We’re beginning to see reports flooding into our inboxes highlighting how trade sanctions are going to dampen economic activity and squeeze oil demand, making now a precarious time to invest in oil and gas. However, these reports seem to focus only on fear mongering and persist in pulling discussion in the direction of a single oil and gas trading nation. When one takes the time to ease back and capture the global view of the oil and gas universe, it becomes clear that sanctions will likely only impact China, and could, in fact, be very good for the U.S. oil and gas producers and investors.
We begin by looking at the latest U.S. Energy Information Administration monthly report. The report states that oil output is rising in all seven major shale formations by 143,000 barrels a day. This will put oil production in the U.S. at a record 7.47 million barrels a day in August. The largest gains are seen in the Permian Basin in Texas and New Mexico and signify the seventh monthly increase in a row. The good news doesn’t end here, as highlighted by analysis from consultancy group- Wood Mackenzie. The report highlights that onshore lower 48 crude oil production will be the driving force behind global oil supply growth well into the middle of the 2020’s.
This news comes on the tail end of a report released by the International Energy Agency, stating that renewable energy investment fell 2% after years of growth. Despite the rising renewable energy production, investment in renewables was down 3% last year. All of this while investment in fossil fuels increased last year, for the first time since 2014, realizing $716 billion in oil and gas investments.
Considering the most recent news to come out of Iraq, the world’s fourth-largest crude oil exporter, this bodes very well for the U.S. oil and gas industry. Al Mada, Iraq’s leading newspaper, proposes that the nation’s recent unrest will have a profound impact on oil production in the OPEC nation. With a majority of the unrest being located in Basra, the nation’s largest provider of oil, where demonstrators are already blocking key port access, oil production in Iraq will likely see setbacks until the middle of 2019.
Finally, looking at recent discussions between President Trump and Russia’s President Putin, the U.S. is poised to be a key player in the European oil and gas markets. With production winding down in the Netherlands, Europe will become more reliant on oil and gas imports. Putin acknowledged, in the conversations, that there is very clear space for cooperation with the U.S. on energy. He even opened discussions on extending gas transit accords with Ukraine if the U.S. can aid in resolving legal disputes between the two Eastern European nations.
So, will sanctions with China impact the U.S. oil and gas industry? Yes, they will. Will the U.S. market feel the impact of these sanctions? No, we will not. When U.S. production is up, when renewable investments are down, when one of the largest players is out of the picture, and when demand climbs in parts of the world where we’ve historically had little trade activity, the outlook for U.S. oil and gas is not as grim as the fear mongers would like us to believe. Ultimately, there is no better time to invest in oil and gas in the U.S., and fortunately, Alpha Seven Energy is perfectly situated to experience the coming gains for its investors.