energy outlook - enercom dallas · eia expects crude oil prices to average $58/b through 2019...

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

2

0

20

40

60

80

100

120

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


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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-2

-1

0

1

2

3

4

5

6

88

90

92

94

96

98

100

102

104

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


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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-40

-30

-20

-10

0

10

20

30-300

-200

-100

0

100

200

300

400

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


The strong draw in inventories has essentially brought them in line with the five-year average level, OPEC’s target for rebalancing


5

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


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

6

-15

-10

-5

0

5

10

15

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

5-year min-max range

2018 2017

5-year average

annualized %


Recent equity market volatility could have spilled over to commodity markets

Source: Bloomberg

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0

20

40

60

80

100

120

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


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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40

45

50

55

60

65

CL1

CL4

CL7

CL1

0C

L13

CL1

6C

L19

CL2

2C

L25

CL2

8C

L31

CL3

4C

L37

CL4

0C

L43

CL4

6

Year agoFeb 17, 2017

TodayFeb 15, 2018

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

Long Short Long Short

February 14, 2017 February 13, 2018

Producersand

Merchants

Non-reportables

Other Reportables

Money Managers

Swap Dealers

billion dollars


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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-30

-25

-20

-15

-10

-5

0

5

10

15

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


Drilling and frac sand costs up 10% year-over-year, but remain below $100 oil days

Source: U.S. Bureau of Labor Statistics, Bloomberg

10

0.60

0.65

0.70

0.75

0.80

0.85

0.90

0.95

1.00

1.05

1.10

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


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

11

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


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

12

-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


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

13

01,0002,0003,0004,0005,0006,0007,0008,0009,00010,00011,000

0200400600800

1,0001,2001,4001,6001,8002,0002,200

Jan-

14

Mar

-14

May

-14

Jul-1

4

Sep

-14

Nov

-14

Jan-

15

Mar

-15

May

-15

Jul-1

5

Sep

-15

Nov

-15

Jan-

16

Mar

-16

May

-16

Jul-1

6

Sep

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-16

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17

Mar

-17

May

-17

Jul-1

7

Sep

-17

Nov

-17

Jan-

18

drilled but uncompleted wells, right axisdrilled but uncompleted wellsdrilled wells

completed wells

Front-month WTI crude oil price$/b


Value of proved reserves positioned well heading into redetermination season; credit lines likely maintained or even increased

Source: Bloomberg

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20

30

40

50

60

70

Jan-

16

Feb-

16

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-16

Apr

-16

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-16

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Jul-1

6

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-16

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-16

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-16

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-16

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Mar

-17

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-17

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-17

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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, %


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


Demand expectations in non-OECD countries remain robust


16

0

1

2

3

4

5

6

7

2012 2013 2014 2015 2016 2017 2018

2013 2014 20152016 2017 2018

2019


Commodity price trends remain up, suggesting less downside risk to the demand outlook

Source: Bloomberg; includes 38 commodities

17

change in global liquid fuels production since January 2016million barrels per day


OPEC cuts being offset from non-OPEC production growth…


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-2.5-2.0-1.5-1.0-0.50.00.51.01.52.02.53.0Ja

n-16

Feb-

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ar-1

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l-16

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ar-1

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l-17

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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


…which is expected to completely satisfy global demand growth the remainder of 2018


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-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

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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


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

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

https://www.eia.gov/petroleum/weekly/

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

http://www.eia.gov/beta/international/?src=home-b1

energy outlook - enercom dallas · eia expects crude oil prices to average $58/b through 2019...

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