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ERCE Energy Review Q1 2021

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

Q1 Energy Review

The Q1 2021 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 as the world deals with the impact of Covid-19 
  • Oil & Natural Gas Trading Prices
  • Brent Future Oil and UK NBP Gas Price Decks
  • Oil & Gas Market Activity & Fundamentals

Who is ERCE?

ERCE is the United Kingdom’s leading employee-owned Oil and Gas Reservoir Evaluation firm. Headquartered in London with a growing office supporting the Asia-Pacific region out of Singapore.

At ERCE we specialise in all areas of upstream energy analysis. Our privately owned status enables us to give truly independent insights whilst working on reserves evaluation, commercial analysis, unitisation/expert services and technical studies.

Graph

Source: Nominal Brent Crude Forecast by Consultants, Lenders Vs. Brent Historical and Futures Curve, ERCE Energy Review Q1 2021

Status Quo: Brent price declined in October to a low of $37.5/b before surging past $54/b at the start of the year, on market optimism due to additional OPEC+ production cuts and positive vaccine news. Numerous countries have approved and begun deployment of Moderna and Pfizer’s COVID-19 vaccines. Uncertainties remain significant, with a strong resurgence of the virus in US and Europe, and the discovery of a new strain in the UK.

Short-term: Short-term consensus on oil prices will be a balancing act between the optimism of vaccine rollout and the resurgence of COVID-19 infections. Fresh lockdowns across the developed world might stall the recent oil price rally. On the supply side, OPEC+ announced a ‘hands-on’ approach, scheduling monthly meetings to increase its control of the markets, as the group commits to additional cuts until March. According to the EIA, US rig counts continue to rise, but total production is expected to decline in the coming months.

Medium-term: Medium-term consensus revolves around steady and continual oil price recovery. The demand recovery is likely to depend on the pace and ease of vaccine rollouts. Three vaccines (Pfizer-BioNTech, Moderna and Oxford/AstraZeneca) have been approved by numerous countries, but worldwide deployment is expected to be a lengthy process, and might extend past 2021. Producers will likely keep a heavy hand on the taps to adjust production and match the demand recovery. US crude oil production is forecasted by the EIA to increase in 2021, as a response to rising oil prices. Upward pressure on oil price is expected to be limited by excess production capacity and elevated inventory levels.

Long-term: Long-term consensus continues to be uncertain and heavily debated. European producers have embraced the energy transition and adopted extensive plans to reach net-zero targets. US producers continue to hold out on significant
changes, but this stance will be tested by mounting investor pressure and an imminent Joe Biden presidency. Despite the increased support for the energy transition, significant obstacles continue to exist and the process is anticipated to be gradual.

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