Depressed oil demand growth, a possible shift in U.S. policies reception and abroad after the presidential election, the continued pressure on the industry to deal with global climate change, the stock market’s lack of confidence in energy stocks, and adequate levels of financing for gas projects are the five key risks ahead for the energy sector next year, Wood Mackenzie’s Simon Flowers writes.
Weak Oil Demand Growth
This year, oil demand growth has been at its weakest since 2011, as slowing the global economic process and therefore the U.S.-China trade war weighed on every economy within the world.
The phase one trade deal last week may be a de-escalation of the trade dispute and will help the outlook on oil demand growth for 2020. most forecasters and analysts expect demand growth to select up next year from the very low growth this year. WoodMac sees oil demand growth quite doubling to 1.35 million BPD from just 600,000 BPD this year, because of marine diesel fuels in China and gas liquids (NGLs) demand for the growing U.S. petrochemicals capacity.
Elections and Energy Policies
If a Democratic candidate were to beat President Donald Trump within the 2020 election. They might not only attempt to scale down U.S. exploration and production. But they might rethink U.S. policies globally, which might significantly impact the energy industry and markets.
For example, current sanctions on Iran and Venezuela are keeping some 2 million BPD of oil off the market. So if a President Democrat were to rethink current U.S. policies regarding the sanctions and therefore the Iran nuclear deal, the market could suddenly become far more oversupplied than it already is.
Senators Elizabeth Warren and Bernie Sanders. Two of the front-runners within the Democratic Party’s race for the nomination, have promised to ban fracking. On a collision course with the refining industry.
Policies to Fight global climate change
The European Union’s (EU) “green new deal” could trigger global acceptance of carbon taxes and tariffs to guard EU products against imports. With a high carbon footprint, for instance, WoodMac’s Flowers says.
Under the Green Deal, the EU pledges to chop emissions by a minimum of 50 percent. By 2030 from the present target of cutting emissions by 40 percent. This pledge could have a big impact on energy companies, consistent with WoodMac’s director of corporate research Valentina Kretzschmar.