Oil & gas macro outlook

The oil sector is firmly in a new cycle, with a dramatically lower cost profile across the industry. Inventories in the US remain at elevated levels (only just below last year’s record levels). Although demand growth is steady, the production growth from the US shales alone is seen to be enough to provide for this growth from (Q217-Q218), with OPEC playing a role as the swing producer to cover seasonal variation. The market agrees, and the forward curve has progressively lowered and flattened over the last 18 months. We lower our long-term oil price assumption to $70/bbl in 2022 (equivalent to c $60/bbl real in 2016).

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