Energy
Heading into 2020, many players in the energy and oil industry has expected a positive growth in the sector, especially with crude oil prices reaching the $60s. This optimistic outlook for the year has encouraged oil producers to drill and operate more wells to boost up the prices and upsurge more revenue for the year.
However, the COVID-19 outbreak came as a surprise for many. Governments started restricting business and travel, disrupting the global oil consumption and eventually decreasing it. With people stuck in their homes and fewer transportation allowed outside, the demand for oil across the world has significantly dropped and pushed revenues off a cliff.
The International Energy Agency (IEA), who initially foresaw a 1.2 million barrel per day (BPD) increase in the worldwide oil demand, now revised their figures and predicted only an average of 91.7 million BPD for the year. This marks a stunning 8.4 million BPD year-over-year decrease.
Organization of the Petroleum Exporting Countries (OPEC) has also estimated the 2020 energy demand to be at 90.2 million BPD only. But while restrictions across the globe will eventually be lifted and life shifts to the new normal, both organizations are still unsure of the future of the oil industry. In fact, IEA says that its outlook for the oil demand in the world has grown “even more fragile.”
The consumption has slowly improved since its initial collapse, though, but it is not recovering as fast as many forecasters anticipated. It is clear that the oil industry is facing a long road to recovery.
With such, many energy oil companies are expected to reconsider their business strategies and reduce their oil rig operations in the coming years (2021-2025). This will also mean that more financially troubled players will begin go bankrupt. To survive the storm that is COVID-19, many oil companies need to consider merging with a rival in the hopes that their increased scale will let them weather the storm.
Click below to read the magazine
