Oil market must solve short-cycle riddle in 2019

Oil producers are invariably in it for the long haul. Investing billions of dollars to find and develop new resources entails an almost clairvoyant understanding of future demand cycles. However, volatile prices and uncertainty over global growth may see more short-term thinking in 2019. This change in mindset has already happened in the US, now the world’s largest producer. The Permian shale oil basin is the world’s epicenter for so called short-cycle investment — where capital employed drilling wells can be recouped over a briefer period than in conventional fields. S&P Global Platts Analytics forecasts Permian oil production will more than double over the next two years. Output is expected to average 4.9 million b/d in 2020, climbing to 5.5 million b/d in 2021. These figures compare to 2.5 million b/d last year. Few basins elsewhere in the world can boast similar growth in production, or investment. According to the International Energy Agency, investment in oil projects globally fell 25% between the end of 2014 and 2016. In 2017, upstream spending flat-lined, with the IEA warning earlier this year investment in conventional projects “may be inadequate to avoid a significant squeezing of the global spare capacity cushion by 2023.” Without… continue reading

Continue reading Oil market must solve short-cycle riddle in 2019. This article appeared first on CTRM Center.

Source: CTRM Center

Related Posts

Leave a reply