Oil & Gas US Integrated Industry Outlook Upbeat On Upstream

The Zacks Oil & Gas US Integrated industry comprises companies that are mostly involved in upstream and midstream energy businesses. The upstream operations entail oil and natural gas exploration and production in the prolific shale plays of the United States.

The integrated energy companies are also engaged in midstream businesses through their gathering and processing facilities along with transportation pipeline networks and storage sites.

Overall, the upstream business is positively correlated to oil and natural gas prices. The produced commodity volumes are then transported through midstream assets, leading to stable fee-based revenues.

Here are the industry’s three major themes:

  • West Texas Intermediate (WTI) crude has recovered significantly and is now trading above the $60-a-barrel mark. In fact, more upside awaits oil prices in 2020 as its demand outlook is improving, since tensions between the United States and China are easing and global supply is shrinking, with OPEC agreeing to deepen oil production cuts. The positive crude pricing scenario is highly favorable for oil exploration and production businesses.
  • Rising demand for cleaner energy has been backing export volumes of natural gas from the United States. Notably, since it will take time to replace oil by alternative sources of energy, export volumes of the commodity are likely to rise steadily in the coming years. Thus, natural gas explorers and producers are well positioned to capitalize on domestic and global clean energy needs.
  • Moreover, for the first time since government monthly records began in 1949, the United States has established itself as a net petroleum exporter. This is because in September, America’s exported volumes of oil and petroleum products were more than imported, per data provided by U.S. Energy Information Administration. Thus, to support growing oil and gas production in the U.S. shale plays, there is heightened demand for the companies’ fresh midstream infrastructure to gather, store, process and transport the commodities.
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