Oil price drivers 2012 - Norges Bank · 2017. 3. 9. · 3Q 2001 1Q 2002 3Q 2002 1Q 2003 3Q 2003 1Q...
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Oil price drivers 2012 Thina Margrethe Saltvedt, Senior Analyst Macro/Oil, Nordea Markets, March 2012
Transcript of Oil price drivers 2012 - Norges Bank · 2017. 3. 9. · 3Q 2001 1Q 2002 3Q 2002 1Q 2003 3Q 2003 1Q...
Oil price drivers 2012
Thina Margrethe Saltvedt,
Senior Analyst Macro/Oil,
Nordea Markets,
March 2012
29 March, 20122
Oil price drivers Financial markets
Commercial/Non-commercials
USD
Asset prices
Liquidity injections
Risk Appetite
Short/Medium termInventory levels
OPEC goals and disipline
Weather
Refinery capacity
Income development
Long-term Supply/DemandOPEC target price and spare capacity
Non-OPEC peak production
Emerging Markets’ demand growth
Renewable energy and regulatory changes
Oil intensity
Technological changes
Illustrative – not meant to be exhaustive
Source: PIRA, Nordea Markets
Geopolitical risk
Financial markets
4
The asset channel:
Oil as an inflation hedge :
Weaker USD can increase inflationary pressure.
The PPP and cost channel:
Stronger USD makes oil more expensive for non-USD regions
Mar07
Jul Nov08
Mar Jul Nov09
Mar Jul Nov10
Mar Jul Nov11
Mar Jul Nov12Mar
2300
2700
3100
3500
3900
4300
4700
5100
5500
30
40
50
60
70
80
90
100
110
120
130
140
150 USD/barrel
QE1 QE2 Opera-tion
Twist
Brent
S&P 500
Index
WTI
Source: Reuters EcoWin
05 06 07 08 09 10 11 1220
40
60
80
100
120
140
20
40
60
80
100
120
140EUR/barrelUSD/barrel
In EUR euro, green
In USD, blue
Finanical activity can influence oil prices in the short term, but the underlying trend depends on the physical market
5 •
0%
2%
4%
6%
8%
10%
12%
20
40
60
80
100
120
140
160
14Aug07 14Aug08 14Aug09 14Aug10 14Aug11
USD
/bbl
Money managers' net positionsNYMEX WTI
WTI 1M Managed Money Net Pos. (RHS)
Supply side
Real investments are growing more slowly
Global E&P spending continues to rise by 9% in 2012 and 2013, but production costs are also increasing markedly
7 •
70
90
110
130
150
170
190
210
230
250
0
20
40
60
80
100
120
140
Nov
‐00
Jul‐0
1
Mar‐02
Nov
‐02
Jul‐0
3
Mar‐04
Nov
‐04
Jul‐0
5
Mar‐06
Nov
‐06
Jul‐0
7
Mar‐08
Nov
‐08
Jul‐0
9
Mar‐10
Nov
‐10
Jul‐1
1
Crude ICE 1‐pos Oil price byMonth Cost Index
Sources: IHSI, Bloomberg and Nordea Markets
E&P spending in USDmCrude oil price and cost index
OPEC spare capacity can quicklybecome critically low if othercountries follow up on theembargo…
8 •
0
0.5
1
1.5
2
2.5Turkey potential sanction
South Korea potentialsanctionJapan potential sanction
Yemen shut‐in
Syria sanctions
South Sudan
EU sanctions
m b/d
20
40
60
80
100
120
140
0
1
2
3
4
5
6
7
1Q 200
13Q
200
11Q
200
23Q
200
21Q
200
33Q
200
31Q
200
43Q
200
41Q
200
53Q
200
51Q
200
63Q
200
61Q
200
73Q
200
71Q
200
83Q
200
81Q
200
93Q
200
91Q
201
03Q
201
01Q
201
13Q
201
11Q
201
2Capacity…
m b/d m b/d
Sources: IEA, EIA, Ecowin and Nordea Markets
The situation can be exacerbated by further supply disruptions eg. Iraq, Nigeria, Kazakhstan
99
9
OPEC strategy: Cartel members need higher oil prices to balance their budgets,
020406080
100120140
Kuwait
Saudi
Arabia
Venez
uela
Nigeria Ira
qIra
nRus
siaAlge
ria
Averag
e
2007 2009 2011
USD/barrel
Source: PIRA and IMF
Dominant firm behavour: «It is optimal for the dominant firm to increase itsoutput substantially, but not so much as to fully offset the output collapse of the fringeso that the oil price rises in tandem with oil sales», Nakov and Nuno, ECB (2011)
10
Source: PIRA
Marginal cost of production changes over time- Peaking production in low cost areas versus new production more challangingand technological developments
North Sea
Changes in trade relations can change the politcal stabilityMiddle East export trends to Europe, China, India and Asia Pacific
11 •
0
50
100
150
2008 2009 2010
From Middle East to India in MT
0
20
40
60
80
100
120
140
2008 2009 2010
From Middle East to China in MT
0
50
100
150
2008 2009 2010
From Middle East to Europe in MT
220
225
230
235
240
2008 2009 2010
From Middle East to Other Asia Pacific in MT
North America heading towards self sufficiency
12 •
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0
2
4
6
8
10
12
14
16
18
20
North American Liquids production
2010 202020001990
100%
20%
40%
60%
80%
20
12
8
4
16
0
US impliedimports (% ofdemand)
North America implied imports (% of demand)
Source: PIRA
Changes in product demand versus refinery capacity
Source: Bloomberg, PIRA 13 •
-60
-40
-20
0
20
40
60
Jan07 Jan08 Jan09 Jan10 Jan11 Jan12
US
D/b
bl
European Oil Product Crack SpreadsSpread to Dated Brent
ULSD 10 ppm FOB Brg FO 3.5% FOB Brg
Firm, but seasonally weakerafter January
Stronger than expected due to limited supplyafter refinery closures
Oil price spike amid diesel/gasoil shortage summer 2008
Oil price spike created surplus fuel oil supply through high refinery runs and limited refinery conversion capacity
88
90
92
94
96
98
100
102
104
2010 2011 2012 2013 2014 2015 2016
m…
Demand side
Oil intensity has fallen markedly thelast 20 years
15 •
Source: IEA
0
1
2
3
4
5
6
US crude oil expenditure as a
fraction of GDP
World transportation oil demand by mode, when will we see a technological break through in the transportation sector?
16 • Source: IEA
60%
52%
Rates of subsidisation for fossil-fuel consumption subsidies, 2010
17 • Source: IEA
Obama – state of theunion: « We have a
supply of natural gas that can last America
nearly one hundredyears, and my
Administration will takeevery possible action to safely develop this
energy».
18 •
Source: Reuters EcoWin
90 92 94 96 98 00 02 04 06 08 10 120
25
50
75
100
125
150
0.0
2.5
5.0
7.5
10.0
12.5
15.0
17.5 USD per mmBtu
Natural Gas Henry Hub, lhs
WTI light sweet crude, rhs
USD per barrel
Price outlook for other energy sources relative to oil
Initial assessment of shale gas resources in 48 major shalebasins in 32 countries indicates a large potensial
19 • Source: EIA
1,069
1,225
624
1,042
1,404
396tcm
Contact details:
Thina Margrethe Saltvedt
Macro/Oil Analyst
Commodities Research
Nordea Markets
Phone: +47 22 48 79 93
Mobile: +47 90 63 40 75
20 •
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