Executive Summary
The fourth quarter of 2021 marked a recent milestone in a long upward march for energy prices. WTI closed the year above $75 (compared to $48 at the end of 2020), while the Henry Hub spot price closed at $3.82 per mmbtu (compared to $2.36 at the end of 2020). Stating the obvious, commodity prices were more economically attractive to producers in the latter half of the year as compared to the previous 6 to 8 quarters. The XLE index, which primarily tracks the broader energy sector, was up over 50% for 2021. Rig counts, although deployed with more caution than in the past, rose along with prices in 2021. Crude oil and natural gas production in the U.S. followed suit, despite the appearance of the Omicron COVID variant, which raised uncertainty in the markets and sparked a price decline in December. However, while the effects of COVID may have slightly dampened the trajectory of energy prices late in 2021, there is little to suggest that overall demand for oil and gas has receded as well.
