oil and natural gas: market outlook and drivers...eia expects wti oil prices to remain low compared...

www.eia.govU.S. Energy Information Administration Independent Statistics & Analysis

Oil and natural gas: market outlook and drivers

forAmerican Foundry SocietyMay 18, 2016 | Washington, DC

byHoward Gruenspecht, Deputy Administrator

Global supply has consistently exceeded demand since the start of 2014; EIA forecasts a return to market balance in the second half of 2017

AFS | Oil and natural gas market outlook and drivers, May 18, 2016 2

Forecast

-3

-2

-1

0

1

2

3

4

5

6

82

84

86

88

90

92

94

96

98

100

2011-Q1 2012-Q1 2013-Q1 2014-Q1 2015-Q1 2016-Q1 2017-Q1

Implied stock change and balance (right axis)

World production (left axis)

World consumption (left axis)

world supply and demandmillion barrels per day

implied stock changemillion barrels per day

Source: EIA, Short-Term Energy Outlook, May 2016

EIA expects WTI oil prices to remain low compared to recent history, but the market-implied confidence band is very wide


0

20

40

60

80

100

120

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

Historical Spot Price

STEO Forecast

NYMEX Futures Price

Current 95% NYMEX futures price confidence interval

2013 2014 2015 2016 2017

WTI pricedollars per barrel


0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

2002 2004 2006 2008 2010 2012 2014 2016

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)

0

5

10

15

20

25

30

35

40

45

2002 2004 2006 2008 2010 2012 2014 2016

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. tight oil productionmillion barrels of oil per day

U.S. dry shale gas productionbillion cubic feet per day

AFS | Oil and natural gas market outlook and drivers, May 18, 2016

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

Sources: EIA derived from state administrative data collected by DrillingInfo Inc. Data are through February 2016 and represent EIA’s official tight oil & shale gas estimates, but are not survey data. State abbreviations indicate primary state(s).

4

Long lead times and past investment are contributing to growth from the Gulf of Mexico as Lower 48 production declines


-2

-1.5

-1

-0.5

0

0.5

1

Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2014 2015 2016 2017

Total U.S. Production

Lower 48

Alaska

Federal Gulf of Mexico

U.S. crude oil production growth by areachange from fourth quarter, 2014 (million barrels per day)


Crude supply trends outside the United States (red areas below) are key to future oil market balance: geopolitical developments, exporter decisions, and the timing and magnitude of supply effects stemming from reduced investment all matter


Shale Regions

5.60

Other Lower 480.87

AK0.47

GOM1.66

2016 oil production, million barrels per day

REST OF WORLD= 72.72

Shale Regions

5.10

Other Lower 480.79

AK0.45

GOM1.85

2017 oil production, million barrels per day

REST OF WORLD= 72.88

Source: EIA, Short-Term Energy Outlook and Drilling Productivity Report, May 2016; International Energy Agency

EIA forecasts global liquids consumption growth at 1.2 million b/d in 2016 and 1.3 million b/d in 2017


Forecast

-2

-1

0

1

2

3

4

5

6

7

8

9

76

78

80

82

84

86

88

90

92

94

96

98

2009 2010 2011 2012 2013 2014 2015 2016 2017

Change in U.S. consumption (right axis)

Change in China consumption (right axis)

Change in other consumption (right axis)

Total world consumption (left axis)

world liquid fuels consumption million barrels per day

annual changemillion barrels per day


Non-OECD economic growth projections, a key driver of oil demand, have been reduced over the course of recent STEO forecasts


0

1

2

3

4

5

6

7

Jan-12 Jun-12 Nov-12 Apr-13 Sep-13 Feb-14 Jul-14 Dec-14 May-15 Oct-15 Mar-16

2013 2014 2015 2016 2017

GDP growth in non-OECD countries annual expectations by date of forecast


Global Energy: Drivers and Projections


Economic activity and population drive increases in energy use; energy intensity (E/GDP) improvements moderate this trend


-4

-2

0

2

4

6

U.S. OECDEurope

Japan SouthKorea

China India Brazil MiddleEast

Africa Russia

Energy Intensity GDP per capita Population

average annual percent change (2012–40)percent per year

Source: EIA, International Energy Outlook 2016

Renewables grow fastest, coal use plateaus, natural gas surpasses coal by 2030, and oil maintains its leading share


0

50

100

150

200

250

1990 2000 2010 2020 2030 2040

Coal

Petroleum and other liquid fuels

Natural gasRenewables

Nuclear

Coal with U.S. CPP

Renewables with U.S. CPP

Share oftotal energy

world energy consumptionquadrillion Btu

Source: EIA, International Energy Outlook 2016 and EIA, Analysis of the Impacts of the Clean Power Plan (May 2015)

History Projections2012

33%

30%

28%

22%

23%

26%

12%

17%

4%6%

22%

16%

Most of the growth in world oil consumption occurs in the non-OECD regions — especially Asia


0 10 20 30 40

OECD Europe

OECD Asia

OECD Americas

Africa

Non-OECD Europe and Eurasia

Non-OECD Americas

Middle East

Non-OECD Asia

2012

2020

2040

world petroleum and other liquid fuels consumptionmillion barrels per day


Passenger-miles per person will rise as GDP per capita grows; travel growth is largely outside the OECD


0

2,000

4,000

6,000

8,000

10,000

12,000

$0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000

OECD

China

Othernon-OECD Asia

Africa

India

passenger-miles per capita (left-axis) and GDP per capita (horizontal-axis) for selected country groupings 2010–40


Liquid fuels supplies from both OPEC and non-OPEC producers increase through 2040


0

10

20

30

40

50

60

2000 2010 2020 2030 2040

Non-OPEC crude and lease condensate

OPEC crude and lease condensate

Other liquids

world production of petroleum and other liquid fuelsmillion barrels per day



Non-OECD nations account for 76% of projected growth in natural gas consumption


0

30

60

90

120

150

2012 2020 2025 2030 2035 2040

OECD Non-OECD

world natural gas consumptiontrillion cubic feet


Non-OECD Asia, Middle East, and OECD Americas account for the largest increases in natural gas production


0 5 10 15 20

Other OECD

Non-OECD Europe and Eurasia

Other non-OECD

OECD Americas

Middle East

Non-OECD Asia

China Other

Other

Other

Other

Iran Saudi Arabia

United States

Russia

world change in natural gas production, 2012–40trillion cubic feet


North American natural gas prices are low compared to prices in the rest of the world, although spreads have narrowed recently


select global natural gas and crude oil prices with average monthly LNG prices in JapanU.S. dollars per million British thermal unit

Source: U.S. Energy Information Administration, Bloomberg L.P.

U.S. Energy Outlook


Key updates in AEO2016


• Incorporation of the U.S. Environmental Protection Agency’s final rules for the Clean Power Plan

• Updated renewable capital costs

• Latest California zero-emission vehicle sales mandates, which have been adopted by a number of other states

• Extension of the production tax credit for wind and 30% investment tax credit for solar

• Lower near-term crude oil prices

Reductions in energy intensity largely offset impact of gross domestic product (GDP) growth, leading to slow projected growth in energy use


0

20

40

60

80

100

120

1980 1990 2000 2010 2020 2030 2040 2020 2030 2040

U.S. primary energy consumptionquadrillion Btu

Source: EIA, Annual Energy Outlook 2016

29%

9%

16%

36%

8%

Coal

ProjectionsHistory 2015

1%Liquid biofuels

32% of U.S. total

8%

14%

33%

12%

1%

Projections2015

AEO2016 Reference No CPP

Natural gas

Renewables

Nuclear

Petroleum and other liquids

33%

8%

10%

34%

14%

1%

(excluding biofuels)

U.S. net energy imports continue to decline (except for liquids in the near term) reflecting increased oil and natural gas production coupled with slowly growing or falling demand


-10

0

10

20

30

1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040

U.S. net importsquadrillion Btu



Coal

Natural gas

AEO2016 Reference

No CPPLiquids

CO2 emissions are lower in AEO2016 Reference case than AEO2015 Reference Case, even without the Clean Power Plan (CPP)


energy-related carbon dioxide emissionsmillion metric tons

4,000

4,500

5,000

5,500

6,000

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040

No CPP

AEO2015 Reference

AEO2016 Reference



U.S. Electricity


Clean Power Plan accelerates shift to lower-carbon options for generation, led by growth in renewables and gas-fired generation; results are likely sensitive to CPP implementation approach


0

1

2

3

4

5

6

1990 2000 2010 2020 2030 2040 2020 2030 2040

13%

electricity net generationtrillion kilowatthours


2015History1993 2040

AEO2016 Reference No CPP

2015

1%

2040

33%

33%

13%

Nuclear

Natural gas

Coal

Renewables

15%

23%

26%

34%

1%

11%13%

19%

53%

4%16%

27%

18%

38%

20%

1%

Petroleum and other liquids

Natural gas generation falls through 2021; both gas and renewable generation surpass coal by 2030 in the Reference case, but only natural gas does so in the No CPP case


0

500

1,000

1,500

2,000

2,500

1990 2000 2010 2020 2030 2040 2020 2030 2040

AEO2016 Reference No CPP2015History 2015

Nuclear

Petroleum

Natural gas

Coal

Renewables

net electricity generationbillion kilowatthours


Lower costs and extension of renewable tax credits boost projected additions of wind and solar capacity prior to the 2022 effective date of the Clean Power Plan (CPP)


0102030405060

1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040

Coal Other Nuclear Natural Gas / Oil Wind Solar

History Projections

0102030405060

2020 2025 2030 2035 2040

No CPP

AEO2016 Reference

annual capacity additions, gigawatts


Reference case projects slightly higher levels of total capacity because of higher levels of renewable capacity


0

200

400

600

800

1,000

1,200

1,400

1990 2000 2010 2020 2030 2040 2020 2030 2040

total electric generating capacitygigawatts

Source: EIA, Annual Energy Outlook 2016Notes: prior to 2000 wind and solar data is not broken out, and is reflected in ‘Other Renewable’; Hydro includes

pumped storage

Nuclear

Natural gas/oil

Coal

Wind

2015HistoryAEO2016 Reference No CPP

2015

Other renewables

284

100

477

102

SolarHydro

215

99

570

103

128

203

176

99

576

103

149

246

Changing tax and cost assumptions contribute to stronger solar growth, with the Clean Power Plan providing a boost to renewables


0

200

400

600

800

1,000

1,200

1,400

2000 2005 2010 2015 2020 2025 2030 2035 2040 2015 2020 2025 2030 2035 2040

renewable electricity generation by fuel typebillion kilowatthours


SolarGeothermal

Biomass

Municipal waste/landfill gas

Wind

2015History

Conventional hydroelectric power

AEO2016 Reference No CPP2015

U.S. Natural Gas


Shale resources remain the dominant source of U.S. natural gas production growth


0

20

40

60

80

100

120

0

5

10

15

20

25

30

35

40

45

1990 2000 2010 2020 2030 2040

U.S. dry natural gas productiontrillion cubic feet


Tight gas

Coalbed methane

Other lower 48onshore

Shale gas andtight oil plays

AlaskaLower 48 offshore

History 2015 ProjectionsAEO2016 Reference

Natural gas consumption growth is led by electricity generation and industrial uses; natural gas use rises in all sectors except residential


0

10

20

30

40

50

60

70

80

90

100

0

5

10

15

20

25

30

35

40

2005 2015 Reference No CPP Reference No CPP Reference No CPP

U.S. dry gas consumptiontrillion cubic feet billion cubic feet per day


ProjectionsHistory

Electric powerIndustrial*Residential Transportation**

12.6

4.6

1.7

11.2

3.7

9.1

4.6

0.9

9.6

3.2

*Includes combined heat-and-power and lease, plant, and export liquefaction fuel

Commercial

12.5

4.6

1.7

12.0

3.7

20402020 2030

**Includes pipeline fuel

For more information


U.S. Energy Information Administration home page | www.eia.gov

Annual Energy Outlook | www.eia.gov/forecasts/aeo

Short-Term Energy Outlook | www.eia.gov/forecasts/steo

International Energy Outlook | www.eia.gov/forecasts/ieo

Today In Energy | www.eia.gov/todayinenergy

Monthly Energy Review | www.eia.gov/totalenergy/data/monthly

State Energy Portal | www.eia.gov/state

http://www.eia.gov/

http://www.eia.gov/forecasts/aeo

http://www.eia.gov/forecasts/steo

http://www.eia.gov/forecasts/ieo

http://www.eia.gov/todayinenergy

http://www.eia.gov/totalenergy/data/monthly

http://www.eia.gov/state

oil and natural gas: market outlook and drivers...eia expects wti oil prices to remain low compared...

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