Bob Tippee 2011 Mid-Year Forecast

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On June 23rd, 2011

On June 23rd, 2011

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  • 1. Oil & Gas Journal Midyear Forecast - 2011
    Bob Tippee, Editor
    Oil & Gas Journal
    Energy Advocates
    June 23, 2011
  • 2. World oil demand
    OECD down slightly at 45.9 MM b/d; non-OECD up 3.5% at 43.4 MM b/d
  • 3. World oil supply
    Non-OPEC: 53.3 MM b/d (+1.1%)
    OPEC NGL: 5.9 MMb/d (+10.2%)
    Stock change: -300 M b/d
    OPEC crude: 29.8 MM b/d (+1%)
  • 4. Second-half problem (MMb/d)
  • 5. The OPEC story
    World needs 30 MM b/d of OPEC crude in 2H
    OPEC production:
    29.9 MM b/d average 1Q
    29.2 MM b/d in May
    OPEC June 8 meeting
    Split interests: haves vs. have-nots
    No quota adjustment
    Unilateral production hikes by S. Arabia, others
  • 6. IEA today: tapping strategic stocks
    Release 60 MM bbl in next month (2 MM b/d)
    North America 50%, Europe 30%, Asia 20%
    “…contribute to well-supplied markets and to ensuring a soft landing for the world economy” (Executive Director Nobuo Tanaka)
    Total storage: 1.6 billion bbl
    Reassess in 30 days
    In market by July; Saudi oil can take 3 months
  • 7. Effect of IEA action
    2 MM b/d jolt of supply
    Brent and WTI quickly dropped by 7%
    Muted (so far) condemnation from OPEC
    Policy shift: market lever vs. emergency supply
  • 8. Price wild cards
    Saudi response to IEA stock draw
    Economic response – especially crisis economies of Europe
    Dollar vs. Euro
    Demand response
    Trader worries about shrunken cushions (inventories and idle production capacity)
  • 9. Spare production capacity (EIA)
  • 10. OECD stocks
  • 11. US oil price
    WTI discount to Brent was almost $20/bbl yesterday (June 22).
  • 12. US energy demand
    Assumes real GDP growth of 2%
    Federal Reserve yesterday lowered GDP growth projection for 2011 to 2.7-2.9% from 3.1-3.3% in April
    Fed raised unemployment rate projection to 8.6-8.9% from 8.4-8.7% in April
  • 13. US oil demand
  • 14. US demand for key products
  • 15. US gas price
    WTI:HH price ratio 22:1 yesterday (June 22) vs. BTU ratio of 6:1
  • 16. US demand for gas
  • 17. US gas production
  • 18. US gas imports
    Canada -9%
    Mexico -83.%
    LNG -7%
  • 19. Treasury: Percentage depletion=subsidy
    “The President agreed at the G-20 Summit in Pittsburgh to phase out subsidies for fossil fuels so that the United States can transition to a 21st-century energy economy. Percentage depletion effectively provides a lower rate of tax with respect to a favored source of income. “
  • 20. The Close the Big Oil Tax Loophole Act
    Foreign tax credit for dual-capacity taxpayers
    Domestic production deduction (Sect. 199)
    Current-year expensing of intangible drilling costs (IDCs)
    Percentage depletion
    Deduction for qualified tertiary injectants