On Bauer Business Focus – a conversation on forecasting and the impact of declining oil prices.
Suzanne Minter, manager of the oil and gas consulting group for Platts Analytics, stopped by Bauer Business Focus to discuss oil forecasting methods and current U.S. production trends.
“We don’t have some magic hidden number that’s proprietary to us,” Minter said about Platts Analytics’ forecasting process. “But what is so unique is we take publicly available data from hundreds of sources and we look at the fundamental reality of what’s happening physically in the market so we can see what supply looks like. And we track things like new projects coming online. Then we estimate what we believe global demand is going to look like.”
Minter added that geopolitical factors are not considered in most forecasting methods due to their unpredictable nature.
“When we model, we actually have to rule out geopolitics because I don’t have a crystal ball. The only thing I do know is world peace is not going to break out in my lifetime. That is the only given. I can’t predict the Nigerian events that are happening. I couldn’t have predicted Canadian wildfires or things like that. But it is our job to take those events into consideration as rapidly as possible.”
As for current production trends, Minter explained that despite the downturn in oil prices, production has not been greatly affected in the U.S.
“When prices fell so hard, OPEC nations really felt the U.S. producer would stop and would lay down. What they really did not get their heads around originally is, unlike an OPEC nation, which is an NOC (national oil company), and is dependent upon production for revenues, we are private entities,” she added. “We are several thousand individuals that produce for our own reasons. If our balance sheets say produce at this price, we’re going to produce. The U.S. producer was very creative, very aggressive and showed huge technology gains during the price downturn. So resultantly, production didn’t slow.”
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