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www.eia.gov U.S. Energy Information Administration Independent Statistics & Analysis

Oil and gas outlook

For National Capital Area Chapter of the U.S. Association for Energy Economics October 16, 2015 | Washington, DC By Adam Sieminski, Administrator U.S. Energy Information Administration

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0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

2000 2002 2004 2006 2008 2010 2012 2014

Eagle Ford (TX)Bakken (MT & ND)Spraberry (TX & NM Permian)Bonespring (TX & NM Permian)Wolfcamp (TX & NM Permian)Delaware (TX & NM Permian)Yeso-Glorieta (TX & NM Permian)Niobrara-Codell (CO, WY)HaynesvilleUtica (OH, PA & WV)Marcellus (PA,WV,OH & NY)Woodford (OK)Granite Wash (OK & TX)Austin Chalk (LA & TX)Monterey (CA)

U.S. tight oil production million barrels of oil per day

0

5

10

15

20

25

30

35

40

45

2000 2002 2004 2006 2008 2010 2012 2014

Marcellus (PA,WV,OH & NY)Haynesville (LA & TX)Eagle Ford (TX)Fayetteville (AR)Barnett (TX)Woodford (OK)Bakken (ND)Antrim (MI, IN, & OH)Utica (OH, PA & WV)Rest of US 'shale'

U.S. dry shale gas production billion cubic feet per day

The U.S. has experienced a rapid increase in natural gas and oil production from shale and other tight resources

2 National Capital Area Chapter - USAEE | Oil and gas outlook October 16, 2015

Sources: EIA derived from state administrative data collected by DrillingInfo Inc. Data are through August 2015 and represent EIA’s official tight oil & shale gas estimates, but are not survey data. State abbreviations indicate primary state(s).

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

Jan 2012 Jan 2013 Jan 2014 Jan 2015

monthly percent change three month rolling average

Production growth in top U.S. crude producing regions (Permian, Bakken, Niobrara, and Eagle Ford) reversed in early 2015

Source: Energy Information Administration, Drilling Productivity Report, October 2015 (chart extends to November 2015


0.00

0.25

0.50

0.75

1.00

1.25

1.50

1.75

Jan Feb Mar Apr May Jun Jul Aug Sep Oct

2016 year-over-year supply and demand growth by STEO forecast month million barrels per day

Forecasts for 2016 global demand have increased faster than supply forecasts

Source: Energy Information Administration, Short-Term Energy Outlook


STEO Forecast Month

2016 demand growth

2016 supply growth

-0.75

-0.50

-0.25

0.00

0.25

0.50

0.75

1.00


2016 OPEC non-crude liquids supply growth

2016 year-over-year supply growth by STEO forecast month million barrels per day

Forecasts for 2016 OPEC supply have risen on the Iran deal, while non-OPEC forecasts have declined - driven by lower U.S. growth



STEO Forecast Month

2016 non-OPEC supply growth

2016 OPEC crude supply growth

-0.25

0.00

0.25

0.50

0.75

1.00

1.25


2016 year-over-year demand growth by STEO forecast month million barrels per day

Forecast OECD demand growth for 2016 have flattened



STEO Forecast Month

2016 non-OECD consumption growth

2016 OECD consumption growth

0

1

2

3

4

5

6

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Forecast

OPEC surplus crude oil production capacity million barrels per day

OPEC surplus production capacity in 2015 is the lowest since 2008

Source: Energy Information Administration, Short-Term Energy Outlook, October 2015


5052545658606264666870

Jan 2011 Jan 2012 Jan 2013 Jan 2014 Jan 2015 Jan 2016

October STEOJanuary STEO

Forecast

=

OECD commercial oil inventories days of supply

OECD oil inventories are very high on a days of supply basis and are projected to continue increasing in 2016

Note: Colored band around days of supply represents the range between the minimum and maximum from Jan. 2010 - Dec. 2014 Source: Energy Information Administration, Short-Term Energy Outlook


Iranian crude oil production is expected to begin increasing in the 2Q 2016, inventory sales could be sooner


Forecast

-2

-1

0

1

2

3

4

5

6

7

82

84

86

88

90

92

94

96

98

100

2010-Q1 2011-Q1 2012-Q1 2013-Q1 2014-Q1 2015-Q1 2016-Q1

Implied stock change and balance (right axis)World production (left axis)World consumption (left axis)

World supply and demand million barrels per day (MMb/d)

Implied stock change million barrels per day

Oil supply and demand begin to rebalance in 2016

Source: EIA, Short-Term Energy Outlook, October 2015


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75

100

125

150

Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct

Historical spot priceSTEO forecastNymex futures priceCurrent 95% NYMEX futures price confidence intervalJune 2014 95% NYMEX futures price confidence interval

2014 2015 2016

WTI price dollars per barrel

The market-implied confidence band for oil prices is very wide

Source: EIA, Short-Term Energy Outlook, October 2015


2013

Long-term outlook for the United States


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20

1990 2000 2010 2020 2030 2040 2020 2030 2040 2020 2030 2040

U.S. crude oil production million barrels per day (MMb/d)

U.S. crude oil production: Supply rises above previous historical highs before 2020 in all AEO2015 cases, with a range of longer-term outcomes dependent on prices, resources and technology

Source: EIA, Annual Energy Outlook 2015


Tight oil

Alaska

Lower 48 offshore

History 2013 2013 2013

U.S. maximum production level of 9.6 million barrels per day in 1970

Other lower 48 onshore

Reference High Oil and Gas Resource

Low Oil Price

-8

-4

0

4

8

12

16

2000 2010 2020 2030 2040 2020 2030 2040 2020 2030 2040

U.S. natural gas imports and exports trillion cubic feet

billion cubic feet per day



LNG imports

Projections History 2013

-10

0

10

20

2013 2013

30

40

-20 Reference Low Oil Price

High Oil and Gas Resource

Pipeline exports to Mexico

Lower 48 states LNG exports

Pipeline exports to Canada Pipeline imports from Canada

Alaska LNG exports

U.S. natural gas trade: Projected U.S. natural gas trade reflects the spread between domestic natural gas prices and world energy prices, along with resource outcomes

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0

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20

30

40

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040

U.S. dry natural gas trillion cubic feet per year billion cubic feet per day

U.S. becomes a net exporter of natural gas in the near future



Projections History 2013

Consumption

Domestic supply

Net exports

100

75

50

25

0

-25

Key takeaways - Oil

• Tight oil clearly matters for measures of U.S. oil import dependence and ability to pressure OPEC

• Policy debate over removing restrictions on exports of U.S. crude oil – Recent EIA analysis shows no significant effects for consumers, producers, or refiners in

cases where domestic production remains below 11 million barrels per day (b/d)

– If U.S. production were to approach or exceed 12 million b/d, as might occur under high resource assumptions, U.S. consumers realize a small reduction in gasoline prices and crude producers, modestly raise output if crude export restrictions are removed; however, the largest effects (in opposite directions) are felt by producers and refiners

• The Middle East remains the center of “easy oil” and will remain key to the future of the global oil market

National Capital Area Chapter - USAEE | Oil and gas outlook October 16, 2015 16

How much will low prices stimulate oil demand?

National Capital Area Chapter - USAEE | Oil and gas outlook October 16, 2015 17 17

gasoline product supplied million barrels per day (4-quarter moving average)

dollars per gallon excluding taxes (nominal) (4-quarter moving average)

The direct price effects can raise gasoline demand---as occurred recently in the United States

Source: Energy Information Administration, Petroleum Supply Monthly and Petroleum Marketing Monthly (as of September 2015)


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3

3.5

8.4

8.5

8.6

8.7

8.8

8.9

9

9.1

2010 2011 2012 2013 2014 2015

Gasoline product supplied

Gasoline demand estimates vary


oil consumption percent change (year-on-year)

The macro impacts are also important---Non-OECD oil consumption growth declined recently as GDP growth slowed

Source: Energy Information Administration, IHS Global Insight (as of September 2015) * Oil consumption weighted GDP


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8

2011 2012 2013 2014 2015

non-OECD consumption growthnon-OECD GDP growth*

Prices and economic growth are important, but policy, preferences, and technology may have a bigger long-term impact • What types of consumption and pricing policies will be enacted across the world?

– Fuel subsidies – Environmental policies – Domestic security policies

• What will light-duty vehicle trends look like? – Ownership rates – Efficiency and emissions standards – Technology/alternative fuels

• Where will goods be produced and how will they be moved?

• Will there be major industrial sector efficiency improvements or fuel switching?


2015 – 2016 Winter Fuels Outlook

National Capital Area Chapter - USAEE | Oil and gas outlook October 16, 2015 22 22

U.S. current population-weighted heating degree days

0100200300400500600700800900

1,0001,100

Oct Nov Dec Jan Feb Mar2012-2013 2013-2014 2014-2015 2015-2016 Forecast

10-year average

NOAA forecasts U.S. heating degree days this winter to be 7% lower than last winter and below the 10-year average


Note: EIA calculations based on National Oceanic and Atmospheric Administration (NOAA) data. Horizontal lines indicate 10-year average over the period Oct. 2005 – Mar. 2015. Projections reflect NOAA's 14-16 month outlook. Source: EIA Short-Term Energy Outlook, October 2015.

Heating fuel market shares vary across U.S. regions


Share of homes by primary space-heating fuel and Census Region

Northeast

South

Midwest

West

U.S. total 117 million homes

natural gas

propane heating oil/kerosene electricity

wood other/no heating

Source: U.S. Energy Information Administration based 2014 American Community Survey

Percent change in fuel bills from last winter (forecast)

Fuel bill

Base case forecast

If 10% warmer than forecast If 10% colder than forecast

Heating oil -25 -33 -16

Natural gas -10 -17 -4

Propane * -18 -30 -3

Electricity -3 -7 0

Expenditures are expected to be lower this winter (October 1–March 31) even if weather is significantly colder than currently forecast


Note: * Propane expenditures are a volume-weighted average of the Northeast and Midwest regions. All others are U.S. volume-weighted averages. Propane prices do not reflect prices locked in before the winter heating season starts. Source: EIA Short-Term Energy Outlook, October 2015.

Key takeaways – winter fuels • EIA expects heating fuel prices for homes that heat with natural gas,

propane, and heating oil to be lower than prices last winter; residential electricity prices are expected to be about the same as last winter

• The latest outlook from government weather forecasters expects winter temperatures east of the Rocky Mountains to be warmer than last winter, with projected heating degree days in the Northeast, Midwest, and South respectively about 13%, 11%, and 8% lower; in the West, this winter is expected to be 12% colder than last winter

• Projected changes in average U.S. household heating fuel expenditures from last winter are:

– 10% lower for homes that heat primarily with natural gas – 25% lower for homes using oil heat – 18% lower for homes using propane heat – 3% lower for homes that heat with electricity


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2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16

Natural gas Heating oil Propane

Heating oil prices are forecast to be 15% lower than last winter, propane prices are forecast to be 10% lower, and natural gas prices are forecast to be 4% lower


U.S. average residential winter heating fuel prices dollars per million Btu

forecast

Winter (October - March) Source: EIA Short-Term Energy Outlook, October 2015.

EIA has expanded the depth and breadth of its program, with more on the way


• International Energy Portal

• Monthly crude-by-rail data

• Analysis of the impacts of the Clean Power Plan

• Excel add-in tool for automatic data updates

• Report on federal subsidies in energy markets

• Ground Water Protection Council data collaboration

• Winter fuels prices for more states

• Domestic oil and gas production (EIA-914)

• Hourly electricity load data (EIA-930)

• Effects of Removing Restriction on U.S. Crude Oil Exports

Coming soon

• Drilling cost data

• Distributed solar generation data and analysis

• Integrating Customs and Border Protection exports data received on a more timely basis into EIA products

For more information


U.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

State Energy Profiles | www.eia.gov/state

Drilling Productivity Report | www.eia.gov/petroleum/drilling/

International Energy Portal | www.eia.gov/beta/international/?src=home-b1

http://www.eia.gov/

http://www.eia.gov/aeo

http://www.eia.gov/steo

http://www.eia.gov/ieo

http://www.eia.gov/mer

http://www.eia.gov/todayinenergy

http://www.eia.gov/state

http://www.eia.gov/petroleum/drilling/

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