For the first time in several quarters, there is some improvement in refining margins. However, spare capacity remains and refiners will have to keep capacity shuttered and may even have to consider shutting in additional capacity.
Companies are continuing to rationalize their refining assets.
On crude oil demand, Ernst & Young said that most analysts see the market coming into balance this year, with ample spare capacity to meet increases in demand.
Prices steadily increased at a comfortable pace over the past quarter, and this trend will continue as demand grows.
However, with prices over $80 per barrel, and a recovering economy, concerns are being raised with respect to a tipping point – where high oil prices may negatively impact manufacturers and consumers and slow economic recovery.
For oil mergers and acquisitions, transaction activity was reasonably strong in the first quarter of 2010, surpassing $70 billion in deal value.
While the global financial crisis is still impacting deal flow, there is evidence of loosening in capital markets.
While there are fewer deals made, they have been greater in value than recent quarters.
“Activity is starting to increase in the deal markets. And we can expect to see more activity in unconventional shale plays and consolidation in the oilfield services segment,” said Jon McCarter, Ernst & Young LLP, Transaction Advisory Services Leader, Americas Oil & Gas Center.