energy outlook - enercom dallas · eia expects crude oil prices to average $58/b through 2019...
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www.eia.govU.S. Energy Information Administration Independent Statistics & Analysis
Energy Outlook
ForEnerCom DallasFebruary 22, 2018 | Dallas, TX
Jeff BarronIndustry Economist, U.S. Energy Information Administration
West Texas Intermediate (WTI) crude oil pricedollars per barrel
Jeff Barron, EnerCom Dallas February 22, 2018
EIA expects crude oil prices to average $58/b through 2019
Source: U.S. Energy Information Administration, Short-Term Energy Outlook, February 2018 and CME Group
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0
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60
80
100
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140
Jan 2017 Jul 2017 Jan 2018 Jul 2018 Jan 2019 Jul 2019
Historical spot priceSTEO price forecastNYMEX futures price95% NYMEX futures upper confidence interval95% NYMEX futures lower confidence interval
world liquid fuels production and consumption balancemillion barrels per day million barrels per day
Jeff Barron, EnerCom Dallas February 22, 2018
Global inventories are expected to build slightly in 2018 and 2019 after large stock draws in 2017
Source: U.S. Energy Information Administration, Short-Term Energy Outlook, February 2018
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2013-Q1 2014-Q1 2015-Q1 2016-Q1 2017-Q1 2018-Q1 2019-Q1
Implied stock change and balance (right axis)World production (left axis)World consumption (left axis)
million barrels dollars per barrel
Jeff Barron, EnerCom Dallas February 22, 2018
OECD inventories are estimated to be declining at the largest annual rate in 15 years; continued increases in backwardation suggest tight supply/demand balances
Source: U.S. Energy Information Administration, Short-Term Energy Outlook, February 2018, Bloomberg
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30-300
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2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
WTI 1-13 spread year-over-year change (inverted,right)
OECD commercial inventories year-over-year change (left)
million barrels
Jeff Barron, EnerCom Dallas February 22, 2018
The strong draw in inventories has essentially brought them in line with the five-year average level, OPEC’s target for rebalancing
Source: U.S. Energy Information Administration, Short-Term Energy Outlook, February 2018
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2,500
2,600
2,700
2,800
2,900
3,000
3,100
3,200
2010 2011 2012 2013 2014 2015 2016 2017 2018
OECD commercial petroleum inventories
OECD commercial petroleum inventories five-yearaverage level
U.S. crude oil and petroleum product stock changemillion barrels, four-week moving average
Jeff Barron, EnerCom Dallas February 22, 2018
In the United States, total petroleum stocks are drawing at the largest rate in years on high refinery runs and distillate consumption
Source: U.S. Energy Information Administration, Weekly Petroleum Status Report
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5
10
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Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
5-year min-max range
2018 2017
5-year average
annualized %
Jeff Barron, EnerCom Dallas February 22, 2018
Recent equity market volatility could have spilled over to commodity markets
Source: Bloomberg
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2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
OVX (oil volatility)
VIX (equity volatility)
WTI futures curvedollars per barrel
Open interest by trader classificationmillion contracts
Jeff Barron, EnerCom Dallas February 22, 2018
Large increase in shorts from swap dealers during past year met by money manager, other reportable longs; hedging lowered back end of the curve
Source: Bloomberg, U.S. Commodity Futures Trading Commission
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CL1
CL4
CL7
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0C
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CL1
6C
L19
CL2
2C
L25
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8C
L31
CL3
4C
L37
CL4
0C
L43
CL4
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Year agoFeb 17, 2017
TodayFeb 15, 2018
0.0
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Long Short Long Short
February 14, 2017 February 13, 2018
Producersand
Merchants
Non-reportables
Other Reportables
Money Managers
Swap Dealers
billion dollars
Jeff Barron, EnerCom Dallas February 22, 2018
Preliminary Q4 income statements showing 20% increase in costs and tax, increase in hedging losses
Source: Evaluate Energy; includes 58 U.S. exploration and production companies
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5
10
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Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2012 2013 2014 2015 2016 2017
realized + unrealized gain/loss on derivativescost of goods soldoil & gas production expensetaxes other than sales taxes
Indexed to January, 2014
Jeff Barron, EnerCom Dallas February 22, 2018
Drilling and frac sand costs up 10% year-over-year, but remain below $100 oil days
Source: U.S. Bureau of Labor Statistics, Bloomberg
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0.60
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1.00
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Jan-14 Jun-14 Nov-14 Apr-15 Sep-15 Feb-16 Jul-16 Dec-16 May-17 Oct-17
DrillingSupportFrac Sand
dollars per barrel of oil equivalent
Jeff Barron, EnerCom Dallas February 22, 2018
Does capital discipline mean restraining capex, or having positive free cash flow? Price is certainly helping cash flow
Source: Evaluate Energy; includes 58 U.S. exploration and production companies
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05
101520253035404550
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2012 2013 2014 2015 2016 2017
cash flow per boe
capital expenditure per boe
Q4 only includes 5 companies
number of active rigs thousand barrels per day
Jeff Barron, EnerCom Dallas February 22, 2018
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
Source: U.S. Energy Information Administration, Short-Term Energy Outlook, February 2018, Baker Hughes
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-280-240-200-160-120-80-4004080120160200240280
-280-240-200-160-120
-80-40
04080
120160200240280
Jan-14 Jun-14 Nov-14 Apr-15 Sep-15 Feb-16 Jul-16 Dec-16 May-17 Oct-17 Mar-18
monthly change in active oil rigs, shifted forward five months, left axis
monthly change in Lower 48 states oil production, three-month moving average, right axis
number of wells number of wells
Jeff Barron, EnerCom Dallas February 22, 2018
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 2018
Source: U.S. Energy Information Administration, Drilling Productivity Report, February 2018
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01,0002,0003,0004,0005,0006,0007,0008,0009,00010,00011,000
0200400600800
1,0001,2001,4001,6001,8002,0002,200
Jan-
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Mar
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May
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Jul-1
4
Sep
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Nov
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Jan-
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Jul-1
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Jul-1
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drilled but uncompleted wells, right axisdrilled but uncompleted wellsdrilled wells
completed wells
Front-month WTI crude oil price$/b
Jeff Barron, EnerCom Dallas February 22, 2018
Value of proved reserves positioned well heading into redetermination season; credit lines likely maintained or even increased
Source: Bloomberg
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2016 first-of-the-month average price: $42.68/b
2017 first-of-the-month average price: $51.19/b
2018 first-of-the-month average price YTD: $63.09/b
$/b Option adjusted spread, %
Jeff Barron, EnerCom Dallas February 22, 2018
High yield corporate bond spreads remain low even after recent energy, U.S. government bond selloff
Source: Bloomberg
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2010 2011 2012 2013 2014 2015 2016 2017 2018
West Texas Intermediate price, left axis
Barclay’s High Yield Corporate Bond Index Energy, right axis
Non-OECD GDP growth forecast (annual expectations) by release datepercent
Jeff Barron, EnerCom Dallas February 22, 2018
Demand expectations in non-OECD countries remain robust
Source: U.S. Energy Information Administration, Short-Term Energy Outlook, February 2018
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2012 2013 2014 2015 2016 2017 2018
2013 2014 20152016 2017 2018
2019
Jeff Barron, EnerCom Dallas February 22, 2018
Commodity price trends remain up, suggesting less downside risk to the demand outlook
Source: Bloomberg; includes 38 commodities
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change in global liquid fuels production since January 2016million barrels per day
Jeff Barron, EnerCom Dallas February 22, 2018
OPEC cuts being offset from non-OPEC production growth…
Source: U.S. Energy Information Administration, Short-Term Energy Outlook, February 2018
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ar-1
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rest of worldnon-OPEC producersOPEC producers
United States
Libya
Nigeria
Canada
MexicoVenezuela
Brazil
Saudi Arabia
total world net change
world consumption and non-OPEC production growthmillion barrels per day
Jeff Barron, EnerCom Dallas February 22, 2018
…which is expected to completely satisfy global demand growth the remainder of 2018
Source: U.S. Energy Information Administration, Short-Term Energy Outlook, February 2018
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2015-Q1 2016-Q1 2017-Q1 2018-Q1 2019-Q1
Non-OPEC production growth
world consumption growth
Venezuela crude oil productionmillion barrels per day
U.S. crude oil imports from Venezuelamillion barrels per day
Jeff Barron, EnerCom Dallas February 22, 2018
However, supply disruption risk in Venezuela is real
Source: U.S. Energy Information Administration, Monthly Energy Review , Petroleum Supply Monthly, Weekly Petroleum Status Report, Short-Term Energy Outlook, February 2018
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For more informationU.S. Energy Information Administration home page | www.eia.gov
Annual Energy Outlook | www.eia.gov/aeo
Short-Term Energy Outlook | www.eia.gov/steo
International Energy Outlook | www.eia.gov/ieo
Monthly Energy Review | www.eia.gov/mer
Today in Energy | www.eia.gov/todayinenergy
This Week in Petroleum | https://www.eia.gov/petroleum/weekly/
Drilling Productivity Report | www.eia.gov/petroleum/drilling/
International Energy Portal | www.eia.gov/beta/international/?src=home-b1
21Jeff Barron, EnerCom Dallas February 22, 2018