Hillcrest Energy Technologies. (CSE: HEAT)
From concept to commercialization, Hillcrest is investing in the development of energy solutions that will power a more sustainable and electrified future.
On Tuesday (local time, September 3), oil prices fell sharply, largely driven by concerns over China’s economic performance, overshadowing the impacts of recent disruptions in Libyan oil production. Brent crude futures dropped by $1.66, or 2.1%, settling at $75.86 per barrel, while West Texas Intermediate (WTI) crude futures fell by $1.07, or 1.5%, to $72.48. This decline marks a reversal from the gains earlier in 2024, with WTI nearly erasing all of its increases for the year.
Goldman Sachs stated on Tuesday that artificial intelligence could negatively impact oil prices over the next decade by improving logistics, lowering costs, and increasing the volume of profitable extractable resources. The effects of AI on energy and metals are mainly focused on demand, given the anticipated growth in electricity demand. This negative impact on oil prices could reduce revenues for producing countries like OPEC+.
In the report, Goldman Sachs noted, “AI may lower costs through improved logistics and resource allocation… Assuming a 25% productivity boost for early adopters of AI, this could lead to a marginal incentive price drop of $5 per barrel.”
Goldman Sachs also remarked, “Compared to the demand effects on electricity and natural gas, AI’s impact on oil demand is relatively small. We believe that AI will have a net negative effect on oil prices in the medium to long term.”
Goldman Sachs estimates that artificial intelligence could reduce the costs of new shale oil wells by about 30%. Additionally, AI may increase the low recovery rates of U.S. shale oil by 10% to 20%, resulting in an increase in oil reserves by 8% to 20% (or 1 billion to 3 billion barrels).
At the same time, new data from China, the world’s largest crude oil importer, has heightened concerns about global oil demand. Recent figures show that China’s manufacturing contracted in August to a six-month low, with new export orders experiencing their first decline in eight months. The weak economic indicators have intensified market pessimism, overshadowing support from ongoing supply disruptions in Libya.
UBS analyst Giovanni Staunovo noted that the uncertainty surrounding the duration of the shutdown limits the support provided by Libya’s large-scale production disruptions to the market. The global oil market remains focused on the broader economic environment, particularly the potential for production increases from countries like OPEC+.
