In 2018, global oil demand looks likely to have actually breached 100 MMbbl/d for the first time, natural gas continues to broaden its share of crucial markets, and the chemicals industry has actually seen strong earnings growth. Now, the oil and gas industry is entering the brand-new year with increased volatility in costs and regulatory overhangs in the middle of lots of new service chances. What elements will shape brief- and long-lasting trajectory? Read about the state of the industry in Deloitte's 2019 Oil and Gas Market and Chemicals Industry Outlook, a draw from Duane Dickson, United States Oil, Gas & Chemicals leader, Deloitte LLP.
As 2018 ends, it is a good time to analyze the recovery for the oil and gas industry, the status of the chemicals market, and their potential customers in 2019. If there is one constant in energy markets, it is modification, as costs shift and companies adjust. Separately, the chemicals market has taken pleasure in positive growth and margins for the previous few years, so we will be seeing to see if indications of a downturn emerge. Although nobody can truly declare to understand what will occur in the next 12 months, it works to try to comprehend how the business environment might evolve.
In oil markets, the depths of the post-2014 decline appear to be behind us. Oil prices have actually recovered from the $40 2016 annual typical WTI (West Texas Intermediate) rate low. It breached $50 in 2017, and through September 2018 it averaged simply shy of $67, though many producers in Canada and the Permian saw lower costs due to widening differentials. This healing has actually been an outcome of different elements, consisting of continual success of the production restraint agreement between OPEC (the Organization of the Petroleum Exporting Countries) and non-OPEC countries in force considering that the start of 2017, less oil coming to market from challenged manufacturers, and continued strong global oil demand development estimated by the Energy Details Administration at about 1.6 million b/d in 2018. These forces together have actually brought global oil stock levels down by more than 175 million barrels because 2016 and buoyed costs.1.
These more positive signals have helped United States crude oil and natural gas liquids (NGL) production delight in another outstanding growth year, adding an estimated two million b/d in 2018, led by the prolific Permian Basin. Natural gas is a various story, as 2018 prices in the United States remained anchored around $3, as abundant, affordable US supply continued to meet growing demand in domestic and export markets.2.
In the chemicals industry, at this stage of the capital cycle, significant brand-new capability in base chemicals is expected to be commissioned now or in the future. An area of danger may be whether this may lead to lower margins by getting ahead of demand trends. Nevertheless, the industry might well prevent anything more than a mild downturn by phasing in ramp-ups in the new capability, offering to the North American market, which is still quite robust, and benefiting from improved US port facilities to export more efficiently to international markets. So, even with a possible slowing down of emerging market development, and a shift to more reuse of plastics, the chemicals market in the United States looks fairly well-shielded from substantial disadvantage risk.