Download - Oil market Structure
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OIL MARKET STRUCTUREBy Dr. Paul CottrellSource material from the Center For Strategic And International Studies
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HISTORICAL AND PROJECTED OIL PRICES
There have been previous oil prices crashes.p p
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BRENT CRUDE OIL
July 2014 started the major decliney j
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WTI FORECAST
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GLOBAL OIL DEMAND WITH GDPStrong correlation g
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GLOBAL LIQUIDS CONSUMPTION
Change in U.S. consumption in 2016 (less) g p ( )
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NORTH AMERICA OIL PRODUCTION
Main growth in production from N.A.g p
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OIL PRICE
Lower oil prices are in theory simulative p yeconomicallyBut may pension funds and institutionals are i t d i th k tinvested in the energy markets
Not good for 401k and pension plansLower oil pricesLower oil prices
Might create contagious sell-offs and geoploticalinstability
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AVERAGE HOUSEHOLD ENERGYEXPENDITURES
U.S. household energy expenditure down.gy p
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+ / - EXTERNALITIES FOR OIL
Increases in pricespSocial unrest in Venezuela leads to supply disruptionsISIL disrupts Iraqi exportsISIL disrupts Iraqi exportsIranian conflictOther social unrests leading to supply disruptionsOPEC cuts production
Decreases in pricesWo ld GDP g o th ed cedWorld GDP growth reducedSaudi Arabia keeps production at 9.6-9.7 million bbl/d in 2016Iran conflicts reduced in region
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GEOGRAPHIC INFORMATION SYSTEM (GIS)
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ENERGY PRODUCTION IN NORTH AMERICA
Production and exports increasing for condensates
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CRUDE OIL FLOWS IN NORTH AMERICA
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PRODUCTION IN BAKKEN ANDTRANSPORTATION
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RAIL TO EAST COAST
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RIG COUNTS
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DAY RATE FOR DRILLING RIG
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PLANNED OIL INFRASTRUCTUREINVESTMENT
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MIDSTREAM CONCLUSIONS
Rapidly responded to tight oil and oil sand p y p gproduction to connect markets by pipeline and tail to move crude to refiners.
R fi bl t t k t Refiners were able to response to market opportunities and export products quicker.
More flexibility for refiners and producers to seek best crude sourcing and best place to place refined products.Lower oil pricesLower oil prices
Lowers need to expand pipeline capacityNeed to export crude to due to production growth
Otherwise logjam in Gulf Coast.
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POSSIBLE WAYS TO TRADE OIL/GASMARKETS
Oil / Gas futures “CL” or “NG” contractsETF
USO (long)GUSH (3X long)DRIP (3X short)DIG (2X long) DIG (2X long) UCO (2X long)SZO (short)DTO ( X h )DTO (2X short)XLE (long)DNO (short)( )