BAKU, Azerbaijan, May 24
By Leman Zeynalova - Trend:
Under most best-case scenarios, oil prices could recover in 2021 or 2022 to pre-crisis levels of $50/bbl to $60/bbl, Trend reports with reference to McKinsey and Company.
“Crude price differentials in this period are also likely to present both challenges and opportunities. The industry might even benefit from a modest temporary price spike, as today’s massive decline in investment results in tomorrow’s spot shortages. In two other scenarios we modeled, those price levels might not be reached until 2024.
In a downside case, oil prices might not return to levels of the past. In any case, oil is in for some challenging times in the next few years. Regional gas prices could fall much lower than in the previous megacycle. Shale gas has unlocked abundant gas resources at breakeven costs less than $2.5/MMBtu to $3.0/MMBtu. The pandemic has had an immediate impact, lowering gas demand by 5 to 10 percent versus pre-crisis growth projections,” reads the latest report released by McKinsey and Co.
With North America becoming one of the largest LNG exporters by the early 2020s, and a sharply oversupplied LNG market, regional gas prices in Europe and Asia will be driven by prices at Henry Hub, plus cash costs for transportation and liquefaction (a premium of about $1/MMBtu to $2/MMBtu), according to the report.
The company says that demand for refined products is down at least 20 percent, and has plunged refining into crisis. “We think it will be two years at least before demand recovers, with the outlook for jet fuel particularly bleak. The immediate effects are already staggering: companies must figure out how to operate safely as infection spreads and how to deal with full storage, prices falling below cash costs for some operators, and capital markets closing for all but the largest players.”
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