In 2015, Oil and Gas Prices were at a historic 10 year low, through Saudi Arabia and Russia – both very oil rich countries – refusing to comply with OPEC instructions on maximum oil production. Crude oil, like all resources throughout the world – is subject to supply and demand – and both countries have pushed down global oil and gas pricing through overproduction throughout 2015.
This has been catastrophic for the industry, as hedges of crude oil have become more of a burden to banks and governments due to lack of demand, low pricing due to competition of cheap Russian and Saudi oil, and has also meant that the hedges themselves are costing money, due to the costs of keeping them. The slump in prices has also meant that countries and banks have been unable to sell these hedges, as they are in negative equity – worth far less than already paid.
As 2016 passed, the oil and gas industry buckled down and prepared for rough times, with oil and gas exploration and production at an all-time low. Reservoir Evaluation companies, expert witness companies and also oil and gas companies weathered the storm, and scraped through 2016 with little company operations.
Other companies, such as Equipoise Software - An independent software company which specialises in niche products for the energy industry - redoubled the development of their products for the day of which the bloated environment would clear. As such, they have added increased functionality to their well-respected platform for Depth Conversion, Velit - as well as optimised their Seismic Inversion Plugin, InSeis.
The diligence of these companies almost reminds us of the story of the Grasshopper and the Ant - and it has become very clear that using good times to prepare for bad throughout the entire oil and gas industry has ensured that the bad times have not been as worse as they have.
Russia and Saudi Arabia eventually conceded and started working with OPEC, after oil and gas pricing was brought to a point where the costs of exploration outweighed what they could sell for. Since 2016, OPEC has been working with these countries to lessen their output, while focusing on the sale of what resources are barrelled up. At the time, many figures within oil and gas economics and pricing saw the move as “too little, too late” but their persistent efforts have meant that the persistent crude oil surplus started to sink throughout 2017.
As of October 2017, the crude oil surplus has been effectively halved, and demand is starting to creep back up. Oil and Gas Prices at September 2017 were at $57.55/barrel, and for October look to be up 10% and 20% growth is predicted for next quarter.
It is thought that middle Eastern tensions as well as the American hurricanes have caused this demand, as US Gulf refineries have been forced to close throughout the hurricane season - but regardless of the reason, it appears that the Grasshoppers of the oil and gas industry have emerged and have started to prosper once more.
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