Excellent Midyear Forecast presentation this morning by Oil & Gas Journal. Well worth the time it takes to listen to the archived version (https://goo.gl/bMAu5f, 1hr, 30min) for those interested in detail. The Q&A session toward the end is especially good (and includes a discussion of Arctic outlook). Slides available here if you want a quick overview.
7. The new supply world
OPEC production…
…now has competition
8. OGJ: US product demand (MMbd)
Motor gasoline 9.300 -0.3% 9.400
Jet fuel 1.645 +2.4% 1.600
Distillate 4.010 +3.4% 3.940
Residual 0.310 -13.2% 0.300
LPG, ethane 2.600 +4.3% 2.600
Other 1.980 +0.4% 1.889
Total before
exports
19.845 +1.1% 19.729
OGJ projections for 2017
Source: Chart from EIA Short Term Energy
Outlook for June 2017
Midyear F&R
9. OGJ: US oil supply 2017 (MMbd)
Crude/condensate 9.30 +4.8% 9.30
NGL & LRG 3.70 +6.4% 3.80
Renewables 1.16 +1.0% 1.13
Proc. gains 1.10 -0.7% 1.08
Total ex imports 15.26 +4.4% 15.31
Tot. imports 10.43 +3.6%
Tot. exports 6.02 +16.0%
Net imports 4.41* -9.4%
Refining capacity utilization high:
90.0% projected for 2017 vs.
89.8% estimated for 2016
OGJ projections for 2017
*Projected net imports = 22.2% of
projected demand
Source: Chart from EIA Short Term Energy Outlook for June 2017
Midyear F&R
14. OGJ: Gas overview 2017 (tcf)
Production 29.001 +2.5% 29.273
Imports 2.956 -1.5% 2.778
Supp. gas,
losses, etc.
-1.824 +2.5% -1.840
From (to)
storage
(0.171) -147.8% (0.050)
Total supply 29.963 +0.3% 30.161
Exports 3.172 +37% 2.670
Total
consumption
26.791 -2.6% 27.491
OGJ projections for 2017
Source: Charts from EIA Short Term Energy Outlook for June 2017
Midyear F&R
15. Geopolitical context: production cooperation
Saudi Arabia Iran
Iraq
Syria
Yemen
Qatar
Russia
Libya
UAE
TurkeyEgypt
Saudi Arabia, UAE,
other Sunni GCC
Economic restructuring
Saudi succession
Aramco IPO in 2018?
ADNOC new partnerships
16. June market highlights: IEA OMR, July 13
• OPEC compliance with production accord slipped to 78% from 95% in
May (average 2017 OPEC compliance: 92%)
• Non-OPEC compliance with production accord rose to 82% in June
• OPEC members 100% or more in compliance: Angola, Equatorial
Guinea, Saudi Arabia
• Combined production from exempt Nigeria and Libya up 500,000 b/d
since March, by 660,000 b/d since year ago (vs. 1.2 million b/d cut
agreed by other OPEC)
22. VAR (vector autoregression model) oil price forecast:
Directional accuracy has been consistently proved
(From January OGJ F&R report/webcast; Published in Jan OGJ Print issue)
23. Updated VAR forecast:
a basic trend forecast till the end of 2017
Forecasts Actual
$/bbl
J F M A M J J A S O N D J F M A M J J A S O N D
2016 2017
25
30
35
40
45
50
55
OGJ analysis
24. Oil price historical decomposition Methodolody
eyByByBy tptpttt
......
2211
e
e
e
y
y
y
bbb
bbb
bbb
y
y
y
t
t
t
t
t
t
t
t
t
3
2
1
1,3
1,2
1,1
333231
232221
131211
3
2
1
Sign restrictions + Boundaries on impact
elasticities of oil supply and oil demand
Monte Carlo Integration+ Rejection method
Source: OGJ analysis,
Reference: Kilian(2010, University of
Michigan), IMF papers
25. Contribution of flow supply shocks to Oil price
1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017
-30.00
-10.00
10.00
Contribution of flow demand shocks to Oil price
1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017
-40.00
0.00
40.00
Contribution of speculative demand shocks to Oil price
1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017
-40.00
-20.00
0.00
20.00
40.00
Historical decomposition of oil prices
Need more data…..
Source: OGJ analysis
35. US shale : the rebound in drilling has been led by oil, with an increasing focus
on drilling in the Permian basin
Breakeven prices by basins
Source: World Bank, IEA, OGJ Analysis
227
50 41
2
28
0
0
4
6
24
0
22
0
50
100
150
200
250
Permian Eagle Ford Woodford Haynesville Williston Marcellus
Oil and gas rig count by basins
May 2016-July 2017
Oil Gas
38. IEA US Shale Investment Cost Index
Source: IEA WEI 2017
39. Source of financing for US shale independent
Source: IEA World Energy Investment report 2017
40. Net debt of the majors and the average interest
rate of corporate debt
Source: IEA World Energy Investment report 2017
Majors: BP, Chevron, ConocoPhillips, Eni, ExxonMobil, Shell and Total
41. US shale: Another investment bubble again so far?
Probably yes
(From January OGJ F&R webcast)
An error-correction model was estimated by nonlinear least
squares to identify the pace at which capex responds to
changes the relative price.
ttttt wtiwtiwticapexcapex 1101211 ))(1(
$/bbl
(WT)
2016 Capex
Change (YOY)
2017 Capex
Change(YOY)
$55-$60 14%
$43 -37.8%
( Barclays' survey results: NA
-37%)