There is a wave of overt optimism rolling through the oil market and I am seeing first hand, signs that confirm that the optimism may lead to a new chapter for crude and one that may include several out-of-the-box initiatives.
Much of the news is coming from the preeminent global energy summit, CERAWeek, taking place in Houston. Named after Cambridge Energy Research Associates and their leader, Pulitzer Prize winning author of the oil classic, ‘The Prize’, Daniel Yergin.
Here’s my take, as an attendee, on what’s ahead for oil a key component of the U.S. economy and national security.
New data from around the world, including from the Paris-based International Energy Agency (IEA) and the US Energy Information Agency (EIA) shows that oil production and demand will continue to grow and that the two–supply and demand–will come more into balance than in recent years, creating somewhat higher oil prices.
Furthermore, the US will produce a record high 10.6 million barrels of oil per day, roughly the same as Saudi Arabia, the number two oil-producing nation. By 2023, it’s estimated that the US will surpass Russia, the current number one oil country which produces 11 million barrels per day.
But the optimism is more than just the numbers and myriad data points. The optimism comes from the oil landscape being larger, and with more global cooperation amongst nations and companies–which seems imminent.
Saudi Aramco, the state owned oil company, just announced they will infuse $30 billion into their Port Arthur, Texas refinery by 2023, creating 12,000 new jobs. This ahead of its highly anticipated initial public offering which could value the company around $2 trillion, making Exxon Mobil and Chevron look like the little guys. Additionally, the average investor will have a chance to buy into the IPO which may list on the New York Stock Exchange. Winning this listing or part of it has received support President Donald Trump.
Plus, OPEC (the Organization of the Petroleum Exporting Countries) is seeking to diversify into new and novel oil and energy-related projects. I spent some time with both Aramco and OPEC officials discussing an oil-backed crypto currency. There’s lots of out-of-the-box thinking and the future seems wide open to many.
Not absent from the summit and hallway conversations are other energy sources, including but not limited to renewables like solar, wind, hydro and plant-based fuels such as ethanol and bio-diesel.
The U.S. Secretary of Energy (and former Texas Governor) Rick Perry, gave a superb speech in which he said he wouldn’t take a back seat to anyone on wind generation dating back to his time as Governor. Still he focused on oil as both a fundamental part of the U.S. economy and as a national security asset.
All in all, optimism reigned, and for these many good reasons. That said, prices for oil–hovering in the high $50 to low $60 per barrel range for West Texas Intermediate (WTI) which makes most people involved in oil pretty pleased. That’s especially true when we consider that those same per barrel prices were as low as $26 a little more than two years ago in early February 2016.
Should the price of oil fall, and it could do so if, for example, OPEC and Russia end their current production cap of 1.8 million barrels of per day, or any number of other unexpected actions which could impact production, the mood would certainly change dramatically. For now though, it is all smiles in Houston at CERAWeek.