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According International Energy Agency (IEA), global investments in upstream is down around $100 billion around 20% lower than 2014. According to IEA, drop is largest on record.
What is upstream?
- Oil and gas industry usually dived into three sectors, upstream, midstream and downstream. Upstream includes exploration and production.
Where most of the investment drop is coming from?
- According to IEA, largest drop is being seen in US, Canada and Brazil with US shale industry registering for steepest decline. Downfall of investments in the sector would finally result in drop in growth potential.
- Lower revenue from oil is leading to drop in further investments. For example Iraq is producing crude at record pace around 3 million barrels per day, however it earned only about $4.8 billion in revenue due to lower oil price compared to $8 billion a year ago.
Supply demand forecast -
- IEA expects global demand for oil will go up in 2015 by 90,000 barrels/day, while production will drop in North America driven shale. US production growth is forecasted to drop by 50,000 barrels/day.
Brent crude oil is trading around $67.4/barrel, down slightly from its yesterday high around $69.2/barrel. Price is very close to initial target of $70-$72, might face some consolidation around here.
As of now shipping statistics indicate that supply in the short term remains at large that is leading to contango in oil market by depressing the spot price.
