Crude oil prices have dropped 60% over the past 18 months. Natural gas prices are at their lowest point in almost four years, and will end 2015 with their lowest annual average since 1999. Composite prices for NGLs are at their lowest level since EIA began tracking the sector a decade ago.
That’s the backdrop for the oil and gas industry as Ponderosa Energy explores the current market and looks ahead to the next five years in its latest Market Outlook Service report, Long Road to Recovery. The report presents Ponderosa’s view of the current crude oil, natural gas and NGL markets and provides analysis of the dynamics affecting each commodity through 2020.
Long Road to Recovery includes Ponderosa’s proprietary data analysis of supply and demand for crude oil and natural gas and utilizes the Ponderosa Energy Production Model. This installment builds on the analysis presented in our three previous reports published earlier this year: The Challenge of Abundance; Over A Barrel: Wild Ride Continues for Crude; and Market Malaise: Making Sense of Uncertainty.
Topics analyzed in Long Road to Recovery include:
In early 2015, Ponderosa forecast WTI crude oil prices would average about $45/bbl for the year. Prices jumped above $60/bbl in Q2 as speculators entered the market and misinterpreted China’s demand for crude. We revised our forecast in late summer, increasing our expected 2015 average of $52/bbl. With that came a caveat that prices would tumble again during fall refinery maintenance, and WTI briefly dropped below $40/bbl and has traded in the low $40s for weeks. The annual average is just below $50/bbl as December begins. Where will prices go in 2016 and beyond?
The global crude market remains out of balance. Supply continues to outpace demand. How will that dynamic impact U.S. crude oil and natural gas markets next year and over the next five years?
U.S. oil and gas production has been resilient in 2015. Why has production not fallen significantly despite low prices? Are U.S. dynamics for exploration and production in line with those for international producers, and what are the implications for the U.S. market?
Production of crude oil and natural gas are tied at the drill bit. When oil prices rise or fall, natural gas prices move accordingly. If natural gas prices rise, supporting production, crude output is likely to rise as well, furthering pressuring prices in an oversupplied market. How will projected low crude prices impact natural gas production relative to demand? What are the price implications for natural gas?
Long Road to Recovery answers those questions and more. Subscribe to Ponderosa’s Market Outlook Service to receive your copy of the report, along with Ponderosa’s earlier reports focused on the markets for crude oil, natural gas and NGLs. Contact Stephanie Broughton or Harry Brookby to learn more. For information about Ponderosa’s previous reports (shown below), contact our information line.