BP Warns Battle for Oil Market Share Could Return

Collaboration between producers could be short-lived

LONDON—The world’s appetite for oil will slacken in the coming decades, but petroleum supplies will remain abundant, BP PLC said Wednesday, highlighting the possibility that big producers will renew their fight for market share.
The trends forecast in BP’s annual energy outlook suggest the collaboration between major oil-producing countries to reduce supply could be short-lived, as producers in the Middle East, Russia and U.S. shift strategies to cope with sputtering demand growth.
BP economists declined to speculate on long-term oil prices Wednesday, but Chief Executive Bob Dudley coined the phrase “lower for longer” during the recent price slump.
The subsequent uptick in oil prices was only possible because of the rare cooperation between the Organization of the Petroleum Exporting Countries and other producers to cut supply.
However, BP sees oil-demand growth down by around 60% in 2035 from 2015. It says some oil barrels could be stranded in the ground, while producers who can survive at low prices will pump hard to keep or expand their market share.
“In that world, if I can produce my oil at a fraction of the cost of somebody else, I would sort of want to try and impose my competitive advantage,” BP’s chief economist, Spencer Dale, said at a news conference.
An all-out battle for market share waged by Saudi Arabia and other members of OPEC is blamed in part for a rout that caused a barrel of crude to trade in 2016 as low as $27 a barrel—a 12-year nadir.
Prices have doubled to roughly $55 a barrel since OPEC said it would cut back production, but few see prices heading back to $100, where they hovered for almost three years until 2014.
The main cause of the rout was vast new supplies of oil and that isn’t likely to go away soon. The volume it is possible to extract with current technology is enough to meet demand until 2050 twice over, BP said Wednesday.
“It is increasingly likely that there will be technically recoverable oil resources which will never be extracted,” Mr. Dale said.
That could change the way oil producers—particularly producers of low-cost oil—strategize, he added.
Oil-demand growth is expected to gradually slow over the next 20 years, as improving fuel efficiency and increasing use of electricity, natural gas and biofuels in the transport sector challenge oil’s core market. Other energy sources, like renewables, are also increasingly prevalent.
Based on these trends, BP says oil demand could begin to decline in the mid-2040s.
By 2035, BP forecasts Middle Eastern producers within OPEC, together with Russia and the U.S., will account for 63% of global oil production, up from 56% in 2015.

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