ConocoPhillips Chief Executive Ryan Lance has warned of incredible volatility in the global oil markets going forward, as demand remains uncertain and new coronavirus variants could further dent prospects for energy markets.

Lance told the 23rd World Petroleum Congress in Houston that three key factors are setting up an environment for the oil markets that is “going to be quite constructive", but also incredibly volatile.

“One is there's this sense of demand stagnation, because of the energy transition. So there's this big uncertainty around what the demand trajectory is going to look like for this business,” he told a panel of speakers.

He cautioned that there’s a fear in the market that demand is “going to stagnate and (could) start to go down pretty rapidly".

Lance warned of reduced capital investment in the oil sector in the coming years.

“We all know that uncertainty leads to reduced capital investment,” he noted.

Investors in the industry are saying “no longer is growth, at the expense of returns, going to be allowed in this business,” said the ConocoPhillips boss.

When it comes to this return on capital in the oil business, it’s been a tough ride, Lance said.

“Our business over the last decade has produced dismal returns,” he said.

The Opec+ group no longer has enough spare capacity to be a swing producer, and that casts further doubts on future oil markets.

The ConocoPhillips boss also warned of market uncertainties surrounding the Covid-19 variants.

“It's going to be things like, you know, a new Covid variant causing a 50% downdraught in the commodity price and a forward curve that starts to go down,” he suggested.

However, Lance reckoned that the challenges ahead will “make it a pretty constructive environment, which is not going to bode well for the energy transition in terms of emissions and emission reductions".

“That's why we all have to do our business smarter, more sustainably, because as this demand starts to grow, it creates an environment [that] will take care of our market,” he said.

Despite the challenges ahead for the oil markets, Lance referred to key mandates that lie ahead for companies like ConocoPhillips.

“We've got to meet the energy transition demand, whatever that's going to look like over the next number of years," with the lowest cost per barrel, he said.

Companies also have to take care of their emissions, Lance said.

“The emissions that we create as a business, we have to have a sustainable path for those in a Paris-aligned climate strategy framework,” he said.

Finally, Lance said investor returns need to be preserved in the industry, after they have been abysmally low in recent years.