In JPMorgan’s view, the stage is set for a potential decline of as much as 50% in oil prices through the end of 2027, taking Brent crude down to the low $30s per barrel range from its current level of around $63.50.
Will bearish forecasts by JPMorgan and others temper bidding at the highly anticipated, and long awaited, Gulf lease sale to be held on 12/10/2025? Probably not for these reasons:
Given the longer term nature of deepwater development, production will not begin for years following lease issuance. Note that anticipated first production for 3 new high-pressure deepwater projects, Kaskida, Sparta, and Tiber, will be 23, 16, and 21 years after the field discovery dates.
To the extent that price forecasts are reliable at all (see no. 9 in the image below), the degree of uncertainty for longer term forecasts is particularly high.
The sale has to live up to its name Big Beautiful Gulf 1 (BBG1). 😉
The title grabs your attention, but the justification isn’t terribly compelling. The author simply adjusts the brief 2008 price spike ($200/barrel) for inflation to justify his forecast.
Per the author:
The thing about commodities like oil is that while they can be acutely volatile because of supply and demand and political events, long term their price is a function of the technology needed to create them and the state of inflation in the denominating economy.
Declines in drilling activity and discoveries suggest that higher real oil prices are on the horizon. We may be fortunate enough to escape significant price hikes and supply disruptions over the next couple of years, but they are coming.
US offshore trends are even more troubling. Per BOEM’s database, no deepwater fields were discovered in 2021 and there were only 2 discoveries in the past 3 years (see chart below). HartEnergy reports 5 announced discoveries in 2021, none of which has been determined by BOEM to be commercially producible. Regardless of the status of those 2021 determinations, recent discoveries have not been sufficient to reach and sustain GoM production volumes at the 2019 peak (August) of 2.044 million BOPD. 2019 was the first year since 1982 without a confirmed deepwater discovery and the trend (below) is not encouraging. Schlumberger data through 2016 indicated GoM depletion rates greater than 20%, and the subsequent low discovery rates do not bode well for future production trends.
from BOEM data
You can’t make discoveries without drilling and only 9 companies drilled deepwater GoM exploratory wells in 2021 (34 wells total). With the Pacific in decommissioning mode, the Atlantic and Eastern GoM off-limits, limited options offshore Alaska, and the decline of the GoM shelf, the deepwater GoM is the only important US offshore production option. The exploration numbers below are therefore concerning.
The shale revolution made the US a net oil exporter, but skepticism about shale production forecasts suggests the need for other supply sources. Given the shale uncertainty and the unrealistic expectations regarding the energy transition, greater US dependence on imported oil is on the horizon. This bodes well for OPEC, but not so well for US and international consumers.
Meanwhile, the US Dept. of Energy shows no evidence of concern about oil and gas production. Although oil and gas account for about 70% of our energy consumption, there has been no mention of either on the DOE homepage for months. DOE does express a strong interest in “energy justice.” Perhaps they can explain how increased imports and higher energy prices benefit the poor. They should also explain how oil imports are environmentally and economically superior to domestic oil and gas production, when the reality is exactly the opposite.
Bud's Offshore Energy (BOE) 