The year 2018 has come to a close, making now a great time to look back over the past year to pick out the most important stories and events that affected the energy industry. While there was no one big story as there have been in other years, many developments did have an effect on oil prices, sending them higher in many cases – and lower in others. Here’s a quick recap of these stories.
1. Unpredictable pricing behavior
In 2018, the West Texas Intermediate Index opened at $60 a barrel, and Brent came in at slightly under $67 a barrel. Ten months later, in October, several developments in the oil industry sent prices higher — the WTI to $80 and the Brent index to $86. The trade war with China had the country ending oil imports from the U.S., a move that caused prices to crash. The fact that Saudi Arabia increased production to make up for oil lost from Iran had an impact on prices, as well. Overall, these changes caused prices to fall. By the end of December, WTI had fallen to $45 a barrel and Brent was at $54 a barrel.
2. The U.S. breaks production records
In early 2018, a report by the Energy Information Administration stated that the U.S. crude oil production record of 10 million barrels a day, set in 1970, had finally been shattered. U.S. oil production climbed after that point until it was at 11.475 million bpd by September.
3. Venezuela’s oil industry falls further
As Venezuela’s economy sank deeper into crisis, its oil production continued to crater. By November, it fell to a little more than a million barrels a day, half the output the country saw in the year 2016. As Conoco Phillips won arbitration worth $2 billion against the country over ownership of two oil projects, Venezuela’s oil industry was further pushed to the brink. Conoco Phillips is reported to have seized ownership of some of Venezuela’s assets in the Caribbean as payment.
4. EPA chief Scott Pruitt resigns, and the ethanol industry cheers
As Oklahoma attorney general, Scott Pruitt did his best to demonstrate opposition to the renewable fuel standard. He continued his stand against the standard when he became EPA administrator. When he departed in 2018, it sent stocks in the ethanol industry soaring. Shortly after, his replacement announced that restrictions would end on the sale of ethanol fuel blends year-round.
5. OPEC raises production, then cuts back
The OPEC cartel met in June and announced that together with Russia, they would raise production for the first time since November 2016. Production raises were in response to prices that recovered to the point that they were over $70. Questions about demand growth began to turn up, however, when the trade war with China began. By December, when prices collapsed, OPEC and countries allied with the cartel agreed to lower production in order to prop up prices.
6. Permian Basin proven to hold reserves and record levels
The U.S. Geological Survey announced in December a revised estimate for recoverable resources at the Delaware sub-formation of the Wolfcamp formation of the Permian Basin. Current estimates stand at 46 billion barrels of crude. This turned out to be twice the amount of crude estimated in the past. This discovery meant that proven resources in the U.S. rose by nearly 20 percent, a new record.
According to Sigma Drilling Technologies, a leading manufacturer of pulsation control solutions including pulsation dampeners, the newly revised estimates can only mean that there are good times ahead for the U.S. oil industry.
7. Natural gas prices finally began to rise
Natural gas spent every year since 2014 under $3 per million BTU. Low inventories in 2018, however, caused prices to rise. The last three months of the year saw natural gas futures rise by 60 percent, on the back of prices that reached $4 per million BTU, for the first time in four years.
The global oil industry went through a roller coaster ride through the year 2018. As the year 2019 begins, prices are seen to be soft because of production surpluses. OPEC is planning a production cut of 1.4 million bpd. Prices should strengthen before long.
