Brazil’s onshore oil renaissance
DEEP-DIVE: The energy transition is roiling oil prices, favouring short-cycle investments
The oil market is entering a period of structural volatility amid upstream underinvestment and extreme uncertainty over long-term demand. Against this backdrop, short turnaround investments that can get barrels to market quickly are highly sought-after. The chastised US shale space is sitting on its hands, opening a small-scale but high-margin investment opportunity in the Brazilian onshore space as national oil company Petrobras retreats from the sector.
Is the oil price going to $50 per barrel, or $100? Probably both, but nobody knows in which order. The latest wobble caused some to question whether Brent could hit triple digits in this cycle, although underinvestment in the upstream means this could yet come to pass in the coming few years.
Brent is yo-yoing on every OPEC+ contortion and Covid-19 dataset. Strong post-pandemic demand is set against the unknowable longer-term caveat of decarbonisation. Market opportunities could be fleeting.