OIL MARKET DEVELOPMENTS & BREXIT

Transcription

1 OIL MARKET DEVELOPMENTS & BREXIT London Thursday 22 nd September 2016 Oil Markets: Where Next? Christof Rühl Global Head of Research

2 Content Oil and the economy: Recap Why did lower oil prices not support economic growth? What does it mean for oil markets? 2

3 Secular Stagnation? Real GDP growth 10-year moving average in percent Yield Real return on 10-year Government bonds 10 US UK 8% US 8 Japan France Italy Germany 6% Germany Japan 6 4% 4 2 2% 0 0% Source: The World Bank -2% 1983 '87 '91 '95 '99 '03 '07 ' Source: Datastream 3

4 Central bank assets and global growth projections Central bank assets Revisions to 5-year GDP growth forecast Trillion US dollars Percent 12 BOJ ECB FED 9 Apr-13 Apr pp pp pp China Emerging World Source: Bloomberg 4 Source: IMF WEO

5 Crude oil prices Weekly oil price Daily oil price and term structure $/bbl $/bbl $/bbl 140 Dated Brent M Dated Brent (rhs) Dated Brent Contango Jan-00 Jun-05 Nov-10 Apr-16 Source: Bloomberg Backwardation 20 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 5 Source: Bloomberg

6 Where is the shot in the arm? Oil price decline Revisions to 2016 GDP growth projections US dollars per barrel 120 July Dated Brent GDP growth 5% Jan-15 Jul-15 Jan-16 Jul-16 4% 3% 2% 1% 20 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Source: Bloomberg 0% Source: IMF World US Advanced economies Emerging economies 6

7 Content Oil and the economy: Recap Why did lower oil prices not support economic growth? What does it mean for oil markets? 7

8 (1) US Dollar is appreciating Real trade weighted US Dollar index Index, Jan 1990 = rises for good reasons 15% real appreciation since July 2014 (20% since July 2011): Relatively strong US growth and productivity gains The end of QE in the US Jan-90 Jan-95 Jan-00 Jan-05 Jan-10 Jan-15 Source: Bloomberg 8

9 (2) Households are deleveraging Household debt as a share of GDP US Euro area 1Q 2008 = 97.9% Change in household debt since peak: percentage points 70 4Q 2009 = 63.6% 60-7 percentage points Q 99 1Q 01 1Q 03 1Q 05 1Q 07 1Q 09 1Q 11 1Q 13 1Q 15 9

10 (3) Structural change: Importers are becoming producers Share of local consumption produced at home 90% US Brazil 80% Decline in imports since 1995: Kb/d 70% - 2,710 Kb/d 60% 50% 40% 30% Source: BP Statistical Review of World Energy 10

11 (4) The long decline of oil intensity Barrels of oil per $1,000 of GDP OECD Decline since 1979: - 42% - 48% - 58% 0.2 Non-OECD World Source: BP Statistical Review of World Energy 11

12 Content Oil and the economy: Recap Why did lower oil prices not support economic growth? What does it mean for oil markets? 12

13 (1) US shale production is resilient Million barrels per day Dollars per barrel Total US crude production US onshore crude production WTI price (rhs) Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Jan-16 May-16 Source: EIA 20 13

14 US shale break-even crude prices US dollars per barrel Average 2016 WTI price so far: $41 per barrel Source: Rystad Energy Eagle Ford Bakken Permian (Delaware) Permian (Midland) Niobrara 14

15 (2) Global market shares not settled OPEC (crude & NGLs) Selected countries (crude and NGLs) Market share 47% Market share November % November % 14% 45% 13% 44% 12% 43% 11% 42% 41% 40% Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Source: IEA 10% Russia 9% Saudi Arabia US 8% Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Source: IEA 15

16 (3) Inventories at historic record OECD inventories Million barrels of crude oil and oil products 3,150 3,050 2, Range Average ,850 2,750 2,650 2,550 Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Source: EIA 16

17 Will demand growth balance the market? European and US demand growth OECD and Non-OECD demand growth Million barrels per day (Mb/d) 0.4 Europe 0.3 US Million barrels per day (Mb/d) OECD Non-OECD 1.6 Mb/d Global growth 1.1 Mb/d 1.5 Mb/d -0.4 Average H Average H 2016 Source: IEA Source: IEA 17

18 Cumulative supply growth since 2Q 2014 Key OPEC producers Thousand barrels per day (kb/d) North American producers Thousand barrels per day (kb/d) 3,000 Iran Iraq 3,000 Canada 2,500 2,000 UAE Venezuela Net change KSA Nigeria 2,500 2,000 US Mexico Net change 1,500 1,500 1,000 1, (500) (500) (1,000) 3Q Q Q Q Q Q Q Q 2016 (1,000) 3Q Q Q Q Q Q Q Q 2016 Source: IEA Source: IEA 18

19 Global supply and demand Incremental global supply and demand growth since 2Q 2014 Thousand barrels per day (kb/d) 4,500 4,000 3,500 3,000 2,500 ~400 kb/d 2,000 1,500 1, (500) Source: IEA North America Other FSU OPEC Global demand growth 3Q Q Q Q Q Q Q Q

20 Conclusion Boost to demand unlikely Price ceiling restricts room for intervention ( freeze ) Meaningful intervention unlikely Effect of Capex cuts will support prices eventually 20