst the backdrop of declining oil prices in 2023, with West Texas Intermediate and Brent futures finishing more than 10% lower due to record production in the U.S. and a weakening economy in China. However, in 2024, WTI is expected to average around $80, as per Occidental's projections.

Challenges for the Industry

As the global oil market navigates current oversupply dynamics and anticipates potential future shortages, the industry will face complex challenges in balancing supply and demand, which could have significant implications for the global economy.