“Unlocking the Super Cycle: How Seven Celebration Years Could Transform the Oil and Gas Industry”
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The energy services market is expected to reach $1 trillion by 2025
According to Rystad Energy, the global market for oil and gas suppliers is expected to peak at $1 trillion by 2025 and stay there for several years. Photo by Nexen
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Oil markets have been rattled by opposing forces of late: fears of a recession on the one hand and the reopening of China, the world’s second largest consumer, on the other.
Crude oil fell 8 percent last week on jitters about major economies, only to get a boost on Sunday when the head of the International Energy Agency touted China’s recovery as a key driver of oil prices.
The IEA expects half of global oil demand growth to come from China this year, Executive Director Fatih Birol said.
“This could get even stronger if the Chinese economy progresses faster than we think. Global oil and LNG demand will increase.”
Part of the industry could be poised for particularly strong growth even if oil eventually stumbles into another downturn.
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Rystad Energy, a research firm headquartered in Norway, predicts that the global market for oil and gas suppliers will peak at $1 trillion by 2025 and stay there for several years.
“Global oil and gas suppliers seem to be recreating the biblical story about the Egyptian pharaoh’s dream of seven years of feasts and seven years of famine – only in reverse order,” said Audun Martinsen, head of energy services research at Rystad Energy, in a recent report.
“All signs point to 2022 being the start of another super cycle for the energy services industry.”
The “seven years of famine” referred to in the report began in 2014, when the industry was first hit by an oversupply of oil from the US shale boom, after which OPEC and Russia flooded the market. The two-year COVID-19 pandemic that followed shrunken demand, low oil prices and limited upstream spending, Rystad said.
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From the peak in 2014 to the trough in 2021, revenue for the largest contractors fell nearly 60 percent.
Last year was a turning point as the post-pandemic recovery ignited oil demand. Oil prices rose and gas prices shot up to record highs. Energy security concerns prompted oil and gas companies to ramp up production and source more goods and services from suppliers, who were quick to sell fracking fleets, rigs and casing and pipe steel, Rystad said. The prices for these goods rose.
“After the recovery in 2022, we are entering a very promising 2023, with potential for 13 percent growth for both oil and gas investments and 10 percent for low-carbon investments,” the report said.
Strong growth in the liquefied natural gas industry should keep oil and gas spending above $920 billion a year on average through 2028.
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Even with the risk of another downturn in oil and gas after 2025, oilfield service providers should be able to offset it by entering the expanding renewable energy market, Rystad said.
“The key for suppliers is to continue to pursue obvious opportunities in geothermal, hydrogen, offshore wind, and carbon capture, utilization and storage,” the report said.
“Combined with oilfield services, this expansion into other energy sectors could create a $1 trillion supplier market by 2025 that could last for several years after that.”
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Almost a year into the Bank of Canada’s fight against inflation, we don’t seem to be much closer to 2 percent.
Inflation was last seen at 6.3 percent in December, down from a 40-year peak of 8.1 percent in June.
“A common question we ask is whether the 2 percent target is even a realistic or reasonable target,” BMO chief economist Douglas Porter said in a statement. “The latter is a debate for another day. But we can say: ‘Yes, 2 percent is indeed still realistic.’”
Today’s chart, provided to us by Porter, shows that inflation has averaged 2 percent over the past 31 years since late 1991, when the central bank first targeted inflation in the 1-3 percent range.
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“So, yes, 2 percent is certainly realistic again,” Porter said.
- US President Biden’s State of the Union address
- Bank of Canada Governor Tiff Macklem delivers a speech to the CFA Quebec on how monetary policy works, followed by a press conference
- Data from today: Trade balance of goods and services in Canada, trade balance of goods and services in US, consumer credit in US
- Merits: Cineplex, Royal Caribbean Cruises, The Carlyle Group, Hertz Global Holdings, Chipotle Mexican Grill, Prudential Financial, WildBrain, H&R Block, Intact Financial
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If you’re determined to make 2023 the year to take better control of your finances, Sandra Fry can help. Here’s her best advice to get you started.
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Today’s post has been written by Pamela Heaven, @pamheavenwith additional coverage from The Canadian Press, Thomson Reuters and Bloomberg.
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Source: financialpost.com
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