2018 Outlook for North American Energy and Commodities Markets

2017 has been a year of recovery for much of the North American energy markets after several very difficult years following the 2014 energy price collapse. Though oil prices haven’t recovered to their pre-collapse levels, producers, marketers and refiners have all found financial comfort in a relative stable price around $50/bbl. With technology advances reducing drilling and completion costs, producers for both oil and natural gas have been able to return rigs to the field and, after a year of declines, the U.S. is again seeing production increases that are expected to continue through 2018.

Liquified Natural Gas (LNG) will play an increasing role in the North American natural gas market in 2018, with the full-year impact of 2017’s commissioning of the Chenier’s Train 4 at Sabine Pass and Dominion Energy’s Cove Point facilities, and new export capacity coming on-line at Freeport LNG in late 2018. All in, by the end of the coming year, the U.S. will have about 4.5 BCFD of LNG takeaway capacity on-line, helping to keep the U.S. gas markets in balance and prices stable as production continues to increase.

Though the regulatory pressures on coal generation have subsided somewhat, the power industry continues to increasingly invest in renewables and natural gas. With the decreasing costs of PV and wind generation, the renewables industry does appear to have developed the economies of scale necessary to survive, and potentially thrive, without significant subsidies. Still, natural gas will continue to make up an increasing share of baseload generation – and with prices for natural gas showing stability after a tumultuous few years – power prices are expected to remain stable as well.

Energy and commodities trading technology spending is expected to increase in 2018, after the hangover of the low energy prices continued to be felt in 2017. With budgets for year set in the still uncertain price environment in 2016, the 2017 price stability does appear to have helped restored IT budgets for many market participants. In fact, it is expected that many energy and commodities companies could see significant budget increases to address delayed projects from the previous couple of years of capital austerity. In particular, system upgrades and digitalization projects, including investigative investments in blockchain and other emerging technologies, are expected to be a priority for many energy companies.

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