Page 21 - ISQ UK JANUARY 2020

JANUARY 2020

Propping up Prices and Production

OPEC and Saudi Arabia have continued to cut their oil production in a bid to prop up global oil prices.
This comes amid the initial public offering of Saudi Arabia’s state-owned oil company, Saudi Aramco.

PRICE

attack against Saudi energy infrastructure, which caused the
world's largest oil supply disruption since 1991, there remains
assuming additional attacks in our baseline forecast, the “ Barring a severe global recession,
potential for future instability. Even though we are not

possibility cannot be ruled out. An even more dramatic demand is unlikely to present much
scenario - outright war between Saudi Arabia and Iran, with or uncertainty, whereas supply is more
without US involvement - looks unlikely based on current of a proverbial ‘black box’.
geopolitical dynamics (but not impossible). Regime change in ”
Venezuela and escalation of fighting in Libya are other issues
to watch.
Closer to home, we will be tracking the presidential campaign
and its potential effects upon drilling activity, especially shale.
Outlook on Prices: Looking Ahead Generally, commodity prices matter much more to the US oil and
gas industry than who is in the White House. But with two of the
Our 2020 forecast of $65/Bbl WTI and $70/Bbl Brent top three Democratic presidential contenders - Sens. Elizabeth
is back-end-weighted, with the bulk of the gains Warren and Bernie Sanders - pledging to ban hydraulic fracturing
likely to come in the latter half of the year. (fracking) on federal lands, a regulatory shift along these lines
could have a meaningful impact on the industry in 2021 and
beyond.

NATURAL GAS: SUPPLY ON THE RISE
In contrast to our upbeat view on the global oil market, we are
2020 WTI CRUDE BRENT CRUDE NATURAL GAS less enthused about North American natural gas due to its

‘inverse’ relationship with oil prices. As recovering oil prices
$2.30/Mcf
$70/Bbl
$65/Bbl
eventually incentivize more oil-focused drilling activity, it will
there is demand). Improving takeaway capacity from the
Source: Raymond James Equity Research spur an increasing supply of associated gas (whether or not

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