Energy Outlook. Kurt Barrow Vice President, Oil Markets, Midstream and Downstream Insights, IHS Markit

Transcription

1 Energy Outlook Kurt Barrow Vice President, Oil Markets, Midstream and Downstream Insights, IHS Markit Building a Foundation for Profitable Growth in Uncertain Markets

2 Agenda Short-term oil markets rebalancing US natural gas Longer-term feedstocks and oil demand view

3 Short-term oil market drivers and uncertainty US tight oil restart Demand OPEC supply cuts Oil market balance Oil inventories Price

4 Million barrels per day OPEC/non-OPEC production cut has been effective, for now Change in OPEC crude oil production from January Feb- 16 Mar- 16 Apr- 16 May- 16 Jun- 16 Jul- 16 Aug- 16 Sep- 16 Oct- 16 Nov- 16 Dec- 16 Jan- 17 Feb- 17 Mar- 17 Apr- 17 May- 17 Jun- 17 Source: IHS Markit Notes: Production data behind the February-June 2017 data points are outlooks.

5 Rig count OPEC action spurred higher prices paving the way for resumption of US crude supply growth US horizontal oil rig count by play 1, Rig count doubled since May Feb-11 Feb-12 Feb-13 Feb-14 Feb-15 Feb-16 Feb-17 Other Bakken Permian Eagle Ford Niobrara Source: Baker Hughes, IHS Markit

6 Million barrels per day US oil supply is set to push higher even with oil prices in the $50s Monthly US crude oil production Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Source: IHS Markit, EIA History Outlook

7 Million barrels per day Higher production coming from several non-opec sources besides US Annual change in crude oil production for selected non-opec countries, Source: IHS Markit

8 Million barrels per day Global crude oil supply to return to growth in 2017 led by non-opec Annual change in crude oil production Source: IHS Markit OPEC United States Rest of non-opec

9 Index level (2000 = 100) Lower costs are aiding supply (at lower prices) IHS Upstream Capital Costs Index and Upstream Operating Costs Index Source: IHS Markit UCCI Some savings achieved from doing things better, faster, smarter will stick UOCI Notes: Historical data are through 2016; outlook is from 2017 on.

10 Changes in oil (liquids) demand by region (volume change from previous year in million barrels per day) North America Global oil demand growth (MMb/d) 0.21 OECD Non-OECD Total world Notes: Mexico is included in Latin America. *OECD Asia Pacific annual changes are about zero in Data in table may not add up due to rounding. Source: IHS Markit Latin America Europe 0.04 Middle East Africa Eurasia India OECD Asia Pacific 0.04 China Non-OECD Asia ex. China & India

11 Thousand barrels per day % NGLs of total liquids demand growth NGL demand growth is augmenting the total liquids demand Global liquids demand growth by type 2,000 40% 1,500 30% 1,000 20% % Source: IHS Markit 0 0% Total Liquids Implied Refined Product NGLs % NGLs

12 Million barrels per day Tenuous balance appears to have formed for next few years Global liquids supply supply and demand to demand 2021 to Market shift to deficit Market surplus Source: IHS Markit Global liquids supply Global liquids demand

13 Million barrels Oil inventories remain high, but edged down in second half of 2016 OECD total oil industry stocks 3,200 3,100 3,000 2,900 2,800 2,700 2,600 2,500 January March May July September November Note: Oil stocks include crude, refined product, NGL, and feedstocks. Source: International Energy Agency, IHS Markit

14 Million barrels per day The global spare capacity cushion remains thin Global indicative spare crude oil production capacity Source: IHS Markit

15 Quarterly avg price / barrel A tenuously balanced oil market will react and overreact to US tight oil and OPEC data Dated Brent and other benchmark crude price outlook to 2018 $120 $100 $80 $60 $40 $20 $0 1Q13 3Q13 1Q14 3Q14 1Q15 3Q15 1Q16 3Q16 1Q17 3Q17 1Q18 3Q18 Notes: LLS = Louisiana Light Sweet. WTI = West Texas Intermediate. Source: IHS Markit, Argus Media Limited (historical) Dated Brent LLS WTI 2016 IHS 2017 IHS

16 Agenda Short-term oil markets rebalancing US natural gas Longer-term feedstocks and oil demand view

17 Average break-even Henry Hub price ($/MMBtu) North American natural gas supply is huge and low cost Break-even price at Henry Hub for natural gas resources Source: IHS Markit Demand to ,400 Tcf $4/MMBtu Demand to ,000 Tcf 1,500 2,000

18 Agenda Short-term oil markets rebalancing US natural gas Longer-term feedstocks and oil demand view

19 Two IHS scenarios describe mobility developments through 2040 Evolving competition New rivals and technologies erode market share Scale, complexity, and inertia moderate pace of change Personal car use remains dominant driver Mobility revolution Driverless electric cars (DECs) transform mobility and logistics DECs accelerate EV adoption Fleet economics have strong influence on car buying decisions Safety, congestion & poor air quality accelerate revolution

20 High-level findings on mobility Driverless technology key to revolutionary change National and local factors affect incentives, hurdles and pace of change Mobility as a Service expands and reinforces mobility changes Fewer cars, smaller cars, driving more miles, consuming less fuel/energy Multifaceted impact on auto, oil and chemical industries

21 Change in decade, Million b/d More demand for petrochem feedstock means more naphtha diverted from gasoline manufacturing Change in global refinery production of petchem naphtha plus gasoline Gasoline Heavy Naphtha Light Naphtha Source: IHS Markit Notes: Light & heavy naphtha production from refining complex to petrochemicals

22 Energy outlook key messages Oil markets in tenuous balance expect price swings US tight oil growing again; OPEC restraint through 2017 doubtful Mobility will evolve and tipping point changes possible Longer-term oil downstream more closely tied to petchem feedstocks