Predictions 2020

04 May Predictions 2020

Posted at 21:55h in Predictions by

At the beginning of the year, I like to write an opinion regarding where we think the industry will be domestically for a calendar year and where the advantage may be from an investment standpoint. We’ve been MOSTLY accurate (taking out 2014) and in the past, have felt confident we can make a decent prediction with some caveats.

To recap 2019, our prediction was very close to actual. In a simple phrase…a pretty boring year…Which I LOVE!

So let’s talk about what we saw in 2019 on the world market:

  • The United States IS the strongest player on the world oil and gas market. The US controls both imports and exports in their hemisphere and what they will and can take from the Middle East.
  • Large US producers evened out supply and demand for the most part
  • Sanctions on Iranian oil and pressure on their typical buyers to refuse delivery has certainly helped. It has helped stabilize the entire oil economy in the Middle East.
  • China’s economy did not make any significant gains due to internal and US pressure to “play fair”, therefore not attributing to any significant demand for hydrocarbons on the world market.

This year, 2021, we anticipate the following:

  • Rig count should be fairly stable throughout the year
  • More small oil producing companies will be merging or being purchased. It’s “big fish eats little fish” season.
  • OPEC+ members will keep playing “ball” with the US…keeping all commodities stable.
  • Neither China nor India will develop enough new demand to outpace supply based on their current overall economic conditions.
  • LNG and crude/refined product export market will slightly increase with new China trade deal, but not at a pace to significantly affect price.
  • Of course, there are possible factors that could fluctuate prices rapidly:
  • Some oil economists are predicting market price increases with volatility especially in Q1. It may create a little chaos with WTI and natural gas pricing. We disagree as we know reserves with small and large producers are ready to pounce on any increase. Hedge funders may get killed trading (we don’t play that game here).
  • Possible Middle East tensions disrupting oil flow (like almost any year)
  • Trump Factor. If he’s not re-elected (seems highly unlikely), you can expect market and commodity chaos at the end of the year.
  • So, what does this mean for the direct oil and gas investor today? We are anticipating no fire sales of leases, production, or equipment nor any soaring prices of operating expenses or leases either. In reality, a fluid and fair-trading market.
  • It’s the long game, which I feel will pay significant dividends for the direct investor in the next 2-5 years. Fossil fuels are NOT going away as no technology can ramp up in any near time frame to replace the FF’s output and distribution.
  • We’re predicting no lower than $45 WTI/ $2.00 natural gas and no higher than $60 WTI/$3.10 natural gas for 2020 for extended periods.