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Energy market themes to watch

Published by , Editorial Assistant
World Pipelines,

Enverus Intelligence Research (EIR), a subsidiary of Enverus, the most trusted energy-dedicated SaaS platform, has released its list of themes it expects will shape energy markets in 2023.

“We’re seeing divergent opportunities across commodity and power markets this year. Fundamentals for oil look strong in 2023, we expect returning to US$100/bbl, while natural gas prices are anticipated to remain weak around US$3.50/million Btu in North America given limited expected US export growth,” said Dane Gregoris, a Managing Director at EIR and report author.

Geography will continue to play a deciding factor and EIR expects oil growth around deepwater opportunities in Latin America by the middle of this decade, as well as expansion in the Permian, Haynesville, and Montney.

“In addition, we expect energy transition-related investments to continue to grow on the back of the Inflation Reduction Act in the US and anticipate other countries will look to compete with accommodative American policy. Policy, technology, and profits will be the deciding factors as more nations follow suite. Carbon capture and sequestration (CCS), renewable natural gas (RNG), and hydrogen will continue to capture industry and investor attention. Emissions scrutiny is likely to take another leap forward as E&Ps respond to the call to produce in more efficient and environmentally sound ways.”

Key takeaways from the report:

  • Enverus expects 1 million bbl/d of y/y global demand growth, half driven by China relaxing COVID-19 restrictions and reopening its economy. Conversely, the combination of modest US supply growth (0.4 million bbl/d e/e), OPEC intervention and Russian sanctions prevents critical OECD crude, product and SPR inventory builds, leaving the market undersupplied if an anticipated pickup in the global economy materialises in the second half of 2023.
  • Enverus estimates L48 dry gas supply will grow another ~1.5 billion ft3/d e/e this year, driven mostly by the Permian. Haynesville production is expected to increase at half last year’s pace based on an anticipated slowdown in activity. Together, EIR’s supply projections refill inventory to 3.9 trillion ft3 by October, which EIR anticipate will push prices to US$3.50/million Btu by summer.
  • EIR believe the recent energy selloff provides a compelling entry point for investors to add exposure to the sector. This year EIR believe institutional investors are more likely to continue adding energy exposure on weakness given strong commodity fundamentals and low sector leverage. In this new market regime of higher inflation and interest rates, real asset exposure with high dividends should continue to perform relatively well, according to EIR.

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