February 10, 2019

Five Fast Forecasts from Stratas Advisors

Here are a few informational nuggets forecasted in reports prepared by Stratas analysts.

Holding the Line in the Bakken

From Stratas Advisors’ Enhanced Shale Service:

In the Bakken, Stratas estimates 2019 year-end production of 1,693 MBoe/d, essentially unchanged from the 1,680 for December 2018. This stable production outlook reflects the play’s relative maturity and expectations for operators to live within cash flow in the play. Rig counts are expected to range between 60-70 rigs over the next two years. Notably, rail exports of Williston Basin crude have been holding steady at roughly 20% of production while refinery processing in the region dipped slightly, according to North Dakota Pipeline Authority reports.

Hydroprocessing, Middle Distillate Hydrotreating Expected to Grow in Asia

From Stratas Advisors’ Global Refining & Products Service:

Between 2020 and 2025, the Asia Pacific region is expected to add conversion capacity of 3,895/MBPD, accounting for 62% of global conversion capacity additions. Total hydroprocessing and middle distillate hydrotreating capacities in the Asia Pacific region between 2020 and 2025 are estimated to increase by 1,929/MBPD and 1,122/MBPD, accounting for 38% and 47% of global capacity additions, respectively. Based on refining capacity expansion plans, the refining sector can produce enough HFO (S≤0.5% S m/m) sulfur fuel to meet marine fuel demand, and at the same time satisfy demand from other market sectors.

Global Biofuels Forecast Revised Upward

From Stratas Advisors’ Global Biofuels Outlook Service:

Global biofuels demand is expected to reach 2.62 MMbbl/d in 2019 (+2.8%) as global sugar prices are expected to remain low. Demand growth is expected to increase at a healthy CAGR of 2.4% from 2018-2022 before slowing to a CAGR of 0.6% from 2022-2040 as North America and Europe both experience significant declines in use. Biofuels’ share of global combined gasoline and diesel demand remains relatively stable, rising from 4.53% in 2018 to 4.66% in 2040; the highest level of penetration in the forecast is expected in 2022-2023 at 4.77%, a moderate increase over our H1 2018 expectation of 4.5% (also in the same timeframe).

A Positive Note for Long-Term Crude Prices

From Stratas Advisors’ Long-Term Price Outlook Service:

Stratas Advisors maintains its constructive long-term view on global crude prices. Our assumption is that there is continued global demand growth despite a global environmental effort to combat the effects of climate change. OPEC will begin to push against a production ceiling and by 2020 much of existing spare capacity will be exhausted without substantial investment. Adding to the upward pressure on prices are the impacts of lower levels of investment ─ specifically in higher cost capital projects like offshore/deepwater ─ which will also contribute to tightening global liquids supply. This gap could close as early as 2030 as prices cause investment to pick up through 2035. 

Looking at Projected Automobile Sales in the US 

From Stratas Advisors’ Global Automotive Service:

Between 2005 and 2010, US GDP grew at a CAGR of 0.8%. As the economy stabilized and recovery began, this rate increased to 2.2% between 2010 and 2018. Over the next seven-year period, Stratas Advisors predicts a CAGR for GDP of about 2.1%. This will bring sales to about 17.74 million light duty vehicles by 2025, which represents an increase of 3.45% over 2017’s sales. In 2025, there will be a fleet size of about 273.16 million LDVs, an increase of 7.98% over the fleet size in 2017.

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