News Release

Enverus: Oil & Gas Winning Streak Remains in Delicate Balance

byEnverus

Austin, Texas (May 18, 2021) — Enverus, the leading global energy data analytics and SaaS technology company, has released its latest FundamentalEdge report. A Delicate Balance focuses on oil and gas’ current winning streak and includes the company’s five-year market outlook, current view of the oil, natural gas and NGL markets, and the financials supporting them.

“Crude oil prices have had a good run over the past several months and the backwardated structure in futures markets is encouraging continued inventory destocking. Improvements in demand for key motor fuels like gasoline and diesel have certainly played their part, but ultimately the key factor behind the continued tightening of physical markets has been production cuts enacted by OPEC+ members. OPEC+ cohesiveness though may be put to the test if the United States and Iran reach an agreement in ongoing negotiations about reconstituting the nuclear deal the U.S. withdrew from in 2018. If this happens, we could see up to 1.5 MMBbl/d of Iranian crude re-enter the market starting as early as this summer,” said Jesse Mercer, senior director of Crude Market Analytics at Enverus.

“Natural gas is benefiting from higher crude prices, too, and, as a result, LNG exports continue to set record highs. But how long this growth continues depends on several factors, including the role natural gas will play in our energy future. It is certainly going to be key in any kind of energy transformation, but for how long will be telling. For now, operators are enjoying a winning streak.”

Key takeaways from the report:

  • Crude oil prices have been on a winning streak since the fourth quarter of 2020 and continue to test resistance at higher levels. With demand for key motor fuels like gasoline and gasoil/diesel on the mend, the continued vigilance by OPEC+ members to manage supply has been instrumental to the global rebalancing and, therefore, higher oil prices. Backwardation in both WTI and Brent forward markets are indicative of physical market tightening, with negative carry trades leading traders to empty storage tanks. Trouble though is brewing on the horizon as the Biden Administration pursues negotiations with Iran which could ultimately lead to the return of roughly 1.5 MMBbl/d of Iranian supplies on the world market by the end of 2022. Despite the desire of OPEC+ participants to unwind current production cuts, active market management is likely to be a feature of this market for the foreseeable future.
  • Natural gas production growth has resumed in 2021 after a challenging 2020 with its weak demand and a low-price environment. Two key factors are driving this growth: LNG exports and higher crude oil prices. LNG exports continue to set record high levels, currently reaching 10.8 Bcf/d in April 2021.The forward curve for WTI shows oil prices in 2021 above $60; this is an increase of about $15/Bbl compared to the January report. Higher crude oil prices mean more associated natural gas from the Permian, DJ, and even Eagle Ford. Enverus expects gas prices to average greater than $3.00/MMBtu.
  • Natural gas liquids production is expected to remain relatively flat in 2021 and grow in 2022+. Ethane has temporarily been relieved from market tightness as the February winter storm Uri decreased demand for the product at petrochemical facilities. However, as those facilities ramp back up, the market will once again be tight based on current recovery. Propane, similar to ethane, is in a tight-market situation. Days of supply in inventory is near the bottom of the five-year range and exports are near all-time highs. Normal butane will see demand and supply increases as refineries continue to increase operating rates and gasoline blending picks up. C5, like normal butane, will see an uptick in demand from gasoline blending, but also from increased Canadian production where natural gasoline is used as a diluent.
  • 2021 budgets have been set and capex is flat year over year. We expect to see limited upward revisions to activity levels given the market’s recent favorable reactions to public operator capital discipline. This quarter, we are introducing more in-depth operator coverage through the benchmarking of 35+ operators using NAV model outputs from our Capital Markets team. We see relatively low reinvestment rates and capital discipline leading to slight production growth from large caps, limited growth from small-to-mid capital (smid-cap) operators, and high free cash flow yields across the coverage list. Lastly, buoyed oil prices leave many hedge programs out of the money. We suspect many operators used much of their remaining hedge capacity to lock in the highs in 1Q21.

Download Preview

Members of the media should contact Jon Haubert to schedule an interview with one of Enverus’ expert analysts.

About Enverus
Enverus is the leading energy SaaS company delivering highly-technical insights and predictive/prescriptive analytics that empower customers to make decisions that increase profit. Enverus’ innovative technologies drive production and investment strategies, enable best practices for energy and commodity trading and risk management, and reduce costs through automated processes across critical business functions. Enverus is a strategic partner to more than 6,000 customers in 50 countries. Enverus is a portfolio company of Genstar Capital. Learn more at Enverus.com.

Enverus

Enverus

Energy’s most trusted SaaS platform — creating intelligent connections that uncover insights and opportunities to deliver extraordinary outcomes.

Related News

Enverus News Release - EPA’s emission revision: More rules, double the methane, triple the tax
News Release
ByEnverus

Enverus Intelligence Research (EIR), a subsidiary of Enverus, the most trusted energy-dedicated SaaS platform, has released a report that analyzes the U.S. Environmental Protection Agency’s (EPA) latest proposed changes to Subpart W of the Greenhouse Gas Reporting Program (GHGRP), quantifying...

Enverus News Release - Maintaining our bullish call past the deadline
News Release
ByEnverus

Enverus Intelligence Research (EIR), a subsidiary of Enverus, the most trusted energy-dedicated SaaS platform, has released its latest FundamentalEdge report focused on global drivers for oil and gas prices to 2030, the five-year oil and gas supply and demand outlook,...

Enverus Press Release - Tapping Alberta’s overlooked lithium brines
News Release
ByEnverus

Enverus Intelligence Research (EIR), a subsidiary of Enverus, the most trusted energy-dedicated SaaS platform, has released a new report that outlines the untapped opportunities in Alberta's lithium brines, focusing on the potential for direct lithium extraction and prospects in wastewater...

Enverus News Release - Who’s making the connection in southern Louisiana?
News Release
ByEnverus

Enverus Intelligence Research (EIR), a subsidiary of Enverus, the most trusted energy-dedicated SaaS platform, has released a report analyzing midstream operators' exposure to low breakeven emissions and significant CO2 storage capacity in southern Louisiana. The report also covers operators with...

Enverus News Release - Quantifying unproven inventory in the Permian
News Release
ByEnverus

Enverus Intelligence Research (EIR), a subsidiary of Enverus, the most trusted energy-dedicated SaaS platform, has released a new report that quantifies the geologically viable but not yet economically proven inventory in the Permian Basin and investigates the associated impact this...

Enverus News Release - Energy impacts of Gulf of Mexico hurricanes quantified
News Release
ByEnverus

As Tropical Storm Hilary downgrades from a hurricane but continues to flood parts of Mexico, California and the Southwest U.S., Enverus Intelligence Research (EIR), a subsidiary of Enverus, the most trusted energy-dedicated SaaS platform, has released a report assessing the...

Enverus Press Release - FundamentalEdge
News Release
ByEnverus

Enverus Intelligence Research (EIR), a subsidiary of Enverus, the most trusted energy-dedicated SaaS platform, has released its latest quarterly FundamentalEdge report focused on global drivers for oil and gas prices to 2030, the five-year oil and gas supply and demand...

Enverus Intelligence Research Press Release - EIR: Density drives steepening declines in U.S. shale
News Release
ByEnverus

Enverus Intelligence Research (EIR), a subsidiary of Enverus, the most trusted energy-dedicated SaaS platform, has released a new report that examines how oil decline profiles have steepened across U.S. shale oil plays over the last decade. 

power-grid-congestion
News Release
ByEnverus

Enverus, the most trusted energy-dedicated SaaS company, announced today it has acquired CRCL Solutions, a provider of cloud-based algorithms and modeling for wind and solar generation forecasts. CRCL Solutions provides a wide range of advanced forecasting data to help power...

Find Out How Enverus Can Help Your Business

Subscribe to the Energy Blog

A weekly update on the latest “no-fluff” insight and analysis of the energy industry.

Let’s get started!

We’ll follow up right away to show you a quick product tour.

Let’s get started!

We’ll follow up right away to show you a quick product tour.

Get Started

Register Today

Get Energy Transition Research updates straight to your inbox by filling out the form below.

Sign Up

Power Your Insights

Connect with an Expert

Access Product Tour

Speak to an Expert