Post on 28-Jul-2020
U.S. Energy Outlook Bright in 2018
Mine YücelSenior Vice President and Research Advisor
Federal Reserve Bank of Dallas
February 21, 2018
Energy Market Overview
• Global oil market• Oil prices between $45 - $55 in 2017. Moved up in 2018• US oil production on track to a record high in 2018• OPEC and friends keeping a lid on production• Robust global growth should boost oil demand
• Natural Gas• Natural gas market increasingly global• US natural gas production a record every year since 2007
Global Oil Balance
SOURCE: Energy Information Administration.
-2
-1
0
1
2
3
4
5
6
88
90
92
94
96
98
100
102
104
2013 2014 2015 2016 2017 2018 2019 2020
Implied stock change and balance
Production
Consumption
Million barrels per day Million barrels per day
OPEC and Non-OPEC Cuts
NOTE: Estimates come from the International Energy Agency’s Feb 2018 Oil Market Report.mb/d: million barrels per day SOURCE: International Energy Agency.
Country/group Agreed cut (mb/d) January actual cut(mb/d)
January percent compliance (est.)
Saudi Arabia -0.49 -0.56 116
Other OPEC -0.69 -1.05 152
Russia -0.30 -0.27 88
Other non-OPEC -0.25 -0.21 85
TOTAL -1.72 -2.09 121
Crude oil inventories remain high
NOTE: Square marks use latest weekly data as of 2/7/2018.SOURCE: Energy Information Administration.
300
350
400
450
500
550
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2010-2014 range 2010-2014 average 2017Million barrels
Jan418
U.S. production up strongly
SOURCES: Baker Hughes; Energy Information Administration.
100
300
500
700
900
1,100
1,300
1,500
1,700
3.5
4.5
5.5
6.5
7.5
8.5
9.5
10.5
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Million barrels per day Rig count
U.S. crude oil production
U.S. oil rig count10.03 mb/d
(Nov)
791(Feb)
Natural gas prices low
SOURCE: The Wall Street Journal.
0
2
4
6
8
10
12
14
16
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
Nominal price, weekly
$2.72
Natural gas production a record every year
SOURCE: Energy Information Administration.
0
10
20
30
40
50
60
70
80
90
1990 1995 2000 2005 2010 2015 2020
US Total
Marcellus (PA, OH, WV)
Texas
Billion cubic feet per day
Global Oil and Gas Production
Crude Oil (mb/d)• World 80.48• Russia 10.95• U.S. 10.03• Saudi Arabia 9.98• Iraq 4.49• Texas* 3.97• Iran 3.81• China 3.71• Canada 3.06• U.A.E. 2.85• Kuwait 2.70
Natural Gas (bcf/d)• World 386.18• U.S. 83.16• Russia 73.38• Qatar 22.33• Texas 19.58• Canada 18.29• Pennsylvania 15.65• China 15.62• Iran 15.50• Norway 12.83• Saudi Arabia 8.33
(Jan. 2018) (Nov. 2017)
*Estimate based on January weekly data.SOURCES: Energy Information Administration; International Energy Agency; Oil and Gas Journal.
Impact on the Economy
Impact on U.S. economy
• The U.S. benefits from lower oil prices• Low prices boost consumer disposable income• Reduces the cost of energy to firms• Reduces profitability of producing oil
• Layoffs, capex declines and bankruptcies in oil patch
• Timing of impact on economy may be asymmetric
Why didn’t low oil prices have a larger positive effect on the economy?
• Oil price changes have asymmetric effects on the economy
• Increases in oil prices impact the economy more than oil price declines
• Oil price increase: Σ (negative reallocation effects + negative price effects)
• Oil price decline: Σ (negative reallocation effects + positive price effects)
Oil investment bounces back
SOURCES: Baker Hughes; Bureau of Economic Analysis.
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2,200
0
20
40
60
80
100
120
140
160
2006 2008 2010 2012 2014 2016 2018
Billlions of chained 2009 dollars Rig count
Investment in mining/exploration
U.S. rig countOPEC decision
Low oil prices benefit most states(Effect of a 50% decline in oil prices on employment)
SOURCE: “The Shale Gas and Tight Oil Boom: U.S. States’ Economic Gains and Vulnerabilities,” by Stephen P.A. Brown and Mine K. Yücel, Council on Foreign Relations, Energy Brief, Oct. 2013.
-2.0
-4.3
-2.3-0.7
-1.2 -1.6
-1.7
-0.7
Current State of Oil & Gas Industry
Drilling concentrates on focus areas
NOTE: Change in active rig count from May 27, 2016, to January 26, 2018.SOURCE: Baker Hughes.
Permian most prolific shale basin
SOURCE: Energy Information Administration.
0
1
2
3
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
PermianEagle FordBakken
Total oil production, million barrels per day
Texas oil production continues to rise
SOURCES: Baker Hughes; Energy Information Administration; Oil and Gas Journal.
100
200
300
400
500
600
700
800
900
1000
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
2010 2011 2012 2013 2014 2015 2016 2017 2018
Million barrels per day Rig count
3.97 mb/d(Jan)
Texas total rig count
Texas crude oil production
479(Feb. 9)
Well completions rise in the Permian
SOURCE: Energy Information Administration.
0
5
10
15
20
25
2014 2015 2016 2017 2018
Permian
Eagle Ford
Bakken
Completed wells per day
Breakeven prices for new wells
Federal Reserve Bank of Dallas
Permian (Midland)
SCOOP/STACK
Eagle Ford
Permian (Delaware)
Permian (Central
Platform)
Other U.S. (non-shale)
Other U.S. (shale)
$46 $47 $48 $48 $50$53
$55
0
10
20
30
40
50
60
70
80
90
100Dollars per barrel
13 8 4 10 13 40 8Number of responses
NOTES: Line shows the mean, and bars show the range of responses; 62 E&P firms answered this question from March 15-23, 2017.SOURCE: Federal Reserve Bank of Dallas.
Oil and Natural Gas Exports
U.S. crude exports surge after lifting of export ban
SOURCE: Energy Information Administration.
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020
Crude oil exports
Million barrels per day
U.S. Crude Imports and Exports
SOURCE: Energy Information Administration.
0.0
2.0
4.0
6.0
8.0
10.0
12.0
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
Crude oil imports
Crude oil exports
Million barrels per day, 3MMA
Imports by API Gravity
SOURCE: Energy Information Administration.
0
10
20
30
40
50
60
70
80
1990 1995 2000 2005 2010 2015 2020
25 degrees and lower
30.1 degrees and higher
Percent, 3MMA
U.S. Total Product Imports and Exports
SOURCE: Energy Information Administration.
0
1
2
3
4
5
6
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
Petroleum products exports
Petroleum products imports
Million barrels per day, 3MMA
Bulk of U.S. natural gas exports go to Canada and Mexico
0
1
2
3
4
5
6
7
8
9
2005 2007 2009 2011 2013 2015 2017 2019
Total ExportsExports to CanadaExports to Mexico
Billion cubic feet per day, SA 3MMA
NOTES: Exports to Mexico comprises pipeline and LNG exports; exports to Canada comprises pipeline, LNG and CNG exports. SOURCE: Energy Information Administration.
U.S. natural gas imports mostly by pipeline
0
2
4
6
8
10
12
14
16
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
Total imports
Pipeline imports
LNG imports
Billion cubic feet per day, 3MMA
SOURCE: Energy Information Administration.
U.S. LNG exports rising
0
1
2
3
4
5
6
7
8
9
10
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
Total Exports
Pipeline exports
LNG exports
Billion cubic feet per day, 3MMA
SOURCE: Energy Information Administration.
Outlook
Business activity picks up in Q4 2017 Dallas Fed Energy Survey
SOURCE: Federal Reserve Bank of Dallas.
-42.1
13.8
26.7
40.1 41.837.3
27.3
38.1
0
10
20
30
40
50
60
70
80
90
100
-50
-40
-30
-20
-10
0
10
20
30
40
50
2016:Q1 2016:Q2 2016:Q3 2016:Q4 2017:Q1 2017:Q2 2017:Q3 2017:Q4
IncreaseNo changeDecreaseDiffusion index
Index Percent
Crude Price Forecasts
NOTE: Prices as of 2/9/2018.SOURCES: Bloomberg; Energy Information Administration.
20
40
60
80
100
120
2014 2015 2016 2017 2018 2019 2020
Historical spot priceSTEO price forecastNYMEX futures price95% NYMEX futures confidence interval
WTI crude oil, dollars per barrel
Outlook
• Uncertainty abounds• Market and contacts expect oil prices in the $50 –
$60 range in 2018.• Downside risks: higher shale growth, break-up of OPEC
agreement, output growth in Libya, Brazil• Upside risks: global growth, Iran sanctions, Middle East
geopolitics, faster decline in Venezuela
• U.S. exports of crude oil, oil products and natural gas rising.
• U.S. a major player in both oil and gas markets.
U.S. Energy Outlook Bright in 2018
Mine YücelSenior Vice President and Research Advisor
Federal Reserve Bank of Dallas