Rising confidence for oil, gas industry in 2018

Optimism returned to the oil and gas industry in 2017 buoyed by the success of the production cut deal orchestrated by the Organization of Petroleum Exporting Countries (OPEC) in conjunction with other key oil producers led by Russia. 

With oil prices at their highest level since mid-2015, the outlook looks better. Already, there is a rising confidence for 2018. For instance, crude oil prices had its strongest opening week for any year since 2013 as refiners and exporters whittled away at crude inventories tucked away in US storage tanks. West Texas Intermediate crude for February delivery closed at $61.44 a barrel on the New York Mercantile Exchange while Brent for March settlement closed at $67.62 on the London-based ICE Futures Europe exchange.

Woodmac expects global exploration sector to return to profit

There are early signs that the global exploration sector may soon return to profit, according to Andrew Latham, Wood Mackenzie’s vice president of global exploration research. Despite the potential increase in profitability, there will not be a surge in global exploration activity in 2018, Woodmac revealed.

The most-favored plays will be deepwater spots promising high resource density, rapid commercialization and breakeven prices below $50 per barrel, Woodmac stated. The organization highlighted that most of the best of these are located around the Atlantic margins.

Wave of LNG projects set to begin

The next wave of LNG projects is set to begin as early as this year, Bernstein analysts said in a report. That is a more aggressive timetable than the firm made in September, when it said investment decisions for the next group of plants would not come until 2019.

Thirty million tons of new LNG capacity is needed to meet 2025 demand, Bernstein says

Energy companies will approve investments for more than 150 million tons a year of new supply capacity over the next four years, according to the report. By comparison, global consumption was 286 million tons in 2017.

Projects in Qatar, Papua New Guinea, Russia and the US are most economically appealing, followed by Mozambique, Australian expansion projects and an Alaskan mega-project, Bernstein said.

Moody’s sees oil prices at $40-$60 per barrel

Moody’s Investors Service said it expects oil prices in the range of $40 to $60 per barrel in 2018, with abundant supplies of US natural gas constraining prices, even while demand goes up.

“Prices will likely remain range-bound, and possibly volatile, on a combination of increasing US shale production, reduced but still significant global supplies, and potential non-compliance with agreed production cuts, especially if demand growth is more tepid,” Moody’s said. 

Oil price rise in late 2017 was supported by assumptions of OPEC extending its agreement to cut production and “political unrest” in the Middle East, Moody’s said.

FRANK UZUEGBUNAM