We are halfway through the first month of the new year, and oil’s bull run is showing no signs of slowing.
Brent crude futures settled $1.59, or 1.9%, higher in Friday’s session at a 2-1/2-month high of $86.06 a barrel, gaining 5.4% in the week, while U.S.
Morgan Stanley predicts that Brent crude will hit $90 a barrel in the third quarter of this year, while JPMorgan has forecast oil to hit $125 a barrel this year and $150 in 2023.
OPEC+ has lately come under pressure to ramp up production at a faster clip from several quarters, including the Biden administration so as to ease supply shortages and rein in spiraling oil prices.
In Nigeria, five onshore export terminals run by oil majors with an average production clip of 900,000 bpd handled 20% less oil in July than the same time last year despite relaxed quotas.
In fact, only French oil major TotalEnergies’ new deep offshore oilfield and export terminal Egina has been able to quickly ramp up production.
Indeed, it could take at least two quarters before most companies can work through their maintenance backlogs which cover everything from servicing wells to replacing valves, pumps, and pipeline sections.
In June, Angola’s oil minister, Diamantino Azevedo, lowered its targeted oil output for 2021 to 1.19 million bpd, citing production declines at mature fields, drilling delays due to COVID-19 and “technical and financial challenges” in deepwater oil exploration.
Unfortunately, the pandemic has stunted the impact of those reforms, and not a single drilling rig was operational in the country by May, the first time this has happened in 40 years.
In an excellent op/ed, vice chairman of IHS Markit Dan Yergin observes that it’s almost inevitable that shale output will go in reverse and decline thanks to drastic cutbacks in investment and only later recover at a slow pace.
According to Rystad, proven oil and gas reserves by the so-called Big Oil companies, namely ExxonMobil, BP Plc.
Granted, this is more of a long-term problem whose effects might not be felt soon.
According to Morningstar research, ESG investments hit a record $1.65 trillion in 2020, with the world’s largest fund manager, BlackRock Inc.
“Energy equities are nowhere close to where they were in 2014 when crude oil prices were at current levels.
Energy Information Administration, the United States had 5,957 drilled but uncompleted wells in July 2021, the lowest for any month since November 2017 from nearly 8,900 at its 2019 peak.
It’s true that higher completion rates have been leading to an uptick in oil production, particularly in the Permian; however, those completions have sharply lowered DUC inventories, which could limit oil production growth in the United States in the coming months.