Energy Industry Trends Review: January 2011

Industry analysts over the past few months have been constantly revising their oil demand forecasts up as the market continues to tighten. There are many positive signals, including improved global gross domestic product (GDP) forecasts, lower Organisation for Economic Co-operation and Development oil inventories and a big improvement in refining throughput. However, the talk is not yet reminiscent of the heady pre-2008 days.

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Key global trends affecting the energy sector in the current economic climate are examined. These trends include:

• Economic outlook. Global output is projected to expand by 4.5 percent in 2011.

• Oil supply. The oil market remains well supplied, with production reaching an all-time high of 88.5 million barrels/day for January 2011.

• Oil demand. Global oil demand grew by nearly 3 percent in 2010 and is expected to grew at a slightly lower rate in 2011 (1.5 percent

• Oil price. The oil price has been rising, due to continued geopolitical unrest in North Africa and the Middle East.

• Gas supply. The International Energy Agency is estimating the global gas market being oversupplied by around 200 billion cubic meters in 2011.

• Gas demand. Short-term gas demand has been supported by severe winter weather in the Northern Hemisphere.

• Gas price. Spot gas prices generally remain low in all markets but prices did see some upward movement due to the tightening supply/demand balance.

• Refining. A good quarter for refining, with margins and throughput improving in most regions.

• Mergers and acquisitions.M&A activity continues to increase at record levels with global sales of upstream oil and gas properties reaching a record $107 billion in 2010.

• Rig activity. Analysts are estimating 2011 upstream spend will grow 11 percent year-on-year.

• Companies. Company results for Q4 2010 and 2010 as a whole were much improved on 2009 due to the sustained high oil price and better demand.