Energy forecasters see a worsening supply glut in 2020, putting OPEC+ in a bind. But beyond that, the bust could result in a boom as supply growth slows to a trickle.
“For three years, oversupply has deteriorated Energy equity sentiment,” Goldman Sachs wrote in a note on Monday. That presented an impossible choice for OPEC – cut output or let prices crash? The group chose to slash production in an effort to rescue prices, but in doing so, it arguably prolonged the adjustment by propping up unprofitable shale drillers.
However, U.S. shale is indeed slowing down. Theoretically, as shale drillers bite the dust in increasing numbers and rigs continue to get scrapped, the slowdown will help the market rebalance, which could lead to a more durable price rally.
Union Jack Oil plc (LON:UJO) is an onshore oil and gas exploration company with a focus on drilling, development and investment opportunities in the United Kingdom hydrocarbon sector.
