<article><p class="lead">Global crude prices could soar to $80/bl this year because of severe inventory shortages and rising demand, but US shale producers are unlikely to ramp up production, a panel of experts told the Argus Live Crude Summit today.</p><p>Crude supply is shrinking much faster than widely estimated, Marshall Adkins, a managing director who oversees energy investment banking at Raymond James, said. Global inventories have dropped by about 370mn bl since last May, which means Opec+ needs to produce at full capacity by the end of 2021 to keep up with demand.</p><p>Once demand starts to gain momentum, the resulting supply crunch will cause prices to jump by as much as 35pc this year to $80/bl from a little over $50/bl today.</p><p>The outlook "is exceptionally bullish," Adkins said. "Oil demand has been stronger and faster than expected. And inventories are falling very fast."</p><p>Ed Morse, managing director and global head of commodity research at Citi Group, concurred.</p><p>"The world overestimated the decline in demand," Morse said. "And the world is now dramatically underestimating the decline in inventories."</p><p>The bullish assessments are at odds with the IEA, which recently lowered its forecast for global oil demand in 2021 because of the Covid-19 pandemic.</p><p>"It will take more time for oil demand to recover fully as renewed lockdowns in a number of countries weigh on fuel sales," the organization said.</p><p>Adkins offered a simple explanation for the different forecasts.</p><p>The IEA "data is wrong," he said.</p><p>Analysts used to exclusively depend on IEA for supply and demand information, but such data only cover about 50pc of the market, Adkins said. Today, a number of firms track the industry and have been able to better get information on China and undersea oil, which means analysts can now see about 80-85pc of the market, he said.</p><p>"We got a much better view on global crude and product than just relying on the IEA," Adkins said.</p><p>But despite these optimistic price forecasts, US producers are not going to suddenly boost capital investments and pump a lot more oil and gas out of the ground, said Nick Allen, general manager, global crude and natural gas liquids for ConocoPhillips.</p><p>US producers took a big hit from the pandemic so they will devote their cash to repairing balance sheets before spending more on capital expenditures, he said.</p><p>Companies have emphasized "capital discipline, and I do not neccesarily think that is going to change," Allen said.</p><p>He also noted that producers have hedged a good deal of their 2021 production in the low $40/bl range, which means they will not get the benefit of a price surge this year.</p><p class="bylines">By Thomas Lee</p></article>
