Global Economic Conditions Implications for Oil & Gas Markets

Presented to IPLOCA 50th Annual Convention

15 September 2016

Laura Speake, PhD Regional Chief Economist Views represented in this presentation are that of the speaker and may not represent the views of her employer.

Economic Growth

Industrial Growth

Oil Demand

Natural Gas Commercial/Residential

Transportation Demand

3025201510

10

8

6

4

2

0

10

8

6

4

2

0

AfricaIndia

ChinaMiddle East

Source: EIA /Haver

3025201510

3

2

1

0

-1

-2

-3

3

2

1

0

-1

-2

-3

Total Primary Energy Consumption - % chg Y/Y

OECD EuropeOECD Asia

US

Source: EIA /Haver

3025201510

3

2

1

0

-1

-2

-3

3

2

1

0

-1

-2

-3

OECD EuropeOECD Asia

US

Source: EIA /Haver

Energy Demand %

Cha

nge

Y/Y

% C

hang

e Y/

Y

History History Forecast Forecast

1615141312

58

56

54

52

50

48

58

56

54

52

50

48

Composite PMI (SA, 50+=Expansion)

DevelopedDeveloping

Source: Markit /Haver(Data through Jul 2016)

Leading Indicators

15100500959085

120

110

100

90

80

70

60

120

110

100

90

80

70

60

EU28: Economic Sentiment Indicator

SA, Long-term Average=100

Source: EC /Haver

Leading Indicators

(Data through Aug 2016)

Economic Outlook

Commodity prices no longer a drag

Weak but positive growth

Weak but positive growth

Improving economies

Fiscal budgets challenged w/ oil prices

Stabilizing at low levels

Oil – Supply & Demand

90919293949596979899

1Q 2

013

2Q 2

013

3Q 2

013

4Q 2

013

1Q 2

014

2Q 2

014

3Q 2

014

4Q 2

014

1Q 2

015

2Q 2

015

3Q 2

015

4Q 2

015

1Q 2

016

2Q 2

016

3Q 2

016

4Q 2

016

1Q 2

017

2Q 2

017

3Q 2

017

4Q 2

017

Demand Production

World oil (liquids) demand and production by quarter

Source: IHS © 2016 IHS

Mill

ion

barr

els

per d

ay

• Oil demand growth estimated to be 1-1.2m b/d

• NonOECD growth is 90% - mostly China & India

• Inventory to remain elevated

US Oil Production

16151413121110

9,750

9,000

8,250

7,500

6,750

6,000

5,250

120

100

80

60

40

20

Crude Oil Production: Total US, 4 Week AverageThous. Barrels/Day

Spot Price: West Texas Intermediate 40 Deg$/Barrel

Source: EIA /Haver

Global Shale Oil Production

Natural Gas – Supply & Demand

• Dominated by Regional Markets

• Pipeline vs LNG • Limited Storage Capacity

Global Shale Gas Production

Global Shale Gas Production

Forecast Risks Economic Risks • Fed tightens monetary policy

too quickly • Chinese economy slows more

rapidly • Geopolitical shock

Oil & Gas Risks • Libya & Nigeria return to full

production • US Shale ramps back up

sooner