Despite continued positive developments in the global oil and gas industry, such as an increase in US crude oil production and an increase in global demand, crude oil price levels (Brent crude oil spot prices averaged US$71 per barrel in 2018 and in April 2019) are still below the four-year high of US$81 per barrel reached in October 2018 and are still well below the record high of US$115 per barrel reached in March 2011. Oil price volatility during 2018 and, thus far in 2019, have resulted from production declines in Venezuela and Iran, a trend expected to continue through 2020 to be partially offset by production increases from other OPEC member countries and also from the uncertainty over US and Chinese recent trade negotiations.
Some Latin American economies are still grappling with currency, depreciation, inflation, fiscal deficit and weaker-than-expected economic indicators, so oil and gas companies operating in the region have continued to behave prudently when it comes to new investments. In addition, with recent political developments across the region as a result of new governments in Brazil and Mexico, presidential elections in Argentina and Bolivia that could change the perspectives in their respective oil and gas industries along with the political crisis in Venezuela escalating in the past several months, the oil and gas sector faces certain political and regulatory challenges in the region.
Despite the uncertain outlook for the oil and gas industry in Latin America, certain countries in the region, most notably Argentina, Brazil, Colombia, Peru and Ecuador, have continued to introduce regulatory reforms to allow for increased participation of the private sector in oil and gas production and development activities. These types of programmes have historically contributed to the development of additional hydrocarbon reserves and to an increase in foreign investment in the sector. Free-market policies in Brazil, such as supporting downstream oil and gas liberalisation and firm intentions to move ahead with the pre-salt auction rounds in coming years. In Argentina, a new regulatory regime allowed oil companies to recommend to regulators specific areas for they would like to see auctioned and the multiplication of investments in Vaca Muerta shale prospect. The return of production sharing contracts in Ecuador.
The Mexican 2013 energy reform had aimed to improve the long-term outlook for Mexico's hydrocarbons production by providing for more opportunity for foreign and private investment in Mexico's oil and gas sector. However, political uncertainty is currently taking centre stage in Mexico. Although the campaign promises of President Andrés Manuel López Obrador to revise contracts have lost momentum, doubts persist about the timing and continuation of future oil and gas auctions and the strategy of the new administration regarding the oil and gas sector in general. The new government recently announced plans for the construction of a new refinery by Mexican state oil company Pemex and a new strategy aimed at restoring Pemex's business and financial condition to avoid future credit rating downgrades, which could bring the state oil company credit rating below investment grade levels, thus substantially increasing its cost of funding and limiting access to the international capital markets.
Several countries, continue to be focused in investigating and prosecuting corruption allegations (particularly in Brazil, Argentina, Colombia and Peru), and the public and private sectors demand that regulators take decisive steps to curtail bribery and corruption in the region. The resignation of former Peruvian president, Pedro Pablo Kuczynsky, the suicide of former Peruvian president, Alan Garcia, in the context of a corruption investigation relating to receiving bribes from Odebrecht, and the incarceration of former president Lula DaSilva in Brazil continue to send shock waves across the regional financial markets, creating uncertainty and negatively impacting economic conditions and investment.