Looking ahead, here are a few themes I think will play a role in 2021, which are a continuation or evolution of where we’ve been in 2020.

1. Resolving the Pandemic is Key to Restoring Oil Demand — Expect oil demand to remain depressed until the pandemic is resolved, economic activity returns to pre-pandemic levels and people are willing/able to travel freely by air and commute to work. 2020 has shown us that many of us are much better able than expected to work remotely, so a small percentage of office workers may never return to the office and others may commute fewer days per week. Nevertheless, I expect that most people will return to their offices more or less full-time later this year. While we’re able to do a lot of work remotely, I expect people to want to get out of their houses and back to a more collaborative office setting. What we learned in 2020 is that social distancing, mask-wearing, etc. works, but people have a hard time sticking with those behaviors for a long time. The pandemic won’t get resolved by those methods, so the timing of oil demand recovery is tied to the roll-out of the vaccines. The good news is that process has started; the bad news is it’s going slowly. We’ll need a much more aggressive, nationwide effort if we’re going to get the level of vaccination we need, and I think that’ll take all of the first half of the year.
2. Continued Pressure on Coal Will Increase Natural Gas Demand — I expect continued movement away from coal-fired generation, which will likely be accelerated by increased regulatory pressure from the incoming administration. Natural gas is well-positioned to capture this market share and provide support to prices. My hope is we’ve seen the lowest gas prices for a while.
3. Novel Capital Sources Will Continue to Expand — Due to poor results, many small- and mid-sized banks are exiting or have exited the energy-lending business, and the larger banks are under external pressure to reduce lending to the sector. Although I don’t expect the large banks to completely leave the space (it would take several years to do so even if they chose to), I do expect challenges for operators who need to raise capital. I expect we’ll see the continued expansion of non-traditional capital sources/structures, particularly on the debt side. Look for shorter-term, amortizing loans to take the place of traditional RBL facilities and non-banks to invest via debt-type instruments.