Providing numerical insights and commentary on the oil & gas sector and the wider energy industry.

Welcome to the Q3 2022 edition of the ERCE Energy Review, a quarterly that provides numerical insights and commentary on the oil and gas sector and the wider energy industry, is now available.

This issue covers:

• Outlook on the energy industry
• Oil & Natural Gas Trading Prices
• Brent Future Oil and UK NBP Gas Price Decks
• Oil & Gas Market Activity & Fundamentals
• Energy Transition and EUA Forecasts

Status Quo: Brent prices continued to rise in April 2022 and peaked at c.$123/bbl in the beginning of June, driven by tightening oil products markets, near-term global oil supply risks amid continued geopolitical tensions in Europe, as well as expectations of a recovery in demand after Chinese authorities started to ease COVID-19 lockdown measures. The start of the summer driving season in the Northern Hemisphere provided further support. Prices eased to c.$111/bbl by July 2022.

Short-term: In the short-term, consensus on oil prices hinges on the forces of supply and demand. While Russia shut in nearly 1 mb/d in April, other supply continued to grow. OPEC agreed to boost production by 648,000 bpd in August and is set to hold its next meeting on August 3, which will determine September production plans. According to IEA, world oil demand growth is forecast to slow on a more tempered economic expansion and higher prices. While China started to ease COVID-19 lockdown measures, in the beginning of July, fresh cases and the official response to them have deepened fears that China may be set to return to the kinds of strict restrictions seen earlier this year.

Medium-term: The medium-term outlook is based on economic growth concerns and adequate supply reaction. According to IMF, the war in Ukraine has triggered a costly humanitarian crisis that demands a peaceful resolution. At the same time, economic damage from the conflict will contribute to a significant slowdown in global growth in 2022 and add to inflation. According to various media, market worries that rising interest rates to curb inflation would spark a recession and dent oil demand.

Long-term: In the long term, peak oil demand and energy transition remain as main factors. So far oil demand growth has not slowed down, except for the hit it took during the height of the COVID-19 pandemic. While some projections indicate that oil demand might have already peaked (according to the IEA’s Net Zero Scenario, which assumes a strong stance toward achieving climate policies), others find demand peaking within the next five to 10 years (such as BP’s New Momentum, and Equinor’s Reforms). A very few, most notably OPEC, expect oil demand to plateau by 2040. While energy transition remains in focus, the rhetoric has now changed to include a focus on resilience and energy security.