Several interesting stories regarding the oil sector have appeared in the Financial Times in the last fortnight. The International Energy Agency has revised upwards its own forecasts of increases in demand, saying that the fundamentals that drive demand look stronger, with COVID-19 vaccination programmes rolling out across the world and economic activity picking up. (The IEA has understandable lingering concerns over this, however, with COVID-19 infection rates once again rising in a number of countries, most alarmingly in India.) Demand is now expected to increase by 5.7 million barrels per day this year, after falling by 8.7 million b/d last year. While prices are at relatively healthy levels of around US$65/barrel (for Brent crude), the IEA expects that increased production on the part of Opec and its allies might renew downward pressure on prices.

Meanwhile, an opinion piece has looked at how investor concerns are changing the climate positions of companies and, as a knock-on effect, industry groups. Shell, for instance, recently said that although there was “some misalignment” with its views and those of the lobby group the American Petroleum Institute, its involvement in it has led to the API’s support of the Paris Agreement on Climate Change, as well as for carbon pricing and stricter methane regulation. The relationship is complicated, however, as not all of the API’s views are in keeping with climate goals, and some of Shell’s investors may not be keen on the continuing partnership between the two entities. Investors in oil and gas companies have different and sometimes competing motives, some more for shorter-term profit, others for longer-term sustainability as a company, and still others almost solely environmentally focussed, and the piece argues that investors need to understand the energy transition landscape in order to put well-tempered pressure on boards and leadership.

Another interesting story has been the change in company participation in North Sea oil and gas activities. A decade ago, only 8% of UK oil and gas production was carried out by private companies, but the portion last year reached 30%. Such private companies are typically backed by private equity funds, who have bought assets from, in the words of the FT, “retreating majors and utilities”. Amongst selling companies have been ExxonMobil, Shell, and OMV, while amongst buyers have been Neo Energy, Chrysaor, and Siccar Point Energy. However, while oil and gas majors’ output has reduced over the last decade, it has been fairly steady in recent years, with the steadiest decline being on the part of non-major publicly-listed companies. The role of private firms, not facing the same investor pressure as oil majors to shift to lower-carbon forms of energy, seems likely to become more influential in the future.