Page 8: of Offshore Engineer Magazine (Sep/Oct 2016)

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The Barrel draw in re? ned product of 3.3 MMbbl

OPINION was reported. This compared to expec-

Down and up?

tations of 300,000 bbl! Previous weeks had reported a surprise re? ned product build. Similar issues undermine the credibility of the weekly crude inven- tory reports.

It would be much more appropriate “Based on the to focus on the things that really matter in the long term: ? rstly, global growth, comments associated which drives demand for oil and gas; with the Q2 results secondly, the reported production de- clines from exploration and production of the large service companies; and thirdly, the observa- companies, they all tions of the service companies that bear witness to what is actually happening in seem convinced that the oil? elds. You could add the move- we are at or beyond ment of the US dollar to this list.

Based on the comments associated the bottom.” with the Q2 results of the large service companies, they all seem convinced that we are at or beyond the bottom. To paraphrase a quote from the Halliburton call: “it’s actually light at the end of the tunnel and not an oncoming train.”

Meantime, the long predicted wave of corporate failures is beginning to wash over us. Some of these businesses can be saved by going through an insolvency

I’m sure process, but no amount of restructuring that everyone is as or money can help those companies that fed up with this downturn are losing money at an operating level.

as I am, partly because this is the This is my last monthly column for longest ever downturn our industry has dashing hopes of a sustainable near- Offshore Engineer (OE) and I would like experienced, but also because the path term upturn in activity. to leave you with a positive outlook for to recovery is opaque. The underlying cause of this situa- our industry. I am certain that, as long

The depression is exacerbated by the tion is the reaction of crude traders to as we don’t have another ? nancial crisis weekly yoyo of crude prices. In the last the weekly data coming out of the US or similar global trauma that devastates month, prices touched US$50 resulting in relation to crude and re? ned product crude demand, there will be a pickup in in a minor uptick in North American stocks. This was particularly well il- activity over the next 18 months.

I plan to spend as much of my time as shale activity then slumped again, lustrated in early August when a record possible helping investors and compa-

Brent – West Texas Intermediate (WTI) spread nies to position for that outcome. Good 140 luck. dollars per barrel 120

HistoryForecast

Colin Welsh is head 100 of international energy investment 80 banking at Simmons

Spread (Brent - WTI) & Company 60

WTI

International, part 40 of Piper Jaffray. He

Brent studied accountancy, 20 economics and law at the University of Aberdeen and 0 01040710 01040710 01040710 01040710 01040710 01040710 01040710 01040710 quali? ed as a Scottish Chartered Accoun- 2010 20112012 2013 2014 2015 2016 2017 tant with Ernst & Whinney (now EY).

Source: U.S. Energy Information Administration, Short-Term Energy Outlook

September 2016 | OE oedigital.com 10 010_OE0916_Barrel_jl1.indd 10 8/23/16 4:47 PM