You might be thinking that last year’s ridiculously numerous developments in the oil and gas industry couldn’t possibly be matched. You might be muttering thanks as you catch your breath, grateful that finally, the 2016 hurricane has cleared; you might take comfort in some certainty that you and those invested in O & G can at last kick back and enjoy the sweet, uninterrupted trickle of stability. You might be very wrong.
Of course, it’s never easy to predict anything about an industry whose recent trend charts more closely correlate with a profile of the Himalayas than anything resembling stable. Nevertheless, with the following list I will do my best to sketch you at least a semi-coherent picture of what 2017 has in store for the O & G industry.
- OPEC countries wiggle around production standards – Each year, the Organization of Petroleum Exporting Countries sets a production quota which limits how much oil member countries are allowed to drum up, and every year, member countries dream up new and innovative ways of skirting these strictures. This year should be no different, which means peace between oil supply and oil demand might again be postponed.
- Trump’s relationship with Russia leaves a mark – If Trump continues his crusade to improve relations with Russia, it will likely lead to a number Obama’s sanctions being lifted, leaving Russia free to produce more oil. The old administration’s original deal was slated to last six months, so the second half of 2017 might likely see Russia ramping up its exports.
- Companies benefit from Trump’s deregulation – The Obama administration’s disdain for oil and gas is hardly hidden. They’ve enacted regulations which made adhering to any sort of federal standard difficult. This inability to develop a coherent strategy due to shifting federal regulation has limited O & G’s profitability, but 2017 should see steps taken to relieve some of the regulatory pressure on the industry.
- Currently increased prices lead to increased US drilling – OPEC’s recent agreement has granted the US permission to produce more oil. With prices hovering at a profitable $55/barrel, US oil companies will likely find increased production too lucrative to ignore, which will subsequently introduce market volatility as the US’s substantially increased supply plays hell with prices.
- 2017’s latter half sees an O & G rebound – After an initial production boom floors prices, companies will likely cut back production, which, combined with OPEC’s efforts to limit excessive supply, should result in market stabilization and an eventual rebound.