Can oil really hit $150? (And more!)

As the current crude oil trading year enters its final two months marked by festive breaks and potentially higher consumer demand as the Northern Hemisphere's winter approaches - thoughts inevitably turn to what price levels we will likely encounter in 2024.

With hostilities in the Middle East failing to lift crude prices despite all the talk of risk premiums and potential supply disruptions, being bullish about oil early in 2024 is proving hard. That's because concerns over crude demand are outweighing concerns over supply. 

We're talking muted demand from the economic powerhouses of Germany and China, lower consumer confidence levels in key OECD markets and elevated interest rate levels kept there by major global central banks, especially the US Federal Reserve. 

It therefore came as a surprise to The Oilholic when the World Bank opined that crude prices could hit $150 if hostilities in the Middle East escalate! Here are this blogger's thoughts on that via Forbes. Simply put - don't hold your breath! 

And let's not forget, Brent hasn't even capped a more realistic $100 per barrel level the bulls crave. The benchmark's January 2024 contract is barely higher than current levels, and contracts further out into the summer of next year are even lower. That implies Brent remains in backwardation mode.

Away from the crude price, the latest quarterly earnings posted by energy majors provided plenty of talking points. More so, after the return of megadeals as ExxonMobil swooped for Pioneer Natural Resources and Chevron swooped for Hess Corp. 

Other deals may follow as the energy majors fish for viable plays. It's led many, including this blogger, to wonder if a supermajor itself could be vulnerable? The prime candidate for finding itself in this position is BP; a chronically undervalued supermajor in the Oilholic's opinion. More on the subject here via Forbes. 

Is it possible? Yes, especially in a industry built on big ticket deals. Will it happen? Probably no, not least down to BP's $100 billion plus valuation (however discounted that may appear to some). But as yours truly noted on Forbes - that the company has had to bat away questions about being a takeover target is pretty extraordinary and indicative of how far it has fallen. Well that's all for now folks. Keep reading, keep it here, keep it 'crude'!

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© Gaurav Sharma 2023. Photo: Oil pump jack model at the AVEVA World 2023 Conference, Moscone Center, San Francisco, US. © Gaurav Sharma October 2023. 

The challenge of producing more industrially with less

Last week The Oilholic had a hectic, but fruitful and amazing trip to AVEVA World 2023 in San Francisco. Much of the discussion at the event was about one profound question - how to do more with less for the energy and industrials complex, and finding answers via the deployment of technologies such as artificial intelligence (AI), industrial internet of things (IIoT), digital twins and enhanced data analytics. 

From the standpoint of the hosts - industrial software solutions and consulting firm AVEVA - the pathway forward is all about creating a connected industrial ecosystem. One that offers a gateway to an unlimited world of data analytics, including third party analytics, with everything focused on one key priority - how to efficiently, safely and diligently improve throughput whilst using less energy and resources.

AVEVA's corporate take goes along the lines of "working to build a new industrial ecosystem, defined by agility, resilience and sustainability. By connecting [clients'] teams with trusted information and insights, powered by the cloud, and finding new ways to deliver life’s essentials – while driving responsible use of the world’s resources."

You deploy solutions to do that, and by default you lower your carbon footprint - a mantra this blogger saw repeated often by the company executives from the exhibition floor to the main auditorium, from keynotes to panel discussions, and much else in between. 

While AVEVA's age-old business mainstay may well have been in the oil and gas business, today it provides software solutions for most segments of the global commerce and industry all of which are under pressure to lower their carbon footprint. In keeping with this, the event had several breakout streams and content on a range of subjects. 

These included sessions for process industries (chemicals, pulp and paper, manufacturing, etc.), infrastructure, power and utilities, and of course oil, gas and energy. Each of these touched on advanced solutions and practices for improving efficiencies and finding that low to zero carbon horizon. And if numbers are your thing, we're talking more than a dozen industry tracks, keynotes, and an immersive expo.

There was also plenty of chatter on deriving multifaceted value from AI, and viewing it as an ally or enabler rather than a threat. Both AVEVA and its customers, including the likes of Mitsubishi Power, Yinson and Henkel, appeared to be pretty candid about the constructive deployment of AI. Read more about it in The Oilholic's latest Forbes post here. 

In summation, to quote AVEVA CEO Caspar Herzberg (pictured here at an analysts' briefing on October 25, seated third from left): "The true benefits go beyond the numbers: connected digital insight and technologies enable you to turn volatility into commercial opportunity by transforming industrial production into digital insights, so you can boost efficiency, resilience, and sustainable impact, and realize your boldest aspirations."

Part of being bold or having bold aspirations - especially for the energy, oil and gas sector - is embracing the technological solutions of our age provided by the likes of AVEVA, and of course, its peers. Going by the interest AVEVA's software products suite generated in San Francisco and the number of energy players in town, The Oilholic reckons that the message is cutting through big time. Well that's all for now folks. Keep reading, keep it here, keep it 'crude'!

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© Gaurav Sharma 2023. Photo 1: AVEVA logo at the AVEVA World 2023 Conference, Moscone Center, San Francisco, US. Photo 2: AVEVA World 2023 Expo Floor. Photo 3: AVEVA CEO Caspar Herzberg (third from left) speaking at an analysts' briefing at AVEVA World 2023. © Gaurav Sharma October 24-25, 2023. 

Connected energy solutions at AVEVA World 2023

The Oilholic is delighted to be back in San Francisco for AVEVA World 2023 - the annual client fixture for technology consulting and industrial software company AVEVA. It's also the company's first major event since being taken over by Schneider Electric in January 2023.

A content packed start to the conference, being held at San Francisco's Moscone Center, has seen wide ranging discussions on connected solutions in the industrial software space, cloud-based applications and how the energy industry can turn volatility and challenges over meeting sustainability targets into opportunities. Afterall, the sector is pursuing a deep transformation to become more sustainable as well as ensure that the world's needs are met. Technology provides many, if not all, of the answers.

Kicking off proceedings, Caspar Herzberg, CEO of AVEVA, talked of exploring use cases for a sustainable industrial ecosystem - one that's connected and utilizes the power of big data and a seemingly unlimited world of data analytics. And of course, placing the company's platform agnostic AVEVA Connect product suite at the heart of this connected industrial ecosystem. 

"Those that master this art [of a connected, sustainable industrial ecosystem] will outperform other systems," Herzberg said in his keynote. The AVEVA boss' pitch is a clear and simple one to energy, heavy industrials, mining, metals, companies, and indeed other sectors - tie in process efficiencies, improved throughout and sustainability, take learnings from data using AI solutions, and the results would become evident.

Those results include energy efficiency pathways that are 20% better and would invariably help in lowering carbon emissions. One enabling solution is digital twin technology. Read more about it and this blogger's conversation with AVEVA's Head of Research and Innovation Simon Bennett on Forbes.

There's more to come from AVEVA World 2023 - an event Herzberg himself described on Tuesday as one of the largest gathering of industrial software professionals and specialists in the world. That appears to be around 2,500 attendees and counting.

Away from the event, here is the Oilholic's latest piece for The Motley Fool on BP's share price direction, and how significant the appointment of its next CEO could be. That's all for now folks. Keep reading, keep it here, keep it 'crude'!

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© Gaurav Sharma 2023. Photo: Caspar Herzberg, CEO of AVEVA, speaks at AVEVA World 2023 at the Moscone Center, San Francisco, US on October 24, 2023. © Gaurav Sharma 2023. 

'Crude' chat with Afentra Plc CEO Paul McDade

Crude oil benchmarks have been bouncing up and down for over 10 days in the wake of geopolitical tension in the Middle East. Predictably, much of the market analysis community is obsessing over where the risk premium might go, and how to square it against the wider crude oil supply and demand dynamic. 

Here are some thoughts via Forbes on what may or may not move the risk premium needle, and it must be noted that crude benchmarks are still way short of the perma-bull pipedream level of $100 per barrel. 

As volatility bites, what do industry operators do to cut out the noise? The Oilholic recently turned to one industry stalwart for his thoughts on the near to medium-term direction of the crude market and approach to a volatile pricing environment - Paul McDade, CEO of West Africa focussed Afentra Plc (LON: AET), and former boss of Tullow Oil.

According to McDade there's no such thing as an optimum or ideal oil price. "I often get asked what is the right oil price assumption for my business, and my answer is wherever our carefully considered hedging strategy takes us. I place a lot of faith in hedging because we operate in a cyclical industry. 

"We see hedging [or shall I say our hedging program] not as a tool for market bets but rather as a form of business insurance, and it all depends on the payback period. If the payback period is a year, you are OK to assume a base of $80 per barrel. But if its five years you would be crazy not to be a little bit conservative, workout what does the downside looks like and be prudent."

More generally speaking, McDade is bullish on the oil price for 2024 and indeed the next five years. "However, there will always be market noise and volatility that's typically associated with our industry. So if you ask me, could oil slip down to $60 per barrel at some point in 2024? Yes that's likely, but the upside would ultimately go further." 

To read the Oilholic's full interview with McDade for Forbes, and learn more about Afentra's journey please click here. More on market developments to follow over the weekend, but that's all for now folks. Keep reading, keep it here, keep it 'crude'!

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© Gaurav Sharma 2023. Photo: Paul McDade, CEO of Afentra Plc (left) with Gaurav Sharma, September 2023.

Media missives from ADIPEC 2023

With ADIPEC 2023 drawing to a close last week, the Oilholic capped a fascinating and engaging week with a rounding off piece for Forbes on the criticality of scaling up technology - and, of course, backing it up with petrodollars and willpower, if a meaningful energy transition is to be achieved. To this end, this blogger had great conversations with ABB, AiQ, AspenTech, AVEVA and Avaada Group. (More here)

Yours truly also hit the airwaves to discuss the various soundbites coming out of the conference and various developments in Abu Dhabi, all in the midst of a very volatile crude oil market riddled with demand concerns, supply-side tightening and geopolitical complications. The final broadcasting call before departing was with Asharq Bloomberg News, with this blogger's week out in Abu Dhabi peppered with plenty of other missives via the keyboard for Forbes, the Motley Fool, and of course via this blog. 

All blog entries for each ADIPEC day may be found here. 

Some commentary on Shell's share price direction via the Motley Fool may be found here. And here are selected Forbes copies in chronological order based on soundbites and insight from ADIPEC 2023. 

• Emirati COP28 President Calls For A "Just, Orderly, Equitable And Responsible" Energy Transition, October 2, 2023.
• India "Will Manage" And Won't Panic If Oil Rises Above $100, Says Energy Minister, October 3, 2023.
• Abu Dhabi To Unveil World’s Fourth Largest Solar Farm "Very Soon", October 4, 2023.
• Oil Futures Slump Further On Uncertain Global Demand Outlook, October 5, 2023.
• Abu Dhabi In First Wind Farm Launch As 2GW Solar Project Nears Completion, October 8, 2023.
• 4 Middle East Geopolitical Scenarios That May Hike Oil Market Risk Premiums, October 9, 2023.
• Scaling Technology And Willpower Critical For 'Fast-Tracking' Global Energy Transition, October 10, 2023.

And that's a wrap. Keep reading, keep it here, keep it 'crude'!

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To email: journalist_gsharma@yahoo.co.uk  

© Gaurav Sharma 2023. Photo: Gaurav Sharma on Asharq Bloomberg TV on October 4, 2023 © Asharq Bloomberg 2023.