Energy Outlook. U.S. Energy Information Administration. For EnerCom Dallas February 22, 2018 Dallas, TX

Transcription

1 Energy Outlook For EnerCom Dallas Dallas, TX Jeff Barron Industry Economist, U.S. Energy Information Administration U.S. Energy Information Administration Independent Statistics & Analysis

2 EIA expects crude oil prices to average $58/b through 219 West Texas Intermediate (WTI) crude oil price dollars per barrel Historical spot price STEO price forecast NYMEX futures price 95% NYMEX futures upper confidence interval 95% NYMEX futures lower confidence interval Jan 217 Jul 217 Jan 218 Jul 218 Jan 219 Jul 219 Source: U.S. Energy Information Administration, Short-Term Energy Outlook, February 218 and CME Group 2

3 Global inventories are expected to build slightly in 218 and 219 after large stock draws in 217 world liquid fuels production and consumption balance million barrels per day 14 million barrels per day Implied stock change and balance (right axis) World production (left axis) World consumption (left axis) Q1 214-Q1 215-Q1 216-Q1 217-Q1 218-Q1 219-Q1-2 Source: U.S. Energy Information Administration, Short-Term Energy Outlook, February 218 3

4 OECD inventories are estimated to be declining at the largest annual rate in 15 years; continued increases in backwardation suggest tight supply/demand balances million barrels dollars per barrel WTI 1-13 spread year-over-year change (inverted,right) OECD commercial inventories year-over-year change (left) Source: U.S. Energy Information Administration, Short-Term Energy Outlook, February 218, Bloomberg 4

5 The strong draw in inventories has essentially brought them in line with the five-year average level, OPEC s target for rebalancing million barrels 3,2 3,1 3, OECD commercial petroleum inventories OECD commercial petroleum inventories five-year average level 2,9 2,8 2,7 2,6 2, Source: U.S. Energy Information Administration, Short-Term Energy Outlook, February 218 5

6 In the United States, total petroleum stocks are drawing at the largest rate in years on high refinery runs and distillate consumption U.S. crude oil and petroleum product stock change million barrels, four-week moving average year min-max range 5 5-year average Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: U.S. Energy Information Administration, Weekly Petroleum Status Report 6

7 Recent equity market volatility could have spilled over to commodity markets annualized % OVX (oil volatility) VIX (equity volatility) Source: Bloomberg 7

8 Large increase in shorts from swap dealers during past year met by money manager, other reportable longs; hedging lowered back end of the curve WTI futures curve dollars per barrel Year ago Feb 17, 217 Today Feb 15, 218 CL1 CL4 CL7 CL1 CL13 CL16 CL19 CL22 CL25 CL28 CL31 CL34 CL37 CL4 CL43 CL46 Source: Bloomberg, U.S. Commodity Futures Trading Commission Open interest by trader classification million contracts Nonreportables Other Reportables Money Managers Swap Dealers Producers and Merchants Long Short Long Short February 14, 217 February 13, 218 8

9 Preliminary Q4 income statements showing 2% increase in costs and tax, increase in hedging losses billion dollars Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 realized + unrealized gain/loss on derivatives cost of goods sold oil & gas production expense taxes other than sales taxes Source: Evaluate Energy; includes 58 U.S. exploration and production companies 9

10 Drilling and frac sand costs up 1% year-over-year, but remain below $1 oil days Indexed to January, Drilling Support Frac Sand.6 Jan-14 Jun-14 Nov-14 Apr-15 Sep-15 Feb-16 Jul-16 Dec-16 May-17 Oct-17 Source: U.S. Bureau of Labor Statistics, Bloomberg 1

11 Does capital discipline mean restraining capex, or having positive free cash flow? Price is certainly helping cash flow dollars per barrel of oil equivalent 5 45 Q4 only 4 includes 5 35 capital expenditure companies 3 per boe 25 cash flow per boe Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q Source: Evaluate Energy; includes 58 U.S. exploration and production companies 11

12 Rig counts began increasing again in recent weeks following Q4 price movement; increase in completion activity over next quarter will resume acceleration in U.S. onshore production growth number of active rigs thousand barrels per day monthly change in Lower 48 states oil production, three-month moving average, right axis monthly change in active oil rigs, shifted forward five months, left axis Jan-14 Jun-14 Nov-14 Apr-15 Sep-15 Feb-16 Jul-16 Dec-16 May-17 Oct-17 Mar Source: U.S. Energy Information Administration, Short-Term Energy Outlook, February 218, Baker Hughes 12

13 The rate of change of completed wells is starting to accelerate above drilled, which will begin to reduce DUCs and push U.S. production to new highs, crossing11 mmb/d by the end of 218 number of wells number of wells 2,2 2, 1,8 1,6 1,4 1,2 1, drilled wells completed wells drilled but but uncompleted wells wells, right axis 11, 1, 9, 8, 7, 6, 5, 4, 3, 2, 1, Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 Jan-18 Source: U.S. Energy Information Administration, Drilling Productivity Report, February

14 Value of proved reserves positioned well heading into redetermination season; credit lines likely maintained or even increased Front-month WTI crude oil price $/b first-of-the-month average price: $42.68/b 217 first-of-the-month average price: $51.19/b 218 first-of-the-month average price YTD: $63.9/b Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Source: Bloomberg 14

15 High yield corporate bond spreads remain low even after recent energy, U.S. government bond selloff $/b Option adjusted spread, % Barclay s High Yield Corporate Bond Index Energy, right axis West Texas Intermediate price, left axis Source: Bloomberg 15

16 Demand expectations in non-oecd countries remain robust Non-OECD GDP growth forecast (annual expectations) by release date percent Source: U.S. Energy Information Administration, Short-Term Energy Outlook, February

17 Commodity price trends remain up, suggesting less downside risk to the demand outlook Source: Bloomberg; includes 38 commodities 17

18 OPEC cuts being offset from non-opec production growth change in global liquid fuels production since January 216 million barrels per day Jan-16 non-opec producers OPEC producers Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 rest of world Canada Libya Brazil total world net change United States Nigeria Saudi Arabia Venezuela Mexico Source: U.S. Energy Information Administration, Short-Term Energy Outlook, February

19 which is expected to completely satisfy global demand growth the remainder of 218 world consumption and non-opec production growth million barrels per day world consumption growth Non-OPEC production growth Q1 216-Q1 217-Q1 218-Q1 219-Q1 Source: U.S. Energy Information Administration, Short-Term Energy Outlook, February

20 However, supply disruption risk in Venezuela is real Venezuela crude oil production million barrels per day 4. U.S. crude oil imports from Venezuela million barrels per day Source: U.S. Energy Information Administration, Monthly Energy Review, Petroleum Supply Monthly, Weekly Petroleum Status Report, Short- Term Energy Outlook, February 218 2

21 For more information U.S. Energy Information Administration home page Annual Energy Outlook Short-Term Energy Outlook International Energy Outlook Monthly Energy Review Today in Energy This Week in Petroleum Drilling Productivity Report International Energy Portal 21