OPEC + deadlock casts uncertainty, but oil and gas inventories surge

Last year, oil and gas inventories flourished in the Goldilocks environment. Oil demand is strong and OPEC + has succeeded in limiting supply, but green energy has failed to close the gap. Despite the growing trend towards environmental friendliness in investment and financing, investment capital is expected to return, according to industry watchers.

For the time being, oil prices are July 5 OPEC + abandon meeting.. A cartel formed by 14 Organizations of Petroleum Exporting Countries (OPEC) and 10 additional oil exporting countries could not enter into a contract to control production cuts after April 2022.US oil benchmark West Texas Intermediate (WTI) hits Highest level since 2014Temporarily exceeded US $ 76 a barrel after the abandonment of the meeting, before it began to fall on July 7.

Investment in oil sands has been fairly low since WTI’s last heyday in 2014, when it surpassed US $ 100 a barrel, but the Canadian Petroleum Producers Association (CAPP) announced upstream natural oil and gas investment in 2021. Is projected to increase by 14%.

“Oil price stability increases the reliability and certainty of our sector’s operations and expects increased capital investment,” CAPP’s market economy manager Mark Pinney told The Epoch Times. ..

Capital investment in the oil and gas sector is expected to reach $ 27.3 billion, an increase of approximately $ 3.36 billion this year, compared to an estimated total investment of $ 24 billion in 2020, according to Pinney.

Pinney called it “industry stabilization.”

“Road to recovery”

WTI prices have risen by more than 50% in the first half of 2021 alone, and oil company stock prices have skyrocketed.

Toronto Stock Exchange (TSX) Energy sector with cap Returned 54 percent From 2021 to June 30, it has been a financial loss for investors over the last three, five and ten years.

In contrast, TSX’s renewable energy and clean technology sector saw a 6.6% decline by June 30, this year, but has shown solid revenue over the three-, five-, and ten-year periods.

“Now we believe [oil and gas] The industry is at the beginning of a long road to recovery, “Pinny said.

US crude oil production also remained subdued as OPEC + cut supplies.

BMO Senior Economist Art Woo in a June 25 memo Suggests three factors that impede US supply: US President Joe Biden’s accelerated consideration for climate change policy, environmental, social and governance (ESG) investment, and industry discipline in capital investment due to continued shareholder demand. did.

Increased use of ESG standards has limited funding for oil and gas companies, and Biden’s promotion of climate change, including tightening regulations and removing various subsidies, has driven industry mining costs and investment. Uncertainty is increasing, Wu said.

According to TSX’s Market Intelligence Group, clean technology and renewable energy companies will have approximately six times ($ 2.65 billion) equity capital from oil and gas companies ($ 444 million) from 2021 to May 2021. Procured through the TSX Venture Exchange. 31. However Total market value As of May 31, the share of oil and gas companies on these two exchanges is more than double that of clean technology and renewable energy companies.

Rafi Tahmazian, Senior Portfolio Manager at Canoe Financial, said of Canadian oil sands: BNN Bloomberg On July 5, he expects investment to return as producers become cleaner and more efficient.

“There is a realization that we cannot simply turn off the desire to use energy without turning off the need to actually use it,” he said. “We may not want to use it, but we use it crazy.”

Tuff Magian said the dynamics will benefit Canada’s energy and economy over the next few years.

Good outlook

Most importantly for Canadian oil producers, the difference between WTI and Western Canada Select (WCS) is narrow. As WTI rises, so does WCS, with the current gap between $ 10 and $ 15 per barrel. Wider spreads can be a pain for Canadian producers to sell their products to the United States at significant discounts.

According to Pinney, Canadian producers will be more dependent on rail transport in 2021 than in 2020, and once the expansion of Line 3 and TMX pipelines is complete, market access will improve in the long run and producers will You can get closer to the full market. The value of their resources.

The industry wildcard is how the OPEC + deadlock develops. According to analysts, one of the scenarios the cartel wants to avoid is Collapse Due to the clash between the United Arab Emirates and Saudi Arabia. This could lead to another price competition between Saudi Arabia and Russia, as in April 2020, and oil prices to plummet.

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