07 Jul We’re in the “Goldilocks” Zone
This term is typically used by those who are searching for habitable planets in other solar systems, but I’m borrowing the term it for this opinion.
Rarely has there be a better time to be in the development side of the oil and gas industry. Everything appears to be “just right”…to us Goldilocks.
Since Russian oil is selling in the grey market only, no matter how much they sell to India and China, it should not affect domestic prices as NATO countries appear committed not to buy directly from them FOR NOW.
The producers are at maximum output and cannot push more product due to labor and equipment shortages. Best way to describe our current situation is “there is 1 crew for every 2 rigs that could be in service”.
Renewable funding have revealed to not be up to the task of being a viable replacement for petroleum. 2021US Energy supply numbers show around 80% fossil fuels and less than 10% renewables.
PCE Index reporting (inflation) for May and June show some moderation, but still historically high.
Natural gas demand at all time high with lesser geographical market limitations. Also, EU just voted natural gas to be “green” conditionally.
Wages appear to be steady and commodity prices are waning
Days Supply appears to be rather steady and a little under, which means plenty of room for increased product (let’s not talk about selling our stockpiles)
This all leads towards healthy high market prices in which those with current production can make the most $$ and those with the equipment and labor resources to develop new production all the incentive they need to make it happen. EIA is predicting steady pricing too into the near future (see above) We expect faster payouts on programs even with cost of goods and services at record levels (but falling).
Anything above $80 oil and $4 natural gas is great in my book! No worries if the market dips below $100…
So, if you’ve never directly participated in oil and gas development programs, now is a great time to do so. We’ve had too many years where the industry has been more like the “3 Bears”. Better to be Goldilocks and take it when we get it!