News and AnalysIs for

Between Covid-19 and the Russia / Saudi Arabia fight, the short-term prospects for oil prices are not great. But what happens after the pandemic passes, demand picks up and Saudis stop pumping as if there was no tomorrow?

I arrived from the UK on March 5^th. On March 9^th, my wife went to the dentist and was refused treatment because I was so recently returned from Europe (sorry Brexit sympathizers). Except for a trip to the grocery store, I’ve been in our apartment ever since. That has given me lots of time to think about the medium- and long-term economic consequences of the current problem.

Last Friday, Brent closed at US$33.85 by our accounting the lowest weekly closing value since February 2016. Logic and the data suggest things will not get better quickly. The question we focus on here is how companies will react and whether they will be successful.

Unless your idea of a winter vacation was a solo trek across Antarctica or the Sahara Desert, you are aware that 2020’s top story so far is the Coronavirus aka Covid-19. While health concerns are primary, the economic impacts are not inconsequential.

Two weeks ago we looked at the UPME’s demand scenarios, pointing out that 70% of the forecast growth comes from the Oil+Gas sector, a fact we found surprising, especially considering that the forecast was not well explained and seemed to be way off in the first year of the study (2019). This week we look at supply and the ‘balance’ or the difference between supply and demand.

So my first fearless prediction did not come true. I said in December this article would be published in January and it is already nearly the end of February. Please do not take this as an indicator of my forecasting ability.

The UPME recently released its forecasts of natural gas supply and demand. It concludes a second regasification plant is required and it has to be in Buenaventura. Surprise! Wow! Amazing! Did not see that coming! Thank goodness Colombian taxpayers can count on an impartial agency like the UPME to objectively study these important issues.

Gas is a ‘hot topic’ presently with concerns about self-sufficiency and the right strategies to address them. In a very timely contribution, Tomás de la Calle returns with a multi-part article on the Colombian gas market.

With oil prices on a roller coaster since the start of the new year, we thought we should update our usual graphs. Last presented in September, the panaorama has changed considerably.

Or even in Latin America. The headline might have upset your board members or institutional investors when it appeared a few weeks ago but it was false. Colombia is not exactly a shining example of public service morality but not the most corrupt in the world or even the region.