(The views and opinions expressed in this article are those of the attributed sources and do not necessarily reflect the position of Rigzone or the author.)
For those eagerly anticipating the end of 2020, approximately six weeks – just 12 percent – remain in this historic, difficult year. Few industries have endured more hardships in 2020 than oil and gas, with exceptionally sharp demand destruction and massive layoffs. During the second half of 2020, however, the oil market also showed signs of recovery. One such indicator tied to U.S. consumer activity suggests better days to come in 2021, according to one of Rigzone’s regular market-watchers. Keep reading to learn more, along with other insights about oil and gas market trends.
Rigzone: What were some market expectations that actually occurred during the past week – and which expectations did not?
Mark Le Dain, vice president of strategy with the oil and gas data firm Validere: Certain indications of demand, as well as structural future demand indicators, continued to impress. India actually reported a month of year-over-year growth in products consumption, highlighting Asia’s widening recovery. Even with restrictions, the U.S. actually saw gasoline consumption approaching pre-pandemic levels and record RV (recreational vehicle) sales and surprisingly high truck sales from automakers – as people prefer to drive now for safety – all point to high demand next year.
Phil Kangas, US Partner-in-Charge, Energy Advisory, Natural Resources and Mining, Grant Thornton LLP: While headlines focus this week on major developments in the political and public health arenas, the U.S. Energy Information Administration (EIA) released its short-term energy outlook. To no surprise the forecast is for modest changes to consumption habits. The EIA expects “high global oil inventory levels and surplus crude oil production capacity to limit upward pressure on oil prices and that Brent prices will remain near $40 per barrel through the end of 2020.”
Nov. 4 saw the United States officially exit the 2015 Paris Climate Accords agreement, a departure long in the works since first announced on June 1, 2017. Only a few days later, the election results were called in favor of a change in the presidential leadership that initiated the exit. While polls had long indicated this electoral outcome for the Presidency, the much-anticipated “Blue Wave” did not materialize. A Republican-retained Senate will modulate any dramatic policy actions, particularly in the energy sector.
Tom McNulty, Houston-based Principal and Energy Practice leader with Valuescope, Inc.: WTI traded up this week when news of a potential vaccine came out – and then traded back a bit. This continues to support the notion I see throughout the market that supply, and demand, are sitting in a tight equilibrium range. I spoke to a client here just this Tuesday who saw some movement in rigs in the Eagle Ford. As I have said many times, producers will produce.
Rigzone: What were some market surprises?
Le Dain: Positive vaccine news continues to surprise the market, but these will likely be short pops given the complex rollout logistics.
Kangas: With the promise of a split government, the market rallied and showed some of its best week-over-week performance in months. WTI and Brent crude benefited from the surging market, though are still down roughly a third in value year-over-year. Further exuberance followed the positive news that a COVID-19 vaccine may be within reach. With the encouraging promise of a return to normal consumption, energy stocks were among those most benefiting from the good news.
While year-over-year numbers are still dramatically down, another notable development was an uptick in oil rigs coming online. A positive indicator of capital investment, oil and gas drilling rigs in operation is up to 300 as of last week, showing a 14-percent increase since October with the largest gains in the Gulf Coast and Permian Basin regions, according to a report by Baker Hughes.
Likewise, moderate recovery is evidenced in recent job numbers from the Bureau of Labor Statistics (BLS). America’s oilfield services and equipment sector employment rose for a second consecutive month, adding 6,430 jobs in October, according to analysis of recent BLS data by the Petroleum Equipment and Services Association. This sector is still down roughly 100,000 jobs year-over-year.
McNulty: I thought the EIA data on U.S. LNG exports in October jumping more than expected was interesting. I think it was the largest month-on-month LNG export increase ever! We know we have plenty of natural gas, so it is a demand factor. Economies in Asia, such as China’s, have boosted their imports of LNG from the U.S. Looks like Asia is recovering from the COVID pandemic rapidly.
To contact the author, email mveazey@rigzone.com.
No comments:
Post a Comment