As we move towards Q2 of 2020, how do we assess the oil and gas industry’s performance so far, and its prospects for the rest of the year? As always, there are headwinds and tailwinds, risks and opportunities and uncertainties and foreseeable trends, but we’re looking ahead to the key factors to watch out for through the rest of the year. So, what’s on the horizon? BOSS Energy takes a look at some of the most noteworthy trends.
US oil production will continue to climb
It’s thought that US exports of both oil and natural gas in the form of LNG will continue to escalate – the EIA estimates that the US became a next exporter of oil for the first time in 70 years in September 2019.
We can expect to see more of the same throughout 2020 and beyond, as production and export capacity at various Gulf Coast port facilities continue to rise.
More focus will land on the environment
2019 was the year when many started to get serious about the environment and climate change, thanks in part to Greta Thunberg whose environmental campaign made it to the global stage.
For the largest European oil producers, this focus on the environment has started a drive to try to find cleaner business lines and to think hard about the future - many producers will want to avoid the banks treating them like coal miners and potentially restricting access to capital. There are expectations that so-called Big Oil may need to accelerate into the energy transition – but it remains to be seen whether 2020 will be the year.
The US 2020 presidential election
For the oil market, this year’s US presidential election is all about one man: Donald Trump. Part of the president’s economic pitch is to lower oil prices, and in the past he hasn’t been shy about letting Opec – and in particular Saudi Arabia – know if he thinks they’re letting oil prices get too high.
There are analysts who believe that this fed into Saudi Arabia’s decision to push for a production cut at the end of 2019 – as reducing output may be more optically challenging in a US election year. Finally, given the pressure the US has heaped on Iran, it’s likely that Saudi Arabia will be backing Trump to remain as president – therefore making it foolish to rule out the presidential campaign having an impact on the oil industry.
Potential slowing demand growth
Lastly, the ‘wild card’ for oil could be the strength of the global economy – oil demand slowed in 2019 as the US-China trade war threatened to derail a decade-old economic expansion. It is, however, still expanding – but analysts continue predict an annual growth rate of below 1% for the first time since prices crashed in 2014.
2019 also saw an economic slowdown in India, which is second only to China in driving consumption growth – and so it seems fair to predict that the oil demand for the rest of the year will hinge on a recovery in global economic growth.
While this is by no means a comprehensive overview of the trends and factors to keep an eye on throughout the rest of 2020, we believe that these areas will be of real importance to the gas and oil industry.