According to a recent study, earth’s crust may hold massive 6,000 billion barrels of oil as its reserves, which also include around 3,000 billion barrels of unrecovered oil resources. Most of the oil and gas industry has survived very tough years with declining price and demand over the past few years. The industry has found it very difficult to plan for the future and to make strategic decisions. However, the industry is now recovering from its bad days and it seems like the good days are near.
The oil price started collapsing, back in June 2014, which eventually led to some cost cutting measures, that included job cuts of around 400,000 workers, deferring and cancellation of projects that were unable to meet profitability criteria. Growing number of projects could have broken the oil prices in the high $20s which was nearly unthinkable few years ago.
However, it seems like prices are recovering, as the price of Crude oil is now up by around 90% in 2017, to around $48.73 per barrel, but still it is much lower than the $115 per barrel.
Still making projection about the Oil and Gas market is not quite easy as the market can change any point of time. Still here we are predicting some of the trends that might come true for the Oil and Gas industry.
OPEC Oil Output Cuts
OPEC’s first oil output cut took effect from the first week of 2017 since 2008. However, most of the analysts thought that some of the OPEC members will eventually cheat by sticking to their quota. OPEC decided to cut production of crude oil by 1.2 million barrels per day in order to reduce the huge stockpile, which will eventually lead to price increase.
In the meanwhile countries like Iraq and Algeria joined Saudi Arabia in supporting an extension to OPEC supply cuts and the U.S inventories fell more than expected. As per the American Petroleum Institute, U.S. crude inventories fell by 5.8 million barrels, which has helped to raise oil prices to some extent.
But question still remains regarding the OPEC-led production cuts as OPEC member Libya is saying that their production has now exceeded 800,000 barrels per day for the first time ever since 2014 and the production may rise to 1.2 million barrels per day later this year.Nigeria is also expecting to see a rise in output as Shell tests Trans Forcados oil export pipeline before it starts.
Relations with Russia could Impact the Market
Over the years, U.S and Russia, both the countries are ideological opponents, be it in social justice or in case of economy. However, things have started to change between these two countries, as newly elected U.S President, Donald Trump has expressed his desire to seek a healthy relationship with his Russian counterpart, Vladimir Putin. The normalization of relation between these countries will eventually help lessen the economic sanctions imposed by Obama administration on Russia, that could help Russia to incentivize more oil.
On the other hand, better relations with Russia means that, U.S will no longer have to depend on Kingdom Of Saudi Arabia for oil and gas. For years, U.S is purchasing oil from Saudi Arabia, that ranges up to 1.5 million barrels per day. However America had to pay steep prices for the Arabic and OPEC oil at times. Even back in 1970’s, Kingdom Saudi Arabia imposed an oil embargo on America.
That’s why as per many industry insiders, this is the right time for America to ditch Saudi Arabia for an all new Russian partnership. Critics are also saying that rise in U.S oil production is the evidence that the U.S and Saudi partnership has outlived its purpose.
Domestic Producers will Drill More Than Ever
One might expect U.S based oil producers to start more than 200 drilling rigs by second quarter of 2017. This trend can already be seen since last year, from when OPEC has reached its agreement. By December 2016, more than 70 oil drilling rigs started to produce oil, with more than 200 added oil rigs, the U.S oil production is all set to rise by half a million barrel per day during the first half of the year, which will eventually lead to high price volatility.
New Forms of Technology Deployment
Some factors like the economic slowdown along with low demand and low oil prices are eventually pressurizing oil companies to examining chances of using digital technology, that will help to improve performance. Digitizations must be done in such a way that it improves productivity and efficiency in the real world. For example, robots can be used for complex tasks such as connecting pipes or repairing machines, which on the other hand wil reduce requirements of human labor.
GE has already announced a number of agreements with some large and small companies to implement machineries that will help to predict breakdown before they happen.
So, these are the trends that might come true for the year of 2017, however the trends of Oil and Gas market can not be predicted before as they can be changed anytime as partially it depends on world politics too.