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crude oil inventories to the five-year average likely will not be seen until the second half 2021. HITTLE: As high as stocks were this spring, a return of U.S. How quickly might stocks be drawn down to within a normal range? oil inventories increased by 47 million barrels–the largest monthly increase on record–and continued to climb to an all-time high by the end of May. Q: In April, with lockdown orders in place across the country, U.S. lower-48 crude and condensate production fell 1.4 MMbbl/d from March to June. At the same time, OPEC+ producers are aspiring to reduce their output by 9.7 MMbbl/d and U.S. But it also is 10 MMbbl/d more demand during the quarter. Already, world oil demand had gone from a sharp fall of 15 million bbl/d year-on-year during the COVID-related shutdown early in the second quarter to minus 5 MMbbl/d year-on-year by the end of the quarter.
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HITTLE: Yes, we do still expect an implied global stock draw for the second half of 2020. Q: In mid-April, after OPEC and Russia had reached an agreement to cut production, you stated, “We expect the second half of 2020 to show an implied stock draw, in contrast to the record-breaking oversupply of the first half of 2020.” Do you still foresee a sustained pattern of inventory drawdown over the next six months? With OPEC+ production cuts in place, and demand on a recovery trajectory, we see crude prices reaching an average of $52 a barrel for Brent in 2021. With China ahead of the rest of the world in its response to the pandemic, it is leading the way in a slow return to growth next year.Īssuming another global economic shutdown on the scale of what we saw in the second quarter of this year is avoided, then we expect continued, gradual recovery throughout 2020 in most oil products, with the exception of jet fuel, which we estimate will take a few years to return to 2019 levels as passengers regain confidence in travel by jet. We saw the lowest point for the decline in demand during April, and since then, it has climbed steadily. HITTLE: The crucial factor for the second half of 2020 is the rate of demand recovery.
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What factors potentially could hasten or hamper the ongoing recovery? Where do you see oil prices going from here? Oil prices followed a similar course, reaching $40 a barrel by the start of 3Q2020. Q: Even though 2Q2020 began with unprecedented turmoil in the financial markets, major stock market indices staged a sharp rally to close the quarter. Lawrence University and holds a master’s in Middle East studies from Harvard University. She began her career with Gulf Oil, and then served as staff editor with Petroleum Intelligence Weekly, focused on OPEC and markets in Asia. Before joining Wood Mackenzie, Hittle served as CERA’s research head of upstream oil service, with responsibility for world oil market analysis. With more than 25 years of experience analyzing global oil markets, she leads the company’s macro oils service. OIL PRICE RECOVERYĪnn-Louise Hittle is vice president, macro oils, at Wood Mackenzie. Questions are in italics, followed by the panelists’ responses. To get expert perspectives on the state of the oil market and the broader banking and private equity markets that support both the upstream and midstream sectors, AOGR presented questions to Ann-Louise Hittle, vice president, macro oils, at Wood Mackenzie David Morris, managing director at Opportune LLP and Jason Downie, co-founder and managing partner of Tailwater Capital. The billion-dollar question is, where does the industry go from here? Forecasts have never contained more “buts,” “contingent upons” or “alternative scenarios.” And for oil and gas producers, an added concern is the availability of capital, which afuels drilling and completion, asset acquisition, and midstream activities. Similarly, oil prices are hovering at $40. Oil & Gas Total Stock Market Index is up 50%. Since March and April, however, both the S&P 500 and the Dow Jones Industrial Average have climbed 40%, and the Dow Jones U.S. But what does oil run on when the world economy shuts down?Ĭoming up with a collective answer unfortunately came down to individual companies making tough decisions throughout the second quarter.
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Editor’s Note: The world economy runs on oil.