Oil: Saudi lollipop set to sweeten energy company valuations

{"text":[[{"start":null,"text":"

"}],[{"start":12.39,"text":"Opec+ has gone through some dry times. "},{"start":15.232000000000001,"text":"But now it has struck oil. "},{"start":17.024,"text":"Saudi Arabia and Russia’s production cuts have succeeded in lifting oil prices by 27 per cent to $95 per barrel since the end of June. "},{"start":25.317,"text":"With oil now within sight of last year’s $100/bbl average, consensus estimates for the energy sector look out of date. "}],[{"start":32.769999999999996,"text":"This run marks a return of form for the cartel. "},{"start":35.873999999999995,"text":"Not so long ago, member producers quailed at tighter output quotas, fearing a rapid supply response from US shale producers. "},{"start":43.19199999999999,"text":"The new financial discipline demanded by exploration and production investors — profits before growth — has given Opec a stronger hand. "}],[{"start":50.83,"text":"A surprisingly resilient global economy has helped. "},{"start":54.097,"text":"Despite fears about economic weakness in China, its crude imports rose to 11.5mn barrels a day in August, according to Jorge León at Rystad Energy. "},{"start":63.489,"text":"That is 2mb/d higher than this time last year. "},{"start":67.244,"text":"That sort of leap leaves China accounting for the lion’s share of this year’s forecast world demand growth. "},{"start":72.637,"text":"The International Energy Agency puts it at 2.2mb/d. "}],[{"start":78.12,"text":"The world now produces less oil than it consumes. "},{"start":81.36200000000001,"text":"Cue rapid destocking. "},{"start":83.092,"text":"Inventories around the world plummeted in August and should continue to fall over the coming months. "}],[{"start":88.71000000000001,"text":"The tightness in the market supply may well continue into next year. "},{"start":92.539,"text":"The exponential penetration of electric vehicles should lop off half a million barrels of oil from demand. "},{"start":97.99400000000001,"text":"Yet overall economic growth should lead to a small increase in consumption compared with this year’s 101.8mb/d. "}],[{"start":106.38000000000001,"text":"Meanwhile, oil production has to run just to stand still. "},{"start":110.23400000000001,"text":"Output from big, conventional oilfields declines at a rate of about 3 to 5 per cent annually, no matter what. "},{"start":116.58900000000001,"text":"Few new projects are expected to come on stream in 2024. "},{"start":120.34400000000001,"text":"The wild card here is Iran, where production has risen sharply despite sanctions. "}],[{"start":126.14000000000001,"text":"The “Saudi lollipop” — a sweetener for the oil market — has wrongfooted analysts. "},{"start":131.08200000000002,"text":"Analysts expect earnings at European energy producers to fall 23 per cent fall in 2023 and a further 6 per cent next year, according to Bernstein Research. "},{"start":140.137,"text":"These should start to rise — and with it the stock prices of the European majors, such as Shell and Eni. "}],[{"start":146.26000000000002,"text":"The sector’s lowly forward multiple of 7.4 times, despite record cash flow yields, could test the resolve of investors to avoid these carbon-heavy giants. "}],[{"start":155.27,"text":""}]],"url":"https://creatives.ftacademy.cn/album/122735-1695172222.mp3"}