Market Update: Oil & Gas – February 2018

Volatility, Inflation and the Oil Market

After a prolonged period of low volatility on global stock markets, a marked increase in bond yields has spooked investors with the possibility of a return to an inflationary environment resulting from strong economic growth. In lockstep with falling markets, oil has retreated from recent highs. However, inflationary pressures resulting from robust growth translates into increasing oil demand, with Goldman Sachs predicting growth at +1.9 Mbpd(1) in 2018, building on a strong 2017 (+1.6 Mbpd)(2) with better then expect demand growth across US, Europe and China last year.

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Choppy waters for global LNG

The new LNG world demands a diversity of approaches and business models. The best companies are seizing opportunities proactively.

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Reinventing the chemical company with digital transformation

Digital transformation has become a part of the fourth and latest industrial revolution. Although many industries are making great strides in digital transformation, the chemical industry has been more a laggard than a leader.  However, to remain competitive and explore new opportunities, many chemical companies are using digital technology for smarter manufacturing, stronger customer relationships and faster innovation.

Reinventing the chemical company with digital transformation

 

Five disruptive trends reshaping the utilities sector

Business as usual isn’t an option for the utilities sector. Technology is reshaping the marketplace causing sectors to converge, allowing new entrants to the market and transforming customer expectations. But this isn’t new for other sectors, and utilities firms can learn from other companies that have successfully survived and thrived in a disrupted marketplace.

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Disrupting Partners – The case for utilities to embrace new energy providers

There has been a lot of speculation in the market about the utility “death spiral” resulting from retail product and service providers. This may have been hyperbole, but new entrants are engaging utility customers directly and claiming revenues that utilities otherwise could have retained. KPMG LLP (KPMG) believes that utilities that become Network Integrators have the best chance of avoiding such a spiral by embracing new entrants. Furthermore, utilities can reverse this disintermediation and add value to their customers by coordinating with these entrants, providing connections, and enabling innovation.

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Unsung Workhorses of the Oil Industry

The growth of the oilfield services sector is very much a story of innovation and finding solutions to technological and cost challenges faced by operators. “It is a solutions-driven industry,” explains Alan Kennedy of KPMG. Companies grow by developing proprietary technologies and know-how that can be applied across particular projects which then become an accepted industry service and way of operating. Their specialisation and repeat use of services allow them to achieve economies of scale on technology development – something oil companies cannot do to the same degree.

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Unfolding Trends in the Oil Trading Industry

Over the last 18 months, the global oil trading industry is experiencing substantial change. A blend of low commodity prices, capital requirements and increased price transparency has eroded margins, reduced arbitrage opportunities and modified the players participating in this competitive arena. Stringent regulatory measures have led to rising complexity costs and a tightening of the financing environment.

In response to shifting dynamics, the leading trading houses are adapting their core business model, status-quo trading patterns and risk management measures. KPMG Global Energy Institute’s latest publication: ‘Unfolding trends in the Oil Trading sector’, highlights six core macro developments shaping the industry today and delves into how oil trading entities are adapting to navigate through a tumultuous time.

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Uncharted Waters: LNG supply in a transforming industry

The global liquefied natural gas (LNG) market is transforming. In early 2016, the US is expected to start LNG exports from the Gulf coast, a plot twist that was unthinkable even 10 years ago. Australia will soon be an exporter on a scale to rival Qatar. LNG importers are becoming exporters and vice versa, but low prices threaten new projects and the profitability of existing ones.

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