Oil and Gas News

Oil and gas sector on track to stabilise: Fitch Solutions

Buru Energy

Demand in the oil and gas sector is set to normalise as containment measures are eased and economic recovery picks up following the impact of COVID-19, according to Fitch Solutions.

In its impact of COVID-19 on global oil sector report, Fitch Solutions stated that the normalisation would take time, as second wave outbreaks arise and social distancing behaviours prove sticky in some markets.

“Our data indicates that demand will remain below the levels seen in 2019 until 2022. Moreover, a portion of demand lost to COVID-19 has, we believe, been permanently destroyed,” Fitch Solutions outlined.

During the pandemic, the global oil and gas sector has faced a lot of unprecedented challenges, with the core concern of companies is to weather the storm as best they can.

This has resulted in companies pulling back on its capex, corporate cost-cutting measures and a reduction of shareholder distributions.

“We do not believe that strategies in the sector have been meaningfully altered by COVID-19. However, we believe that the pandemic has shed greater light on the risks arising from demand destruction and that strategic shifts in the sector will occur more rapidly as response,” the report stated.

In addition, Fitch reported that all companies face the challenges of the low carbon economy, with companies needing to tailor its response to its own existing asset base, competitive strengths and operating environment.

“In general, though, we see the European majors accelerating their transition into clean energy, while North American majors and global independents retrench into their back into their core competencies, seeking protection in lower costs, improved capital efficiency and lower carbon intensity,” Fitch Solutions outlined.

Further highlighted in the report, Fitch Solutions has identified that there is a clear need for further consolidation in the industry to improve operational efficiency and lower the cost base.

With strategies shifting from volume to value, acquisitions will be made to complement the existing portfolio core and develop resources.