Austin, Texas (August 24, 2021) — Enverus, the leading global energy data analytics and SaaS technology company, has released its latest FundamentalEdge report. Oil and Gas Markets: Can the Balance Hold? focuses on Enverus’ latest medium-term oil, gas and natural gas liquids (NGL) outlook.
“We think there are three critical pillars that will drive oil and gas prices: a smooth economic recovery coming out of the pandemic, OPEC’s ability to maintain control of the oil market, and the U.S.’ response to OPEC’s Goldilocks price target,” said Bill Farren-Price, director at Enverus and one of the lead authors of the company’s latest FundamentalEdge report. “Demand growth will likely accommodate modest North American production growth and OPEC’s $65/bbl Brent target, but even flat oil demand could upset that equilibrium.”
Farzin Mou, vice president of Intelligence at Enverus and co-author of the report, added, “We believe capital discipline and supply growth are not mutually exclusive in a high-price environment even if public perception muddies the picture for clear economic incentives to drill. Increased activity from private operators, high-grading core inventory and low base declines will allow U.S. oil and gas production to grow in 2022 while achieving a reinvestment rate in the 45% to low 50% range.”
Key takeaways from the report:
- Oil demand growth in 1H22 decelerates at the same time U.S. oil production grows, reflecting the lagged impact of shallow base declines and high prices this year, pushing prices briefly to $60/bbl Brent and sub-$60/bbl WTI. According to Enverus’ analysis, OPEC will need to take ~2 MMbbl/d of production off the market.
- With OPEC supporting high prices, we expect U.S. producers to deliver ~1.2 MMbbl/d of supply growth exit-to-exit 2022 and 90-300 MMbbl/d per year thereafter – mostly Permian driven. The muted and delayed drilling response to tighter oil and gas markets this year keeps Henry Hub prices in the $3.50s through winter 2022-23. Associated gas production grows 1.7 Bcf/d by year-end 2022, just keeping pace with new liquefaction facilities coming online.
- Gas prices soften in the 2023-24 period, likely trading under $3/MMBtu, as Mountain Valley Pipeline’s anticipated start temporarily debottlenecks the Northeast, LNG development slows and associated gas production continues growing. Henry Hub prices rise in 2025-26 as feedgas requirements accelerate again.
- Enverus expects a strong post-COVID-19 recovery in oil demand in 2H21, with growth moderating in 2022 as demand moves closer to outright pre-pandemic levels. Oil demand declines begin in the latter half of this decade, but growth from 2023-26 is enough to accommodate rising U.S. production of ~200 Mbbl/d annually and keep prices within OPEC’s desired band.
Members of the media should contact Jon Haubert to schedule an interview with one of Enverus’ expert analysts.
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. Learn more at Enverus.com.