At a recent energy summit held in Aspen, Colo., in late August, Raymond James stood by its incrementally bullish outlook for global oil supply and said that more industry players are “coming around to our view.”

Supporting the outlook is “a greater consensus from those in attendance that Saudi is incentivized to push Brent prices higher,” to around $75 a barrel, said Marshall Adkins, head of Raymond James’ energy research team, in a note recapping the highlights from the firm’s summit.

Demand appeared to be more of a conundrum for conference attendees. Raymond James characterized its outlook on demand as “already below consensus, but arguments suggest we may still be too high.” There was no consensus on whether demand issues were “transitory or structural” or on why demand is weakening outside of the U.S./China trade war.

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In the note, Adkins said that global supply appears to be weakening. Raymond James’ 2020 total liquids growth forecast is below consensus. The firm expects slowdowns in capital flow to U.S. shale and large-scale international projects will begin to exact more of a toll on supply levels in the coming year as well.

As for U.S. well productivity going forward, the analysts said that the “bigger hammer” approach is reaching its limits as may also be the case for downspacing and multi-bench drilling efforts. Strategies to continue to expand core inventory may also have limited success.

Midstream takeaways from the conference were generally more benign. The pipeline bottlenecks that had a stranglehold on Permian crude over the past couple of years have for the most part lessened considerably, as have concerns around export bottlenecks.

“There will be inefficiencies, but nothing to drive Permian-Brent diffs like we saw in 2018,” Adkins wrote.

On climate change and environmental, social and governance (ESG) criteria, the industry has been reticent to be in the forefront of communication and the analysts suggest that must change. Those who are proactive in ESG and climate change messaging “will likely be rewarded,” Adkins wrote.

Governance/alignment issues are another area where the industry may benefit from having “skin in the game,” according to the note.

The greatest challenge for industry executives is how to lure investors back to the sector after the exodus prompted by the severe downturn beginning in 2014. Raymond James analysts said they are “incrementally bullish” on the issue.

“The industry has a fundamentals—rather than ESG—problem,” Adkins wrote. “Focusing on ROIC and free cash flow [to above market levels] should improve investor views.”

He added that supply-side discussions suggest “a structural change to an inflationary environment may be nearing,” which could again attract the interest of value-driven investors to the space.

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