Austin, TX (July 8, 2020) – Enverus, the leading oil & gas SaaS and data analytics company, has released its latest FundamentalEdge report, Don’t Call It a Comeback, that explores the company’s current, cautiously optimistic view of the oil, natural gas, and NGL markets and where they are headed over the next five years.
Six months into a pandemic that brought the global economy to its knees, green shoots have begun to appear, reads the crude oil overview in Enverus’ latest report. In April, more than half of the world’s population was in lockdown. Today, that estimate is closer to 25%. Indicators of traffic congestion in major urban centers around the world also show signs of a partial recovery in personal mobility and economic activity—the key drivers of global oil demand.
In addition to supply and demand recovery for crude oil, Enverus’ report also covers impacts to natural gas prices. While natural gas demand losses due to COVID-19 were higher than production declines, upcoming peak demand for winter is expected to produce an impressive bump for the price of natural gas. With prices averaging under $2/MMBtu in 2020, Enverus could see prices increasing above $3.50/MMBtu as soon as winter 2020-2021, with the most production growth coming from the Marcellus/Utica, Haynesville, and Permian Basins.
“We’re cautiously optimistic, but not ready to label this a comeback,” said Bernadette Johnson, vice president of Strategy and Analytics at Enverus. “We anticipate some operators to carry that same theme, too. A lot of the pain should be behind them now. Capex has been cut, costs were lowered in both development and production, and hedges provided parachutes. Demand is on the uptick—for now at least.”
Members of the media can download a preview of the full report, Don’t Call It a Comeback, or contact Jon Haubert to schedule an interview with one of Enverus’ expert analysts.
Key Takeaways from Don’t Call It a Comeback:
- Crude oil prices staged an impressive recovery in May and June after deep production cuts and a partial recovery in demand for motor fuels. After a painful shock to the system, rebalancing is currently underway. The recovery in demand remains tenuous, though, and anemic refining margins and the recent rise in new COVID-19 cases do raise concerns. We nevertheless remain cautiously optimistic that the rebalancing will continue, with much needed inventory draws coming over the second quarter of 2020, extending into 2021.
- The natural gas market remains very bearish, with prices averaging under $2/MMBtu in 2020. Demand losses due to COVID-19 have been higher than the production declines so far. However, current production levels are not enough to meet the upcoming peak-demand winter months. Therefore, Enverus expects prices to increase north of $3.50/MMBtu as soon as this winter 2020-21 in order to incentivize drilling activity. Based on breakeven prices, production growth will come from the Marcellus/Utica, Haynesville, and Permian.
- As production for crude oil and natural gas declines, Natural Gas Liquids production will also decline. While C3+ pricing fell along with crude, propane and butane have seen a nice recovery due to stable demand and declining production. C5 is still depressed, as demand for the gasoline blend stock and diluent is depressed in the current market environment. Ethane has seen an uptick in pricing over the past two months, as demand at petrochemical facilities has remained strong, and higher prices will likely be needed in the future to incentivize ethane recovery in order to accommodate additional demand from new petrochemical facilities.
- Q2’20 earnings will begin in the back half of July. All eyes will be on curtailments, activity, costs, and liquidity. The April-through-June quarter saw a range of budget fluctuations, bankruptcies, shut-ins, and operational disruptions. With WTI eclipsing $40 in late June, we expect optimistic but erratic results, with a continued focus on balance sheet health and hedges to suppress near-term ambiguity.
Visit enverus.com/managing-the-energy-market to stay informed of the latest market conditions.
Enverus is the leading data, software, and insights company focused on the energy industry. Through its SaaS platform, Enverus provides innovative technologies and predictive/prescriptive analytics, empowering customers to navigate the future. Enverus’ solutions deliver value across upstream, midstream and downstream sectors, enabling the industry to be more collaborative, efficient and competitive. With more than 1,300 employees across the globe, the Company’s solutions are sold to more than 6,000 customers across 50 countries. Enverus is a portfolio company of Genstar Capital and brings together the technology of Drillinginfo, RS Energy Group, PLS, 1Derrick, MineralSoft, Midland Map Co., Oil-Law Records, MarketView, DataGenic Group, PRT, Oildex, Cortex, Red Dog Systems, and RigData as one company. Creating the future of energy together. Learn more at www.enverus.com.