EIA expects Brent prices will average $71 per barrel in 2018 before declining to $68 per barrel in 2019
In the June 2018 update of its Short-Term Energy Outlook (STEO), the U.S. Energy Information Administration (EIA) forecasts Brent crude oil prices will average $71 per barrel (b) in 2018 and $68/b in 2019. The new 2019 forecast price is $2/b higher than in the May STEO. The increase reflects global oil markets balances that EIA expects to be tighter than previously forecast because of lowered expected production growth from both the Organization of the Petroleum Exporting Countries (OPEC) and the United States. Brent crude oil spot prices averaged $77/b in May, an increase of $5/b from April and the highest monthly average price since November 2014. EIA expects West Texas Intermediate (WTI) crude oil prices will average almost $7/b lower than Brent prices in 2018 and $6/b lower than Brent prices in 2019 (Figure 1).
EIA expects that OPEC crude oil production will average 32.0 million b/d in 2018, a decrease of about 0.4 million b/d compared with 2017. Total OPEC crude oil output is expected to increase slightly, however, to an average of 32.1 million b/d in 2019, despite expected falling production in Venezuela and Iran, along with decreasing output in a number of other countries.
OPEC, Russia, and other non-OPEC countries will meet on June 22, 2018, to assess current oil market conditions associated with their existing crude oil production reductions. Current reductions are scheduled to continue through the end of 2018. Oil ministers from Saudi Arabia and Russia have announced that they will re-evaluate the production reduction agreement given accelerated output declines from Venezuela and uncertainty surrounding Iran’s production levels. In the June STEO, EIA assumes some supply increases from major oil producers in 2019. Depending on the outcome of the June 22 meeting, however, the magnitude of any supply response is uncertain. EIA currently forecasts global petroleum and other liquids inventories will increase by 210,000 b/d in 2019, which EIA expects will put modest downward pressure on crude oil prices in the second half of 2018 and in 2019.
EIA expects a decline in Iranian crude oil production and exports starting in November 2018, when many of the sanctions lifted in January 2016 are slated to be re-imposed. Iranian crude oil production is expected to fall by 0.2 million b/d in November 2018 compared with October and by an additional 0.5 million b/d in 2019.
The outlook for Venezuelan production is also lower than in the May STEO, with EIA now expecting larger declines in both 2018 and 2019 than previously forecasted. The seizure of state oil company PdVSA’s assets in the Caribbean by ConocoPhillips has diminished PdVSA’s ability to continue meeting its export obligations because it now must rely solely on domestic ports and ship-to-ship transfers to sustain crude oil exports. Venezuela’s domestic export infrastructure, however, is in disrepair and unable to accommodate the volume of exports previously handled out of its Caribbean facilities.
EIA expects that decreases in Iranian and Venezuelan production will be partially offset by increased production from Persian Gulf producers, most notably Saudi Arabia, which will likely increase production in an effort to offset Iranian production losses. Other sources of increasing production include Kuwait, the United Arab Emirates, and Qatar, all of which have been restraining their crude oil output in compliance with the November 2016 OPEC/non-OPEC agreement on production cuts.
U.S. crude oil prices in both the Permian region and in Cushing, Oklahoma, traded at lower values relative to Brent in May, continuing the trend of constraints in transporting crude oil to the U.S. Gulf Coast for refining or for export, as discussed in the April and May STEOs. The Brent–WTI front-month futures price spread, in particular, widened to $11.43/b on June 7, the widest since February 2015. Although transportation constraints to the U.S. Gulf Coast are primarily affecting Permian Basin crude oils, the rapid increase in the Brent–WTI futures price spread in May and early June 2018 suggests some constraints are developing in crude oil transported from Cushing (where the WTI futures contract is delivered) to the Gulf Coast.
Because transportation options out of Cushing are limited, it remains uncertain how much the spread could narrow if Gulf Coast refiners increase refinery runs, which were lower than expected in May. In addition, U.S. crude oil exports are currently limited to higher-cost options which, unless port infrastructure buildout is expanded, will likely maintain a wide Brent–WTI spread. EIA is increasing its forecast of the Brent–WTI spot price spread for the second half of 2018 from $5.49/b to $7.67/b and for 2019 from $5.12/b to $5.79/b.
EIA estimates that U.S. crude oil production averaged 10.7 million b/d in May 2018, up 80,000 b/d from the April level. EIA projects that U.S. crude oil production will average 10.8 million b/d for full-year 2018, up from 9.4 million b/d in 2017, and will average 11.8 million b/d in 2019.
U.S. average regular gasoline and diesel prices decrease
The U.S. average regular gasoline retail price decreased nearly 3 cents from last week to $2.91 per gallon on June 11, 2018, up 55 cents from the same time last year. East Coast prices decreased nearly four cents to $2.84 per gallon, Midwest prices decreased three cents to $2.82 per gallon, Gulf Coast prices decreased nearly three cents to $2.70 per gallon, and West Coast and Rocky Mountain prices each decreased less than a penny to $3.45 per gallon and $2.99 per gallon, respectively.
The U.S. average diesel fuel price decreased 2 cents from last week to $3.27 per gallon on June 11, 2018, 74 cents higher than a year ago. Midwest prices declined nearly three cents to $3.20 per gallon, while East Coast, Gulf Coast, West Coast, and Rocky Mountain prices each declined nearly two cents to $3.26 per gallon, $3.04 per gallon, $3.77 per gallon, and $3.34 per gallon, respectively.
Propane/propylene inventories rise
U.S. propane/propylene stocks increased by 3.7 million barrels last week to 50.8 million barrels as of June 8, 2018, 10.7 million barrels (17.4%) lower than the five-year average inventory level for this same time of year. Midwest, Gulf Coast, Rocky Mountain/West Coast, and East Coast inventories increased by 1.9 million barrels, 1.5 million barrels, 0.2 million barrels, and 0.1 million barrels, respectively. Propylene non-fuel-use inventories represented 5.7% of total propane/propylene inventories.
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‘Nine to five plus a single employer’ is no longer an equation that the current workforce operates on. This traditional marketplace has been disrupted with the advent of new technology that has heralded gig or on-demand economy. Players like Uber, Airbnb, & Deliveroo offer a classic example of how these innovators have leveraged on this concept of gig economy and have shaken up the traditional setup. Millions of people today, prefer flexible work timings, multiple employers, interest-based projects and multiple revenue streams, the working style we commonly refer to as gig economy.
CIPD describes the gig economy as a new way of working that is based on the temporary jobs or projects, which is paid on the project or hourly basis. It is also referred to as the ‘sharing economy’ or ‘collaborative economy’
The gig economy: pros and cons in the context of the Oil & Gas Industry
The Oil and Gas industry is considered traditional when it comes to adapting to new technology or concepts. However, the notion is changing now with 30% of its workforce comprising of gig workers and the trend is expected to rise in coming years. Instead of depending on the recruitment agencies, companies are now focussing on targeted industry digital platforms to search, shortlist, verify and hire the gig contractors or freelancers. However, like everything else, there are pros and cons of hiring freelancers or gig employees:
Reduced Overhead cost
The cost of hiring an in-house employee is immense because apart from salary it also includes costs of insurance, perks, benefits, training, leaves, and cost associated with providing the facilities like internet, sitting arrangements, refreshments, canteen, electricity, and so on. All the extra cost apart from salary gets waived off when it comes to hiring gig employees or also known as “freelancers” in the market. Thus reducing the huge chunk of overhead cost for the employing company.
Low Financial Risk
In the case of full-time employees, the company needs to pay even during “down-times” when the work is low, or the productivity standards are not met. However, in the case of temporary staff or freelancers, the company only pays for the work accomplished as per the specified standard. Thereby lowering the financial risk.
Bigger and better pool of talent
The energy sector is a highly specialized sector and hence requires employees with a specific skill set. Specially for an on-site project, location is the biggest constraint. What if you do not find the right talent at your location? Then you are left with two options: either to hire a new employee and provide training or offload and distribute the work to the current employees. Both this scenario is risky. That’s when the gig employees are a real life-saver. The boundaries are no barrier, you can gain access to any person sitting in any part of the world. You do not even have to compromise on the skills and invest in training.
Innovation and knowledge-sharing
The company spends a substantial amount on strategizing and talent development. However, when you opt for a freelancer, you gain access to knowledge that the employee brings in by working with other organizations. So, in the oil and gas sector, a new employee can bring an innovation in the process or methodology by his experience and observation with different clients.
Round the clock functioning
Sometimes, the gig employee operates from different time zone which means that you can get your work running even while you have closed down at your part of the world. Additionally, you can reach out to freelancers for revisions, urgent works, even after the fixed working hours and during weekends, which is a great relief during tight-deadline projects.
Lack of supervision and discipline
Most gig workers operate remotely, and you cannot monitor their work physically which means that you can never be sure whether the hourly rates that the employee billed you for, is actually spent on work or for leisure. However, now there are numerous monitoring sites like Hubstaff that tracks the productivity level of the employee. Also, working in oil and gas sector involves potential hazards that can lead to serious injuries and even death. In case of remote workers, managing and monitoring all safety measures pertaining to explosions and fires, equipment safety, machine hazards and so on is a daunting task.
Until you gain mutual trust, there is a lot at the stake. For example: if you hire a temporary staff or freelancer to work on a project, you cannot be certain if the person will be able to deliver his/her duties. The risk of losing time, money, and energy is high. If all turns well, you can enjoy the perks however if it didn’t go your way then you suffer a loss on multiple levels. To avoid this scenario, it is advisable to ask for previous work references and keep reviewing the work periodically so that you are aware of the direction things are shaping in.
Loyalty and company ethics
Because, each company has its own set of principles and working guidelines which forms the culture of the company, it is challenging for the freelancer to operate as per the company’s code of conduct or policies. Furthermore, they work for multiple clients at a time, their loyalty may be questionable.
Training and development issue
Every company works and operates differently though key process remains the same. The complete onboarding of the remote worker is not possible as in the case of a full-time employee where the company’s working style becomes their second nature. Additionally, the effort to organize a training program for the gig worker is tricky because of the location and time bound issues.
Thus, for a dynamic industry like oil and gas, gig employees can be an asset if they can bring in the required expertise, skill set and attitude to outperform your expectation. You can find the right talent by using dedicated oil & gas professional networking platforms that bring talents and employers together. Use it to your advantage and you are good to go.
Malaysia has the fourth largest oil and gas reserve in Southeast Asia and produces a whopping 30,000 megawatts of energy per year. The country continues to be hopeful about the prospects of its oil & gas industry and expects it to contribute meaningfully towards the growth of its economy. But then again, what does it mean for the employees who are working in the industry or plan to enter it? Is it a profitable industry in terms of salary growth and expectations? Let’s figure out what the industry holds for its employees and job seekers of oil and gas jobs in Malaysia.
What does the number say?
The best way to analyze the oil and gas job sector is to look at the recent studies and research conducted, which can give a substantial view into the future of the industry. As per the statistics department, Malaysia saw 8.1% growth in the salary in 2017 amounting to RM 2880 as compared to 2016, in which the average salary recorded was RM 2657. Additionally, the chief statistician of the department, Datuk Seri Dr Mohd Uzir Mahidin, said that an increase in the mean monthly salary and also the wages are in sync with the country’s economic performance. Even the exports indicated to grow by 20.3% which amounts to RM935.5bil. He made these observations based on the results of Salaries and Wages Survey 2017 of oil and gas professionals and entry-level oil and gas job seekers.
What the number means for prospects of oil and gas salary in Malaysia
If the above data is viewed on a sectoral basis, then the mining and quarrying sector indicated the highest monthly salaries as well as wages, which amounted to a mean of RM5,709 and a median of RM3,700.
Datuk Seri Dr Mohd Uzir Mahidin, further added that capital-intensive industries like the oil and gas, which is a major part of mining and quarrying sector, employs professionals, who are highly skilled and hence a bigger paycheck and higher mean and median salary.
The observation made by the chief statistician gets further backing by an online job site’s employment index. Although, it shows a decrease of 11% in May 2018 for the hiring activities in comparison to the previous year. However, it pointed towards a steep growth in the Oil & Gas sector. The hiring activity went up by 14% year-on-year in May 2018.
What can be the salary expectations for energy professionals?
The above studies and research indicate a positive outlook for both upstream and downstream players of this sector. However, it is important to note that a lot of factors help to determine your salary potential, which includes: education, years of experience, expertise, work ethics, job location, skill set and so on.
As per payscale.com, a Petroleum Engineer can earn on an average RM 104,343 per year. Which means an average salary of RM 99,803 with an estimated average bonus of RM 22,500 and profit sharing of RM 5120. Your experience and education play a major role in determining your salary. Similarly, in oil and gas industry, the average salary of a mechanical engineer amounts to RM 72,000 whereas the average salary of Account is RM 82,248 and for Project Engineer is RM 57,000 while a sales manager has the potential of RM 120,000.
Since the industry prefers professionals with high-level skills in the respective areas, it is advisable to enhance your overall employability factors to enjoy higher compensation and perks. And also use oil and gas professional networks to your advantage in getting the desired contacts and opportunities.
Headline crude prices for the week beginning 13 August 2018 – Brent: US$72/b; WTI: US$67/b
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