Thursday, December 19, 2019

Post OPEC quips & LatAm, Shale outlook

The Oilholic returned from the OPEC+ ministers’ summit in Vienna, Austria to a crazy few weeks of crude chatter and of course umpteen discussions on the Saudi Aramco IPO.

Here are yours truly's thoughts on the final communiqué from OPEC via Forbes, and another take on the Aramco IPO via the same publication plus a ReachX podcast touching on the issue of the company's valuation kerfuffle.  

Away from it all, two pieces of research caught one's eye this month. Starting with the first of two, rating agency Moody's reckons 2020 will be a stable year for the Latin American oil and gas sector. While, global economic environment and trade disputes could become a concern to Latin America's commodity exporters, including those in the business of black gold and natural gas, Moody's opined that many regional players have indeed improved their capital structures. 

"Business conditions will vary in 2020, contributing to stable overall conditions. A shift toward exploration and production favours credit quality for Brazil's national oil company Petrobras, but 2020 production appears stable at best in Mexico as investment stalls," says Moody's Senior Vice President Nymia Almeida.

Mexico investment momentum in oil and gas is negative for 2020 as national oil company PEMEX has limited ability to increase investments and deliver on production and reserves targets, Almeida added. 

Away from Latin America, Rystad Energy predicted that even with potentially lower prices, the production outlook for North American shale "appears robust" in the years ahead.

In Norway-based analysis firm's base-case price scenario - that assumes a WTI price at $55 per barrel in 2019; $54/bbl in 2020; $54/bbl in 2021 and $57/bbl in 2022 - would see North American light tight oil supply will reach 11.6 million barrels per day (bpd) by 2022. 

This implies a compound annual growth rate (CAGR) of 10% from 2019 to 2022. In a price scenario with the WTI oil price remaining flat at $45 per barrel, supply of the same would plateau at 10.1 million bpd towards 2022.

"The flat development of US light tight oil production is also possible in lower price scenarios, but we would likely see an initial period of multi-quarter production decline, with output stabilising at a lower level," said Mladá Passos, product manager of Rystad Energy's Shale Upstream Analysis team. Plenty to ponder about as 2020 approaches, but that's all for the moment folks. Keep reading, keep it 'crude'!

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© Gaurav Sharma 2019. Photo: Oil exploration site in Oman © Royal Dutch Shell. 

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