OIL SUPPLY - PTT PRISM
Transcript of OIL SUPPLY - PTT PRISM
OIL SUPPLY
AGENDA
CHAPTER ONE
BATTLEBARREL
CHAPTER TWO
OIL WAR
CHAPTER THREE
OUTLOOK
OIL SUPPLY
AGENDA
CHAPTER ONE
BATTLEBARREL
CHAPTER ONE
BATTLE FOR MARKET SHARE
Source: Investopedia, CIA World Fact Book
Oil &Gas42%
Oil & Gas30% Country’s
GDP
Economic DiversificationDiversify & invest in education,
science and technology
Rely heavily on Oil & Gas, but want to diversify
Saudi Arabia
11%Market Share
16%Market Share
Russia
Country’s GDP
CHAPTER ONE
NEW MAJOR OIL SUPPLY INFLUENCER
0
40
80
120
160
2010 2012 2014 2016 2018 2020
Unit: USD/BBL
OPEC (SAUDI)
& RUSSIA IN CONTROL
U.S. SHALE
Ruins the status quo, more supply, leads to price war
40USD/BBL
Source: BP Statistical Review
CHAPTER ONE
UNEXPECTED OIL SUPPLY
• Advanced Tech. • Costs typically higher, but
improved via:• Economies of scale• Govt. policy support
CONVENTIONAL WAY:
VERTICAL DRILLING HORIZONTAL DRILLING& FRACTURING
SHALE WAY:
U.S. oil industry found new hope in Shale
• Conventional Tech.• Costs vary greatly
• Onshore• Offshore & Deepwater
Shale rocks Previously thought to have no production
potential
Source: James Scherrer
CHAPTER ONE
U.S. SHALE RISES
The U.S., from importer to exporter
2014 2015 2016 2017 2018 2019
U.S.
Saudi Arabia
Russia
U.S. Shale becomes quicker to drill and cheaper
as production rises
Source: IHS Markit
CHAPTER ONE
MAINTAINING SUPPLY LEADERSHIP
OPEC+
To compete with U.S. Shale & remain top exporter
Once enemies, now allies
Jan 16 Jul 16 Jan 17 Jul 17
50-55 USD/BBL
35 USD/BBL
To balance the market
Source: BP Statistical Review
OIL SUPPLY
AGENDA
CHAPTER TWO
OIL WAR
CHAPTER TWO
COVID-19 PILES ON THE PRESSURE
Early 2020,COVID-19 Crashes demand, starting from China
Saudi Arabia • Yes more cuts
• Wants to balance market
Russia• No more cuts• Wants market share
OPEC+ failed to agree to any further cuts
CHAPTER TWO
CARTEL VS. FREE MARKETFree market companies act independently
“U.S. kept producing until storage full”
The lowest WTI ever on 20th April 2020
-37.6 USD/BBLOnly shut-in wells if they are
no longer making money
“U.S. Shale is a free market”
CHAPTER TWO
THE OIL WAR BEGINS
Demand-Supply Gap
Supplies remain high, inventories overflow, price collapses
Unit: USD/BBL
Jan 20 Feb 20 Mar 20 Apr 20
Unit: MBD Crude Price
-4
-7
-11
-21
Source: IHS Markit
CHAPTER TWO
HISTORIC DEAL TO END THE OIL WAR
Source: CNBC
Once enemies, now allies again
“Producers joinedforces to fight disaster”
• Budget deficits
• Job cutsPrice rises to 34-45 USD/BBL
May-July ‘20
Aug-Dec’20
2021
7.75.8
9.7
“Severe impacts from very low prices”
• Higher debts
• Bankruptcies
CHAPTER TWO
RESERVES SITUATION
“…we’re confident that there are around 50 years of oil left..”
- HSBC, 2011
“…~50 Years of oil left…”
- BP, 2020
Lower production and refinery runs help prolonging supply life even further
OIL SUPPLY
AGENDA
CHAPTER THREE
OUTLOOK
OPEC+ attempts to balance market but faces potential issues
CHAPTER THREE
POTENTIAL SUPPLY GROWTH IN 2021
Supply WatchlistCompliance Concern
Russia
Nigeria
Iran & Venezuela“Sanction”
Libya“Civil War”
Non-OPEC“Revival”
U.A.E.
Iraq
CHAPTER THREE
2021 OIL MARKET BALANCEGlobal Supply and Demand Changes
Demand(MBD)
Supply(MBD)
Balance(Demand – Supply)
Base Case
45-55 USD/BBL+3.5
• COVID-19 under control• Good economic recovery
• Good compliance rate• Moderate growth from
“Supply Watchlist”
+5.3
+1.8
Low Case
• COVID-19 persists• Poor economic recovery+1.3
+5.7• Poor compliance rate• Significant growth from
“Supply Watchlist”
-4.4 35-45 USD/BBL
Price Forecast : Price Forecast :
Source: IHS Markit, PRISM
OIL SUPPLY