Oil Faces "Mission Impossible" With Sub $60/bbl Prices Through 2020, Demand Peak by 2024

Libya, Nigeria, and U.S. shale are again cited as the stumbling blocks to OPEC's attempt at a market rebalance.

A palpable sense of foreboding infused the comments of experts this week as they assessed the Organization of the Petroleum Exporting Countries' (OPEC) attempt to maintain its troubled production cutback initiative for eight more months.

In the short term, they say it is almost inevitable that compliance will slip compared to what the cartel experienced in the first half of 2017; in the longer term, they believe prices will be stuck through 2020 at $60 and that demand will peak four years later due to better fuel efficiency and the rise of electric cars.

Victor Shum, head of IHS Markit's oil market and downstream energy practice in Asia, told CNBC, "Various producers will try to comply, but I think compliance will slip; it seems like OPEC really faces a mission impossible at this time, which is to try to tighten oil markets and to sustain oil prices."

His comments came in the wake of a Monday meeting between OPEC members and some non-members participating in the cutbacks, in which the cartel acknowledged that some countries had not done their part to alleviate the crude glut and were the target of "serious discussions."

OPEC did not discuss making deeper cuts, although this had widely been teased by some members as a possibility and is widely regarded as something that could improve the efficacy of the initiative.

Mouhammed Choukeir, chief investment officer at Kleinwort Hambros, thinks OPEC's effort to stimulate prices is doomed because oil prices have a life of their own: "You can see that since the beginning of the year clearly OPEC has tried its best to keep that oil price going higher and higher (but) it has failed to do so for a number of reasons."

He added that oil "is behaving in a very atypical way if you like, and that's largely because people are not convinced that OPEC is going to be able to comply and [U.S.] shale producers are going to continue producing."

For the short term, Credit Suisse thinks crude prices won't even approach the $60 per barrel level until 2020, and on Monday it lowered its price forecast for U.S. West Texas Intermediate crude by $5 per barrel to $57.50 in 2020.

Citing full-out production by renegade OPEC members Libya and Nigeria as drivers of their gloomy forecast, Credit Suisse also predicted that the long overdue rebalancing of supply and demand won't happen until 2019, despite their expectation that OPEC will ultimately extend its cutbacks for a second time.

And then, according to Goldman Sachs, the carefully laid schemes of OPEC could collapse in 2024: the bank on Monday stated that global oil demand will peak by then if there are more efficiency gains in vehicles, greater market penetration by electric cars, lower economic growth and higher fuel prices.

Goldman Sachs projects annual oil demand growth between 2017 and 2022 at 1.2 percent, slowing to 0.7 percent by 2025 and to 0.4 percent in 2030, despite economic expansion in emerging markets such as India; concurrently, the global electric fleet, is expected to grow more than 40-fold to 83 million vehicles by 2030, compared to 2 million in 2016.

OPEC faces yet another problem, if a prediction made last week by John Kilduff, founding partner of Again Capital, is anything to go by: in debating whether the cartel will get tough on Libya, Nigeria, and other countries defying the cutback agreement, he said, "If nothing comes out of this meeting and they disappoint us all, the cartel and Russia will be punished mightily."