U.S. Oil Prices Outlook January 2019

Transcription

1 U.S. Oil Prices Outlook January 219

2 Oil Prices OPEC+ decision to reduce output prevented prices from declining further The expiration of import waivers of Iranian oil could have a positive effect on prices U.S. production is expected to remain robust through the year Demand is projected to slow down as global economic growth weakens Prices could move between $6 and $7 in 219, but may decelerate further in 22 We maintain our forecasts of convergence to long-term equilibrium around $6/b Elevated uncertainty around long-term equilibrium: CAPEX, protectionism, alternative energy sources, EM convergence, EVs, climate change, efficiency and technology

3 BBVA Research U.S. Oil Prices Outlook January 219 / 3 Oil prices increased after OPEC+ committed to curtail production and markets perceived some progress in the U.S.-China trade negotiations Crude oil prices August 218 to January 219 ($ per barrel) August 6 First set of U.S. sanctions against Iran come back into full effect September 25 India may cut imports of Iranian oil to zero in November September 23 OPEC and allies agree not to further increase oil production November 2 U.S. issue waivers to Iran s oil buyers October 8-12 Stock market chaos. Concerns on weaker demand emerge November 12 OPEC lowers oil demand growth forecasts and anticipates oversupply December 6 OPEC hints a lower than expected cut December 7 OPEC+ decide to cut output by 1.2 Mb/d November 6 EIA expects U.S. crude oil production to surpass 12 million b/d by 219 Jan 2 China post slowest economic growth Jan 4-19 since 199 U.S China trade talks, expectation of OPEC+ cuts 4 Aug Sep Oct Nov Dec Jan WTI Brent Source: BBVA Research and Haver Analytics

4 Mar-17 May-17 Jul-17 Sep-17 Nov-17 Jan-18 Mar-18 May-18 Jul-18 Sep-18 Nov-18 Jan-19 Mar-19 May-19 BBVA Research U.S. Oil Prices Outlook January 219 / 4 OPEC+ adjustments have yet to fully materialize. The expiration of waivers to importers of Iranian oil would tighten supply even further Crude oil production (Million barrels per day) Iran: exports of crude oil (million barrels per day) Wellhead Production: Non OPEC: Russia (Ths b/d) Wellhead Production: OPEC: Saudi Arabia (Ths b/d) Other China India Turkey South Korea Japan Europe Source: BBVA Research, Haver Analytics, and Bloomberg

5 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 Jan-18 Mar-18 May-18 Jul-18 Sep-18 Nov-18 Jan-19 BBVA Research U.S. Oil Prices Outlook January 219 / 5 In the meantime, U.S. production will remain solid. Transportation bottlenecks may ease in 219 U.S. Crude oil inventories (Excluding SPR, million barrels) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec WTI Midland-Cushing differential ($/b) U.S. Real private investment in E&P (yoy $billion ) Average 5-yr high 5-yr low WTI (lhs) Investment (rhs) U.S. Estimated crude oil production (Thousand barrels/day) Source: BBVA Research and Haver Analytics

6 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 Sep-8 Mar-9 Sep-9 Mar-1 Sep-1 Mar-11 Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 Mar-18 Sep-18 BBVA Research U.S. Oil Prices Outlook January 219 / 6 Demand supported by China, India and the U.S. Oil product demand: total world (Thousand barrels per day, yoy change) Oil product demand (Million barrels per day) non-oecd OECD (rhs) - -1 Western Europe United States China India Total World (rhs) China: imports and production of crude oil (Million metric tons SA, and million b/d) Sharp increase induced by Iranian sanctions and expiration of small refineries import quotas Source: BBVA Research and Haver Analytics Production (lhs) Imports (rhs)

7 BBVA Research U.S. Oil Prices Outlook January 219 / 7 A weaker economic outlook points to slower demand growth Oil product demand (YoY change, million b/d) Oil product demand (million b/d) BBVA Research forecasts Average Actual BBVA Research forecasts Source: BBVA Research Source: BBVA Research

8 BBVA Research U.S. Oil Prices Outlook January 219 / 8 Short-term risks are now tilted to the downside >= $65/b* < $65/b* OPEC+ expands output deal to 2H19 Oil waivers to importers of Iranian oil expire and are not renewed Additional negative supply shocks (e.g. Venezuela, Libya, Nigeria) Consistent signs of progress in trade negotiations between the U.S. and China Milder-than-expected deceleration of global demand Takeaway issues preventing U.S. crude to reach global markets Weaker global economic outlook Persistent deadlock in trade talks between U.S. and China Dollar appreciation President Trump s pressure on OPEC Limited enforcement of Iranian sanctions Higher-than-expected crude oil production in the U.S. *Brent crude prices. Source: BBVA Research

9 $USD/bbl BBVA Research U.S. Oil Prices Outlook January 219 / 9 Prices could move between $6/b and $7/b in 219, but may decelerate further in 22. We maintain our forecasts of convergence to long-term equilibrium around $6/b Brent Futures ($ per barrel) Brent prices forecast ($ per barrel) BBVA Research (baseline) Bloomberg Survey (as of Jan 21) EIA (STEO, Jan 15) Months Ahead Source: BBVA Research and Bloomberg 1/24/19 1 month ago 3 months ago 6 months ago BBVA Research Bloomberg Survey (as of Jan 21) EIA STEO (as of Jan 15) Actual

10 U.S. Oil Prices Outlook January 219