Page 11 - NorthAmOil Week 01 2021

NorthAmOil COMMENTARY NorthAmOil

A long, strange year:

2020 in review

NewsBase’s editors are marking the start of 2021

with a review of how each of the regions covered by

our organisation was affected by the events of the
past 12 months

GLOBAL WORLD oil markets have never quite recovered could be consigned to inventory, as most storage
all of the ground they lost between mid-2014 and facilities were almost completely full. As a result,
WHAT: early 2016, when prices for Brent crude and West prices plummeted even more than they might
An unprecedented Texas Intermediate (WTI) plummeted from have done otherwise – and the rest of the year
year for the oil and gas levels above $110 per barrel to less than $30 per was taken up by attempts to repair the damage.
industry brought a variety barrel. But in 2020, traders discovered that there The clean-up campaign is not over. Neverthe-
of challenges with it. was more room for these two benchmarks to fall. less, NewsBase’s editors are marking the start of
World oil markets have never quite recovered 2021 with a review of how each of the regions
WHY: all of the ground they lost between mid-2014 covered by our organisation was affected by the
Existing crude oversupply and early 2016, when prices for Brent crude and events of the past 12 months.
has significantly West Texas Intermediate (WTI) plummeted
exacerbated by the from levels above $110 per barrel to less than Africa: Delays and disruption
COVID-19 pandemic. $30 per barrel. But in 2020, traders discovered Undoubtedly, Africa’s oil and gas sector has suf-
that there was more room for these two bench- fered over the last year.
WHAT NEXT: marks to fall. Falling energy prices and weakening demand
Some of the challenges On April 20, WTI prices hit unprecedented caused export earnings to sink, and the decline
have spilled over into lows, sinking below zero for the first time in imposed significant hardships on major pro-
2021. history. (Brent, by contrast, hit a 19-year low ducers such as Nigeria and Angola, which are
slightly below $20 per barrel on the same day.) heavily dependent on oil export revenues. They
Prices did not stay at these levels for long, but also left some of these producers with large vol-
they have not regained all their strength either. umes of crude and LNG that they simply could
As of the beginning of 2021, both were trading not sell – and could not put into storage either,
near $50 per barrel, and some market observ- since they lacked the facilities to do so. On April 20,
ers were speculating about the possibility of Nigeria, for example, found itself stuck repeat-
further declines, owing to disagreements over edly during the spring with dozens of unsold oil WTI prices hit
OPEC+ production quotas and new lockdowns cargoes, and its attempts to attract buyers with unprecedented
to combat the ongoing coronavirus (COVID- price discounts did not always succeed. Angola
19) pandemic. also experienced similar problems, though on a lows, sinking
This speculation is hardly misplaced, given smaller scale.
that OPEC+ production quotas and COVID-19 At the same time, market conditions also below zero for
were the main reasons why 2020 wreaked such affected a number of major investment ini-
havoc on the energy sector. The pandemic (and tiatives. Low prices, sluggish demand and the first time in
the public health measures taken to combat it) lockdowns delayed final investment decisions history.
caused oil and gas consumption levels to plum- (FIDs) on several projects, including Eni’s
met astonishingly quickly in the first half of the Agogo field, located offshore Angola. They also
year, even as they upended predictions about led some companies to hand their African assets
future demand. over to their partners; for example, FAR Ltd
At the same time, the lapse of the OPEC+ (Australia) and Cairn Energy (UK) both opted
production agreement at the end of March led to quit the Sangomar field offshore Senegal,
Russia and Saudi Arabia to bring much more oil and their stakes were eventually bought out by
to market in the hope of gaining more market Woodside Petroleum (Australia), the project’s
share. (It also led other members of the group to operator.
follow suit.) This rapid increase in supply took The same factors also forced the cancellation
place at a time when very little surplus crude or rescheduling of licensing rounds in multiple

Week 01 07•January•2021 www. NEWSBASE .com P11