Displaying items by tag: gas

On March 15th, the International Energy Agency raised its estimate for global oil demand in 2023 by another 100,000 b/d as rebounding air traffic and pent-up Chinese demand push consumption to record highs. In its latest monthly oil report, the energy watchdog said it now sees global oil demand averaging 102.02 million b/d in 2023. That’s 2 million b/d higher than in 2022. The IEA estimates that gains will accelerate over the year, rising to 2.6 million b/d year on year in the fourth quarter, from 710,000 b/d in the current quarter. In the report, IEA stated, "Global oil demand growth started 2023 with a whimper but is projected to end the year with a bang .... Rebounding jet fuel use and a resurgent China will see an overall Q1-Q4 ramp-up of 3.2 million b/d, the largest relative in-year increase since 2010 with oil use surging to 103.2 million b/d in second-half 2023." The agency attributes the rise in demand to China's economic momentum, with rebounding February Purchasing Managers' Index data and robust air traffic demand. The IEA said Chinese mobility mostly stabilized after January's "remarkable bounce." It also added that Chinese air traffic with domestic flights is now well above pre-pandemic levels. Due to this, the IEA raised its estimate for Chinese jet/kerosene demand by 60,000 b/d.

Finsum:In its recent monthly oil market report, the International Energy Agency raised its estimate for global oil demand this year by another 100,000 b/d as rebounding air traffic and pent-up Chinese demand push consumption to record highs.

While offshore oil drilling has been growing slowly in recent years, research firm Rystad Energy expects a surge in new spending over the next two years. Energy companies had previously been hesitant to commit to expensive new projects that can take years to pay off. But with oil and gas demand rising after the pandemic, some companies are now looking for projects that can offer reliable production in the longer term. According to Rystad Energy, the offshore oil and gas industry has $214 billion of new project investments lined up in the next two years, the highest two-year total in a decade. In fact, it will mark the first time since 2012-2013 that companies have spent this much to develop offshore projects. According to Rystad, “Offshore activity is expected to account for 68% of all sanctioned conventional hydrocarbons in 2023 and 2024, up from 40% between 2015-2018.” Middle Eastern producers will account for most of the growth, however, there are projects off several continents. For example, U.K. offshore spending is expected to rise 30% this year to $7 billion, while spending on Norwegian projects could increase 22% to $21 billion, according to Rystad. Plus, North America, Brazil, and Guyana are all seeing growth as well.

Finsum:According to research firm Rystad Energy, a surge in new spending for offshore oil drilling is expected over the next two years as companies look for projects that can offer reliable production in the longer term with oil and gas demand rising.

With ESG investors pressuring companies to transition to sustainable businesses, BP’s chief executive Bernard Looney is warning that the energy transition needs to happen in an orderly fashion or else oil and gas prices will spike if supply is cut too quickly without a drop in demand. Looney stated the following at the recent International Energy Week event in London, "Reducing supply without also reducing demand inevitably leads to price spikes – price spikes, leads to economic volatility." He added that we need, “Affordable energy flowing where and when it's needed... Investing in energy security and the energy transition. This is Looney’s second warning for the need for an "orderly transition.” In early February, he stressed "an orderly" transition when he announced that BP would be producing more oil and gas for longer, and now aims for a fall of 20% to 30% in emissions from the carbon in its oil and gas production in 2030 compared to a 2019 baseline, lower than the previous aim of 35-40%. At the London event, he also noted that “People today want an energy system that works. That provides secure, affordable, and low-carbon energy - what the Energy Institute calls the triple energy crisis."

Finsum:At a recent energy event in London, BP CEO Bernard Looney warned for the second time that the energy transition needs to happen in an orderly fashion or else oil and gas prices will spike.

After two years of surging growth, this earnings season could mark the beginning of energy company profits coming back down to earth. That is according to Wall Street analysts who believe Big Oil has passed its peak. However, the ride down is expected to be slow, with companies still expected to bring in large profits for some time. Last year was a boon to oil and gas companies. The energy sector ended the year up 64.56% as sky-high oil and gas prices were one of the largest contributors to inflation. The sector thrived with a hawkish Fed, high inflation, economic uncertainty, and Russia’s invasion of Ukraine. But analysts don’t believe this will continue for much longer. HSBC Global Research analysts wrote in a note that “Although 2023 should remain a solid year for the integrated oils, there is less headroom than we envisaged just a couple of months ago given the correction in oil prices and halving in European gas prices.” In addition, Bank of America estimates that earnings for the fourth quarter from oil and gas producers will be down 11% from third-quarter levels. Doug Leggate, a Bank of America research analyst, wrote in a recent note that “In our view, upcoming earnings for the US oils will be one of the most consequential in several years. It is now clear that the best quarter for many US oils has passed.”

Finsum:While oil and gas companies thrived in last year’s conditions, Wall Street analysts think profits will eventually come back down to earth due to a recent correction in oil prices and the halving of European gas prices.

In a year when almost every S&P 500 sector was in the red, the energy sector surged 64.56%, according to S&P data. While the portfolios of energy investors looked great, energy bills for the home were another story. High energy prices took a bite out of the household budgets for many. However, a reversal seems to be in play this month. The energy sector is now under pressure as natural-gas prices have fallen more than 60% from their 52-week high due to a warmer-than-expected winter. While energy prices falling is good for household budgets, it’s bad news for energy stock investors. Matt Portillo, head of research at Tudor, Pickering, Holt, told Barron’s that “The warmer-than-expected winter pulled forward the expected decline in natural gas price. Stocks could fall an additional 20% to 30% until they find a bottom.” Wall Street analysts expect more volatility in natural-gas prices in the months ahead, but patient investors can look forward to better valuations for energy stocks in the second half of the year. Paul Diamond, an analyst at Citigroup, wrote in a note Tuesday that “We expect the coming volatility to present a better entry point than is currently available and expect recent volatility to persist through the winter, at which point eyes will turn to the build for next winter.”

Finsum:With natural gas prices falling due to a warmer-than-expected winter, energy stock prices have taken a hit, which could lead to more attractive valuations in the second half of the year.