Link here. Excerpts. Archived.
If you thought coronavirus had hobbled the oil industry for good, think again.
Just a year after a Saudi-Russian price war and the coronavirus pandemic triggered the worst oil crash in decades, a stunning reversal is under way.
“The next five years may be the best five years we’ve ever had for hydrocarbon investing,” Wil VanLoh, head of Quantum Energy Partners, one of the US oil patch’s biggest private investors, told me recently.
Yet despite a glut so great it briefly forced oil prices below zero, consumption still averaged 91m barrels a day — more than the world consumed daily in 2012.
Morgan Stanley thinks demand will be back above 100m barrels later next year (2022)..
Goldman Sachs expects that marker to be passed before 2021 is out.
Investors are suddenly flocking to previously out-of-fashion companies that promise to meet the world’s renewed hunger for crude.
The revival in the industry’s fortunes is especially obvious in the US shale patch, the most dynamic corner of the global oil business. Famous for ruinous debt and high spending in pursuit of breakneck production growth, the shale business is suddenly — and surprisingly — profitable. The market likes operators’ pledges to spend cash flows on dividends, not rigs; debt repayment, not private jets. Shares in some shale companies are up by about 200 per cent since early November. For some old crude market hands, all of this is proof that oil remains a cyclical business.
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