Pushing Back on Anti-Oil & Gas Macro Biases In Shorter-Term Analyses

Obliterating Peak Oil & Gas Demand

The residue of an extended period of anti-oil & gas macro bias continues to overhang the traditional energy sector. It manifests most clearly in the questionable expectation by some high profile forecasters that both oil and natural gas will go ex-growth within a decade. Let us be clear: We take the way, way over on those forecasts. A “going ex-growth” sentiment has raised sector cost-of-capital (i.e., made valuation metrics like P/E or EV/EBITDA inexpensive) and been a contributing factor to energy’s lackluster weighting in the S&P 500.

Given how little energy the other 7 billion people on Earth use in comparison to The Lucky 1 Billion of Us, we expect aggregate energy demand to be multiples of current energy usage over the long run (many, many decades ahead). We will need new technology developments, sensible energy and economic policies, and significant capital employed to build out both traditional and new sources of supply and infrastructure in order to meet energy needs and achieve our aspiration that everyone on Earth is some day energy rich.

Our “Obliterating Peak Oil Demand” series of posts (here, here, here, and here) has primarily focused on our more optimistic view of long-term oil (liquids) and natural gas demand versus many of the high-profile macro forecasters. An area we have spent less time discussing until recently has been to link the long-term anti-oil & gas macro biases to near-term forecasts and sentiment. At Super-Spiked and Veriten, we are not in the business of guessing commodity prices over the short-term. We are in the business of helping companies think through long-term strategy, which includes navigating inherent macro volatility. That remains our emphasis even as we spend more time on shorter-term commodity supply/demand balances.

What jumps out to us right now includes the following:

• Most market participants are way too bearish on crude oil prices. We differentiate between our shared concern of modest softness over the next 6-9 months versus calls by some leading voices of a more meaningful supply/demand imbalance that could crash oil to $50/bbl and possibly lower, with a longer-term adjustment process potentially being required.

• The AI boom has driven many market participants to hold a more favorable view of global natural gas demand versus oil/liquids demand. Still, long-term growth forecasts by leading energy agencies and other forecasters assume a sharp deceleration in long-term growth that to us does not comport with the massive unmet energy and power needs of everyone on Earth.

• If the demand for crude oil continues to grow as we expect, global refinery runs will have to increase, with margins high enough to justify some combination of new expansions and debottlenecking of existing plants.

• Natural gas liquids (NGLs) will continue to grow to meet petrochemical and clean cooking fuel demand (among other uses). We are committed to doing a better job of disaggregating overall liquids demand into its components: black crude oil that is used by refineries to primarily produce gasoline, diesel, jet fuel, and naphtha versus natural gas liquids that are used as a petrochemical feedstock, gasoline blending component, and for clean cooking fuels. The supply/demand/price dynamics of NGLs are distinct from crude oil. Yet most “oil” supply/demand balances mix the two together.

• The cost-of-capital for the oil & gas (i.e., traditional energy) sector is being weighed down by a brutal combination of excessively bearish cyclical concerns juxtaposed against a false expectation that the sector will go ex-growth within a decade.

Why does the market have an anti-OPEC Research bias?

In our most recent pre-Labor Day video podcast (here), we observed that much of the current extreme pessimism toward the oil sector in particular is seemingly driven by the market prioritizing the International Energy Agency’s Oil Market Report (OMR) over OPEC Research’s equivalent Monthly Oil Market Report (MOMR). As Exhibit 1 shows, the implied liquids overhang using the IEA’s OMR is staggering, whereas balances look more manageable using a “crude only” analysis via OPEC Research’s MOMR. To be clear on a couple of points:

• Neither report explicitly forecasts the estimated stock builds we are showing in Exhibit 1, as both groups do not publicly forecast future OPEC crude oil production. We have made the simplifying assumption of using respective reported July 2025 production for the forecasted periods to project the forward balances that uses each report’s outlook for global liquids demand and non-OPEC (or OPEC+) supply.

• If we adjust the IEA’s balances to “crude oil only,” we still get much larger expected builds than using OPEC Research figures.

It bears repeating that we believe forecasts and analysis from both the IEA and OPEC Research are made in good faith. The question we are raising is why OPEC Research is not given greater consideration by market participants versus the apparent default assumption to treat the IEA’s views as the starting point for oil analysis.

Exhibit 1: Big differences exist in expected oil S/D balances between the IEA and OPEC

Source: IEA, OPEC, Veriten.

The following is our best guess as to why the market treats the IEA as the gold standard and places much less weight on OPEC Research:

• According to a Perplexity search, the IEA has been publishing the OMR since 1983, whereas the MOMR only started in 2005. The IEA has therefore been the default standard for all veteran oil analysts, which has been handed down to the newer generation.

• The IEA’s OMR is excellent. Full stop. In the pre-energy transition/net zero years, there was no reason for an analyst to consider basing their forecasts on anything other than the IEA. The data provided by the IEA, especially if you subscribe to the additional services it provides, has been deeper and broader than what is available from OPEC Research.

• The IEA makes it easier to build out a basic supply/demand model than does OPEC Research, especially since OPEC shifted to its “Declaration of Commitments (DOC)” versus non-DOC approach to supply from the more traditional and broadly followed OPEC vs non-OPEC splits.

• The IEA has generally been the more visible organization to analysts in the United States, Canada, and Western Europe. It has only been in recent years that OPEC Research has felt more accessible to a broader group of analysts and oil market observers. We credit the late, great former OPEC Secretariat Mohammad Barkindo for being the person most responsible for improving the transparency and broader market engagement of OPEC and OPEC Research.

• We suspect the legacy of the Arab Oil Embargo years of the 1970s coupled with ongoing geopolitical turmoil in major Middle East countries has contributed to a negative bias by western energy analysts and the media toward OPEC in general and by extension OPEC Research. We acknowledge to having historically felt this way; we no longer do.

• We are especially surprised by interactions we have with some oil company executives that to us come across as dismissive of OPEC Research vis-à-vis the IEA, despite the broad-based agreement that the IEA going all-in on “Net Zero by 2050” was a mistake.

We believe OPEC Research has the most realistic long-term views for energy demand

As we have articulated in our recent “Obliterating Peak Oil Demand” series of posts (here, here, here, and here), our own views of long-term energy demand most closely aligns with OPEC Research—certainly versus the IEA but also versus forecasts from many leading oil and gas firms. Exhibits 2-5 show the outlook for oil (liquids) and natural gas to 2050 from OPEC Research’s World Oil Outlook (WOO) report, the IEA’s equivalent World Energy Outlook (WEO) report, and the IEA’s most recent Net Zero by 2050 (NZ0) report.

We have now added data from ExxonMobil’s latest Global Outlook update (here). We would observe that similar to the IEA’s WEO report, ExxonMobil assumes that oil (liquids) is on the verge of going ex-growth, albeit at higher absolute levels than the IEA and without the explicit downtrend the IEA shows in its WEO report. ExxonMobil is more optimistic than OPEC Research and considerably more bullish than the IEA on global natural gas demand growth, but also assumes a sharp slowdown post 2040.

Similar to the IEA and OPEC, we believe outlook reports from major oil companies are made in good faith. But despite coming from industry insiders, they are not necessarily any more “accurate” than anyone else’s scenarios or projections. In recent years, the oil and gas industry has been under significant pressure from left-leaning politicians, ESG/Sustainability investors, activists, and academics to show that they take climate concerns seriously. We do not know the degree to which this has impacted the macro scenarios provided in publicly-available materials. Irrespective of whether we agree with the various scenarios provided, we have always been impressed with and enjoyed our interactions with those in the chief economist’s office at the large oil and gas firms. We will add corresponding scenarios from other high-profile forecasters as they are updated in the coming months.

As best as we can surmise, no macro forecaster, including the major oil companies, correctly called for the continued increase in global coal demand we have observed to date. Prior to 2004, we do not recall anyone expecting China to experience the sharp economic and energy s-curve that came about that decade; a lot of the focus back then was on Japan, the Asia “Tigers” and “Tiger Cubs,” and a maturing Western Europe. Right now, it is still in vogue to call for out period sharp slowdowns in oil (liquids) and natural gas. We are skeptical of those calls.

We would also observe that all of the published scenarios end in 2050. No one, including us, is assuming that everyone on Earth will be energy rich by 2050. In our view, that is the end state—be it aspirational or reality. We acknowledge that we do not know what decade it is achievable and how changing demographics, including the potential for global population to rollover in the second half of this century, will impact global economic health and therefore energy usage.

Exhibit 2: We believe OPEC Research has the most realistic outlook for oil (liquids) demand

Source: ExxonMobil, IEA, OPEC, Veriten.

Exhibit 3: Even OPEC Research assumes a long-term slowdown in structural growth rates for oil (liquids), seemingly before everyone on Earth is energy rich

Source: ExxonMobil, IEA, OPEC, Veriten.

Exhibit 4: ExxonMobil now has the fastest global gas demand growth expectation until 2040

Source: ExxonMobil, IEA, OPEC, Veriten.

Exhibit 5: All major forecasters assume a sharp slowdown in global gas demand growth by the 2040s for reasons we find unconvincing

Source: ExxonMobil, IEA, OPEC, Veriten.

Energy transition mindset a major problem in many long-term scenarios

We are going to differentiate specific “net zero by 2050” scenarios—none of which do we think are remotely plausible—from the more insidious “energy transition” mindset that has plagued macro forecasting since the 2020-2021 time frame. It is one thing to produce a specific scenario as to what “net zero” could look like, if you are so inclined. We are increasingly observing the split between those that still subscribe to the idea of “energy transition” with those of us that have stopped using the term entirely (when people first started using it, it did not bother us).

Energy transition in our view is now associated with slowing global energy demand and a shift out of higher carbon energy sources into low- or no-carbon energy sources. The focus remains on counting CO2 as the primary objective—not solving for maximum global wealth as the overarching objective everyone on Earth obviously cares about and is stiving for. As a reminder, it is not up to ourselves as Americans or any of you reading this as a likely fellow Lucky 1 Billioner to decide what the goals or aspirations should be for the other 7 billion people on Earth. They are rightfully going to decide for themselves. It is on that basis we have an optimistic view of long-term demand for all sources of energy, new and traditional.

We disagree with macro scenarios that de facto assume widespread energy poverty and a lack of ambition to achieving rich-world lifestyles in primary energy demand forecasts be it by 2050 or any other decade, inclusive of whether a lot of stuff is electrified or not. On a related note, we need to revisit our “Sticks and Stones” post (here) from the early days of Super-Spiked to update how we view various energy descriptors.

⚡️On A Personal Note: Parent Corner, End of Summer Edition

We love Summer and would actually love Fall if it didn’t lead to shorter and colder days in Winter. Given Jerry Jones’ incomprehensible trade of Micah Parsons to a primary conference rival, I am thankful for fantasy football, the strong start to the Trojans season, and for Coach Prime staying for another year with the Buffs despite his sons graduating. The Knicks have a new coach and a lot of promise in a weak Eastern Conference. The Yankees will hopefully move on from the failed Cashman/Boone regime after this season; Hal must have at a least a modicum of The Boss in him. And let’s see if having a second home in Houston helps ward off winter gloom and allows for more consistent year-round golf.

The summer of 2025 will be remembered as the summer of transition for my parents, both of whom are 85. I have heard from many of you on my prior OAPN Parent Corner and already knew that I was super lucky to have reached my mid-50s with both parents still around. I am also lucky that my parents made the big call to move from a place they have spent parts of the past 51 years, Cape Cod, to a senior living community about 10 minutes from where I live, which also happens to be the same area where they raised me and my siblings.

In the same way I am blessed to have retired from Goldman Sachs at age 45—and stayed retired for 8 years while my kids were in middle and high school—I think the opportunity to live near my parents again will prove similarly rewarding. Already, it is eye opening versus what were decades of a weekly Sunday evening FaceTime or phone call for 10-20 minutes and short stays over major holidays. I believe I know my children much better having been home for so many key years with them—something many Dads my age (or older) were not able to do. I think the same is already proving true with my parents, whom I have not lived in close vicinity to since transferring to the University of Denver in 1989.

I would note that many people use “senior living” and “assisted living” interchangeably. In fact, my parents are not in assisted living, but are in their own 2 bedroom unit that is otherwise no different than owning an apartment or condominium anywhere else. It just happens to be in a place that offers senior-oriented services around health and professional care as well as various activities and logistical services. Their place is billed as a “college campus for seniors”…spot on! It’s a warm and friendly environment and thankfully only a short drive away.

I know the pure happiness I feel when our oldest comes home to visit. Surely I must bring my parents that same joy! You’re welcome Mom and Dad. I am especially happy that you will get to see at least two of your three children and three of your seven grandchildren on a regular basis going forward. You both are super lucky.

⚖️ Disclaimer

I certify that these are my personal, strongly held views at the time of this post. My views are my own and not attributable to any affiliation, past or present. This is not an investment newsletter and there is no financial advice explicitly or implicitly provided here. My views can and will change in the future as warranted by updated analyses and developments. Some of my comments are made in jest for entertainment purposes; I sincerely mean no offense to anyone that takes issue.