December 15, 2021

As I have talked about for several months, OPEC and OPEC + have again reached the global power that they originally desired. The United States shale revolution held that in check and reduced their influence over our energy policies. 

The world and the U.S. travel and demand are increasing despite Omicron’s arrival. These are some key factors in their review of the production levels for both organizations.  This metrics is important, but not the most important. 

On December 14th, the Saudi oil mister was quoted; “We’re heading toward a phase that could be dangerous if there’s not enough spending on energy,” Oil Minister Abdulaziz bin Salman said in Riyadh. The result could be an “energy crisis,” he said. Abdulaziz bin Salman was also quoted in November saying that we need over one-half a trillion dollars invested in E&P to keep the normal depletion of oil and gas replaced. 

Asia Drives Demand - ENB
China’s demand is a critical component of the world’s pricing matrix. They are also buying the most oil outside of the production quotas. How much that may impact their demand remains to be seen.

In the United States, the E&P and OFS companies are going to benefit for the next 3 to 5 years. It is hard to predict past that as the biggest impact on the energy crisis will be Energy Tech. While the shale rig counts are less than in previous years, the technology has a significant production increase. Fewer rigs are required. That being said costs for drilling are increasing because of the supply chain and inflation crisis. 

The King Operating Research Team is looking for the data points to calculate these offsetting matrices and impacts on the WTI prices. 

The Bottom Line. 

Omicron does not matter to the United States pricing, while OPEC and OPEC+ have significant interests in keeping the Brent and WTI above the $125 to $145 average pricing for next year. 

Buckle up; we are heading into interesting times in the energy, oil, and gas markets.

Jay R. Young, CEO, King Operating

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