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Falling share prices on the horizon

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World Pipelines,

Enverus Intelligence Research (EIR), a subsidiary of Enverus, the leading global energy data analytics and SaaS technology company, has released its latest FundamentalEdge report focusing on its medium-term outlook for oil and natural gas.

“The surging dollar, signs of weakening US/Chinese economies and building recession risks outside North America have prompted a price correction with Brent falling below US$100/bbl,” said Bill Farren-Price, Lead Report Author and Director of EIR. “Demand headwinds are building but supply remains tight with no relief on the horizon. As the downside risks build, we expect Brent to consistently trade in the low US$90s/high US$80s next year.”

Al Salazar, Co-author of the report and Senior Vice President of EIR, added, “Hot summer weather has kept gas demand strong and inventories low relative to the five-year average, despite the Freeport LNG outage (2 billion ft3/d). Limited options for fuel switching and strong industrial demand support current prices (US$7.00/million Btu) until spring of next year when we anticipate supply growth will push prices lower.”

Key takeaways from the report:

  • EIR now expects US oil supply to grow by 0.95 million bbl/d E/E, concentrated in the Permian. Cost inflation and availability of crews remain significant headwinds to this forecast.
  • Rising risks to global economic growth have prompted EIR to downgrade their 2022 E/E global oil demand growth forecast to 1.5 million bbl/d from 1.65 million bbl/d. Similarly, EIR has downgraded its expectations for 2023 to 1.3 million bbl/d y/y from 1.6 million bbl/d y/y growth.
  • US industrial natural gas demand continues to increase, up 1 - 1.5 billion ft3/d y/y as the US threatens to replace uncompetitive European industrial production. This provides a structural advantage to the US industrial sector and is bullish for natural gas demand domestically.

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