The oil sector will generate unprecedented revenues for 25 years due to current oil prices, analysts have forecast.
In recent weeks, major oil companies have reported profit growth for the first three months of the year. All of this is due to the fact future prices of the globally-dominant Brent crude oil have risen more than 40 percent this year to over $130 per barrel following the Russo-Ukrainian war. Although prices have fallen since then, the price of Brent per barrel is still above $100.
For the whole of 2022, international financial institutions are forecasting a Brent exchange rate of around $110 per barrel.
Most of the profits in the oil industry come from the upstream industry. The exploration and production sector, which includes the upstream industry, will make record profits this year due to high oil and gas prices.
According to Rystad Energy’s research, the total free cash flow (FCF), i.e. the companies’ cash flow from operations after expenses, will grow to $834 billion, a 70 percent increase from $493 billion in 2021.
As a result of the coronavirus pandemic and the ensuing collapse in oil prices, the total free cash flow (FCF) of state-owned oil and mining companies fell to about $126 billion in 2020, halving the previous year’s figure. With the global economy booming and fuel demand rising, last year’s FCF levels rose to nearly $500 billion, the highest financial result for the upstream industry to date.