OPINION: After a dizzying decline in the price of oil earlier in the year, producers are finally beginning to feel some measure of comfort.
August was a fifth straight month of crude value increases, but also a welcome four-week period of relative price stability.
Brent reached a peak above $46 per barrel on 5 August and continued roughly at that level, even as US stock markets rocketed upwards.
There are now grounds for optimism, with oil demand expecting to increase gently to the end of the year as the world economy continues its recovery.
We have moved a long way from April when an estimated 4 billion people were in lockdown and oil demand plunged by a third.
Opec helped on the supply side by cutting output, but that restraint eased on 31 July.
The Baker Hughes US rig count remains static at 254 units, but US oil output is on the increase.
Data from the US Energy Information Administration showed local oil production turning upwards again between June and July.
A buying surge by the world’s biggest importer, China, in late spring to take advantage of cheap crude also helped reboot global oil demand.
Now, that phase is over and Beijing is trying to deal with the refinery bottlenecks that its spending spree engendered.
Admittedly, this is peak US “driving season", but many are surprised that prices during August held up as well as they have.
Both small and large oil companies are now hampered by high debt levels.
Hurricane Laura, which swept through the US southern states forcing rig and refinery shutdowns, might also have been expected to cause commodity prices to gyrate wildly, but passed with relatively little lasting impact on either installations or prices.
Opec on watch
Opec is keeping a close watch on both prices and production levels, with Saudi Arabia keen to act in the face of any further weakness.
But even with a better business outlook, interest rates being kept low and high stock markets, it remains hard to see Brent hitting more than $50 by the end of the year.
And, this is not the kind of level big producing countries or oil majors would have traditionally liked.
Some analysts estimate the Saudi national budget needs an $80 oil price to break even.
Russia earlier this year claimed it could sustain a five-year period with prices at under $30, but that was largely bravado.
Both countries have amassed considerable financial reserves or borrowings to help, but a price war between the two was quickly called off as economic damage mounted.
Low price environment
Some private companies can make money drilling shale wells at an oil price of $40 per barrel, but operators would be much more comfortable at $60 at least.
Both small and large oil companies are now hampered by high debt levels forcing cost-cutting and denial of dividends.
Chevron and Shell are best prepared to handle a lower oil price environment, according to consultancy Wood Mackenzie.
ExxonMobil is more likely to struggle — hampered by its current commitment to high-cost Arctic and Canadian oil-sands assets.
It is a sign of the times that the US supermajor has just been dumped from the Dow Jones Industrial Average for the first time since 1928.
European oil majors such as BP have promised to downsize their fossil-fuel commitments in the face of lower oil demand and climate breakdown.
Oil price stability may have arrived, but wider industry upheaval looks set to continue.
(This is an Upstream opinion article.)