AI's Impact on Oil Prices: Goldman Sachs Predicts Decade-Long Pressure

AI likely to weigh on oil prices over the next decade, Goldman says

(Reuters) - Artificial intelligence could hurt oil prices over the next decade by boosting supply by potentially reducing costs via improved logistics and increasing the amount of profitably recoverable resources, Goldman Sachs said on Tuesday. WHY IT'S IMPORTANT The impact of AI on energy and metals has mostly focused on the demand side given the expected boost to power demand. Negative impact on oil prices could decrease incomes of producers like the members of Organization of the Petroleum Exporting Countries and allies, known as OPEC+. KEY QUOTES "AI could potentially reduce costs via improved logistics and resource allocation ... resulting in a $5/bbl fall in the marginal incentive price, assuming a 25% productivity gain observed for early AI adopters," Goldman Sachs said in a note. Goldman expects a modest potential AI boost to oil demand compared to demand impact to power and natural gas over the next 10 years. "We believe that AI would likely be a modest net negative to oil prices in the medium-to-long term as the negative impact from the cost curve (c.-$5/bbl) - oil's long-term anchor - would likely outweigh the demand boost (c.+$2/bbl)," Goldman said. BY THE NUMBERS According to Goldman Sachs' estimates, about 30% of the costs of a new shale well could potentially be reduced by AI. Additionally, an AI-induced 10% to 20% increase in the low recovery factors of U.S. shale could boost oil reserves by 8% to 20% (10-30 billion barrels). CONTEXT Brent crude futures were down $3.51, or 4.5%, to $74.02 a barrel, the lowest level since December. West Texas Intermediate crude futures were down $2.97, or 4.1%, at $70.58 - their lowest price since January. [O/R] U.S. technology companies are pursuing energy assets held by bitcoin miners to secure a shrinking supply of electricity for their rapidly expanding artificial intelligence and cloud computing data centers. (Reporting by Anmol Choubey, Brijesh Patel and Anjana Anil in Bengaluru; editing by Jonathan Oatis)

AI likely to weigh on oil prices over the next decade, Goldman says

The impact of AI on energy and metals has mostly focused on the demand side given the expected boost to power demand. Negative impact on oil prices could decrease incomes of producers like the members of Organization of the Petroleum Exporting Countries and allies, known as OPEC+. "AI could potentially reduce costs via improved logistics and resource allocation ... resulting in a $5/bbl fall in the marginal incentive price, assuming a 25% productivity gain observed for early AI adopters," Goldman Sachs said in a note. Goldman expects a modest potential AI boost to oil demand compared to demand impact to power and natural gas over the next 10 years. "We believe that AI would likely be a modest net negative to oil prices in the medium-to-long term as the negative impact from the cost curve (c.-$5/bbl) - oil's long-term anchor - would likely outweigh the demand boost (c.+$2/bbl)," Goldman said. According to Goldman Sachs' estimates, about 30% of the costs of a new shale well could potentially be reduced by AI. Additionally, an AI-induced 10% to 20% increase in the low recovery factors of U.S. shale could boost oil reserves by 8% to 20% (10-30 billion barrels). Brent crude futures were down $3.51, or 4.5%, to $74.02 a barrel, the lowest level since December. West Texas Intermediate crude futures were down $2.97, or 4.1%, at $70.58 - their lowest price since January. [O/R] U.S. technology companies are pursuing energy assets held by bitcoin miners to secure a shrinking supply of electricity for their rapidly expanding artificial intelligence and cloud computing data centers. (Reporting by Anmol Choubey, Brijesh Patel and Anjana Anil in Bengaluru; editing by Jonathan Oatis)

AI Expected to Dampen Oil Prices Over Next Decade, Goldman Says

Artificial intelligence will ultimately help drive down oil prices over the next decade as improved US shale output outweighs better oil demand, according to Goldman Sachs Group Inc. The bank forecasts a 30% cut to shale costs thanks to AI during the period while delivering a modest boost to long-run oil demand, analysts including Callum Bruce wrote this week in a note to investors. The bottom-line impact could lower oil prices by $5 a barrel through increased supply and raise crude prices by $2 a barrel through higher demand, according to the note.

AI Could Lower Oil Prices Via Improved Logistics And Resource Allocation: Goldman Sachs - Invesco DB Oil Fund (ARCA:DBO), Alphabet (NASDAQ:GOOGL)

Goldman Sachs sees AI as a modest net negative for oil prices, outweighing any demand increase due to AI-driven efficiencies. On Tuesday, Goldman Sachs reportedly stated AI could lower oil prices over the next decade by reducing costs and increasing recoverable resources, boosting supply. The bank says that AI's impact on energy and metals has largely centered on the demand side, anticipating a rise in power demand. However, a negative effect on oil prices could reduce the incomes of producers, including OPEC+ members. Goldman Sachs anticipates a modest potential increase in oil demand from AI over the next decade, especially compared to the larger impact AI is expected to have on power and natural gas demand. Goldman Sachs estimates that AI could reduce the costs of a new shale well by about 30%. Furthermore, AI-driven improvements in recovery factors for U.S. shale could potentially increase oil reserves by 8% to 20%, adding 10 to 30 billion barrels. Goldman Sachs said in a note, "AI could potentially reduce costs via improved logistics and resource allocation ... resulting in a $5/bbl fall in the marginal incentive price, assuming a 25% productivity gain observed for early AI adopters." "We believe that AI would likely be a modest net negative to oil prices in the medium-to-long term as the negative impact from the cost curve (c.-$5/bbl) - oil's long-term anchor - would likely outweigh the demand boost (c.+$2/bbl)," Notably, Brent crude oil prices have experienced significant selling pressure recently, dipping to 77.21 USD per barrel on Tuesday. Although there has been a slight recovery from earlier lows, the overall market sentiment remains bearish. Investors are reacting to recent data from OPEC, which indicates that 8 OPEC+ members plan to increase their production by 180,000 barrels per day. This anticipated rise in supply casts a shadow over the oil market, particularly as it coincides with weakening demand indicators from major economies. Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors. Image by Pixels Hunter via Shutterstock Market News and Data brought to you by Benzinga APIs