As the markets try to figure out how solid the footing is for the world economy as we exit the pandemic, energy prices are seeing some positive sentiment throughout the world. With increasing demand and a slower recovery in production levels, many are calling for sustained higher oil and gas prices.

Oil Supply and Demand

OPEC+ supply management and the potential Iranian production re-entry are key themes in the market today. Current conversations by OPEC+ around increasing production levels by 400 Mb/d each month through 2022 broke down recently when the United Arab Emirates refused to go along with the planned increase with hopes for a higher production quota for themselves. This breakdown in talks has positive implications for oil prices until a deal is struck as OPEC+ production will continue at current levels for the time being. 

As developed countries have seen a sharp rebound in demand after COVID, major growth areas like India, China and much of Latin America continue to see downward pressure on demand as the pandemic and its related aftereffects persist. Even so, overall global demand appears on-trend to outpace production for the rest of 2021 and into early 2022 – if these countries can see a quick rebound, this trend should continue to add more demand pressure into 2022 – keeping prices elevated even longer. 

The North American picture

With public companies increased focus on reducing debt and increasing shareholder returns instead of growing production, North American growth will be subdued. Additionally, drilled and uncompleted wells (DUC’s) have been reduced in the US – with DUC well inventory levels dropping by about 27% since last summer according to the EIA. With both the reduction in capital and reduction in readily available wells to be brought on production, we can see the story starting to form that there may be significant barriers to increasing production in the near future.

Natural Gas

Oil is not alone in its upward price trajectory – Natural Gas is seeing some of the highest summer pricing since 2014. With storage levels below average for much of Europe and North America these prices are anticipated to persist higher through the winter.

In Europe, the Russian Nord Stream 2 pipeline into Germany is expected to come onstream in the next few months, alleviating much of the upside pressure for European gas into 2022 and 2023, bringing overall natural gas pricing back down from current highs and more in line with historical levels. North American gas is anticipated to continue seeing higher pricing due to increased LNG exports – creating a better link to international natural gas markets and pricing.

GLJ’s July Pricing

GLJ has released our latest evaluator commodity price forecast effective July 1, reflecting the current upward market sentiment seen throughout energy markets.

Published On: July 7, 2021Categories: Pricing


  • Justin Mogck

    As GLJ’s Director of Commodities Research, Justin leads the creation of GLJ’s price forecasts and related market research and analysis. He has also developed expertise in both conventional and unconventional evaluations and has a variety of experience with North American A&D transactions, corporate evaluations and economic modelling.