19606750 jp morgan oil gas basics
TRANSCRIPT
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O C T O B E R 2 0 0 6
O I L & G A S B A S I C S
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Katherine Spector(1-212) 834-2031
Scott Speaker(1-212) 834-3878
Kristi Jones(1-212) 834-2835
Sung Yoo(1-212) 834-7045
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Oil & Gas Basics_20061020_book
This presentation was prepared exclusively for the benefit and internal use of the client in order to indicate, on a preliminary basis, the feasibility of a possible transaction or transactions and does not carry any right of publication or disclosure to any other party. This presentation is incomplete without reference to, and should be viewed solely in conjunction with, the oral briefing provided by JPMorgan. Neither this presentation nor any of its contents may be used for any other purpose without the prior written consent of JPMorgan.
The information in this presentation is based upon management forecasts and reflects prevailing conditions and our views as of this date, all of which are subject to change. In preparing this presentation, we have relied upon and assumed, without independent verification, the accuracy and completeness of all information available from public sources or which was provided to us by or on behalf of the client or which was otherwise reviewed by us. In addition, our analyses are not and do not purport to be appraisals of the assets, stock, or business of the client. The information in this presentation does not take into account the effects of a possible transaction or transactions involving an actual or potential change of control, which may have significant valuation and other effects.
JPMorgan is a marketing name for investment banking businesses of J.P. Morgan Chase & Co. and its subsidiaries worldwide. Securities, syndicated loan arranging, financial advisory and other investment banking activities are performed by J.P. Morgan Securities Inc. and its securities affiliates, and lending, derivatives and other commercial banking activities are performed by JPMorgan Chase Bank and its banking affiliates. JPMorgan deal team members may be employees of any of the foregoing entities.
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Volatility of Various MarketsVolatility of Various Markets
Energy is significantly more volatile than other markets
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Power EUR GLD CL NG HO SPX 10-yr T bills
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Agenda
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References, Websites and Data Releases to Watch
Natural Gas Specifics
Whats the Story This Year?
The Big Picture: Macro Oil Fundamentals
Oil Specifics
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From the well to the tank. . .
Source: JPMorgan Energy Strategy
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Market drivers to watch
Macro economy Sectoral trends are growth sector
energy intensive?
Power generation trends what kind of fuel does new generation use?
Transportation trends number and type of cars sold?
Tax and subsidy regimes distort price signals to consumers and affect their consumption behavior
Weather, seasonality winter heating demand, summer cooling demand, holidays, vacation and travel trends
Non-oil fuel markets, substitution (e.g. gas, coal, hydro, nuclear)
Misc events e.g. SARS, Sep. 11
Upstream investment capacity additions? Cost? Location? Type of crude?
Natural decline rates Field age, field maintenance, geological makeup
Geopolitics (e.g. Iran, Nigeria)
Field maintenance, unplanned outages
Weather (e.g. hurricanes)
OPEC decisions and politics internal politics, spare capacity, relationships with consumer countries
Level relative to long term trend and normal seasonality
Level relative to demand
Regional distribution
Levels at transit points
Crude versus refined product levels
Oil DemandOil Demand Oil SupplyOil Supply Oil InventoriesOil Inventories
Deals associated with mergers/acquisitions
Speculative flows
Tanker supply/demand/rates
Seaborne disruptions weather, traffic, accidents
Port capacity, availability
Pipeline capacity/nominations
Refinery capacity/investment
Planned outages, unplanned outages
Refining economics, run rates
Refined product yields
OtherOther DistributionDistribution Oil RefiningOil Refining
Source: JPMorgan Energy Strategy
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Price relationships to watch. . .and what JPMorgan trades
Time spreads e.g. Q1 vs. Q3; winter vs. summer, Cal 05
vs. Cal 06
Regional spreads e.g. NYMEX West Texas Intermediate vs.
IPE Brent, NY Harbor gasoline vs. US Gulf gasoline
Crude vs. refined product spreads Cracks (e.g. crude-gasoline;
crude-heating oil) Refinery margins
Crude grade differentials (physical trade only) e.g. West Texas Intermediate vs.
West Texas Sour; Bonny Light vs. Brent
Product vs. product spreads e.g. gasoline-heating oil
Interfuel spreads e.g. natural gas-heating oil
Oil Crude
WTI Brent Tapis Dubai
Refined productsUS market: NYMEX heating oil US Gulf Coast heating oil US Gulf Coast jet fuel NYMEX gasolineEuropean market: IPE gasoil Gasoil 0.2% CIF NWE Jet fuel cargoes CIF NWE EN590 cargoes CIF NWE 1% and 3.5% fuel oil cargoes FOB NWEAsian market: Singapore jet fuel
Natural Gas: NYMEX natural gas European natural gas priced as oil-referenced
formula
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Source: JPMorgan Energy Strategy
How oil (gas) trades
Formal Exchanges
Intl Petroleum Exchange(London)
Brent Crude
1 lot = 1,000 bbl
Gas Oil
1 lot = 100 tonnes = 750 bbl
NY Mercantile Exchange
West Texas Intermediate(Light, Sweet) Crude
1 lot = 1,000 bbl
Heating Oil
1 lot = 42,000 gallons = 1,000 bbl
Unleaded Gasoline
1 lot = 42,000 gallons = 1,000 bbl
Henry Hub Natural Gas
1 lot = 10,000 MMBtu
Over-the-Counter
Swaps/Options
Variety Of RegionalBenchmark Crudes and Refined Products. . .
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Major global crude benchmarks and oil market centers
Dubai
London (IPE)Dated Brent
Urals
WTINew York (NYMEX)
TapisSingapore
Oman
Source: JPMorgan Energy Strategy
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Risk exposure and management strategies
Production
Consumption
Source: JPMorgan Energy Strategy
Exposure Type Risk Management Strategy
Price of crude
Cost of transportation, insurance, duty/tariff
Cost of carry (time value of money), time spread
Refinery margins
Refined product price
Locational/basis risk
Retail margins
Producer hedging: swaps or put options
Freight hedging
Hedging with time spreads
Hedging cracks (spread between crude and refined products) or full margins
Consumer hedging: swaps or call options
Hedging product product risk, or regional risk
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Conventions of the oil market
Commodity Lot Size Quote Unit
Crude (global) 1,000 barrels US$/barrel
Gasoline (US) 42,000 gallons cents/gallon
Heating oil (US) 42,000 gallons cents/gallon
Gas oil (Europe) 100 metric tons US$/metric ton
Jet fuel (Europe) 100 metric tons US$/metric ton
Natural gas (US) 10,000 MMBtu US$/MMBtu
BenchmarksBenchmarks
Barges: 1,000 - 5,000 MT (2 - 8 days loading) Cargoes: 10,000 - 25,000 MT (15 days loading)
ParcelParcel
Delivery specifications are factored into the cost of products. For example Free on Board (FOB) Cost Insurance Freight (CIF)
In the US, products may be priced as pipe, barge, or waterborne based on delivery method
Delivery MethodsDelivery Methods
Europe: Amsterdam-Rotterdam-Antwerp; Arab Gulf; Mediterranean; North West Europe; Rotterdam. United States: New York Harbour; Los Angeles; San Francisco; US Gulf Coast; Midcontinent; West Coast. Singapore
Main LocationsMain Locations
Source: JPMorgan Energy Strategy
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For example. . .
What is the price of spot fuel oil relative to crude?
What region? Europe.
Rotterdam or Med? Med.
What sulphur content? 1%.
CIF or FOB? CIF.
Barge or cargo? Cargo. $239/tonne
Compare to what crude? Urals.
36.60 x $1.34 - $239 x 1 tonne = $13.16/bbl
1 bbl Urals 1 1 tonne FO 6.66 bbl
Extensions of this idea? Look at the forward spreads; look at the spread to the US or Asian fuel cracks
Source: JPMorgan Energy Strategy
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Backwardation vs. contango
Backwardation vs. Contango CurvesBackwardation vs. Contango Curves
$4.70
$4.80
$4.90
$5.00
$5.10
$5.20
$5.30
M01 M05 M09 M13 M17 M21 M25 M29 M33
In US$/bbl
contango curve
backwardation curve
Source: JPMorgan Energy Strategy
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More backwardation than contango
Contango vs. BackwardationContango vs. Backwardation The oil curve shifts regularly between backwardation and contango
Historically, oil has spent more time in backwardation than contango
Backwardation has been steeper than periods of contango
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$(11) $(9) $(7) $(5) $(3) $(1) $1 $3 $5 $7 $9 $11
N ote: M02M 13 in U S$/bblSource: JPM organ Energy Strategy
Contango Backwardation
Number of instances
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Agenda
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References, Websites and Data Releases to Watch
Natural Gas Specifics
Whats the Story This Year?
The Big Picture: Macro Oil Fundamentals
Oil Specifics
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How is crude oil related to other oils, like gasoline and heating oil?
Crude oil is what gets pumped out of the ground. Very little crude oil is consumed directly it is a raw material that has to be refined into other products, such as gasoline and heating oil
Other products that are derived from crude oil include: Jet fuel, diesel, residual fuel oil, naphtha, kerosene, lubricants, tar, asphalt, petrochemicals, fertilizers, and plastics
The difference between the price of a finished product, such as gasoline, and the price of crude oil is often referred to as the crack spread. A crack spread is a very simplistic representation of how much money a refiner makes by turning crude into products
A refinery netback is the crude price at which a refiner breaks even, given the value of the finished product slate minus other costs to the refiner such as transport costs, refinery fuel costs, etc.
A refinery margin is essentially the refiners profit i.e. the value of the product slate, minus the cost of crude inputs and other expenses
Source: JPMorgan Energy Strategy
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Is all crude oil the same?
There are many different grades of crude oil. All grades have different qualities, and sell for different prices based on their qualities
When we talk about light, sweet crude, we mean grades with a high API gravity number, and a low sulfur content. A heavy, sour crude has a low API gravity and a high sulfur content
In general, light/sweet crude tends to sell at a higher price than heavy/sour crude
In general, refiners can produce a higher yield of high quality refined products, such as gasoline, by running light/sweet crudes. Heavy/sour grades yield less gasoline, and more of the dirty products such as fuel oil Source: JPMorgan Energy Strategy
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Where are most of the worlds oil reserves?
Source: JPMorgan Energy Strategy, BP Statistical Handbook (June 2006)
Proved Oil Reserves (end 2005)Proved Oil Reserves (end 2005)
40.2 59.5103.5 114.3
140.5
742.7
Asia Pacific North America Africa South & CentralAmerica
Europe & Eurasia Middle East
In thousand million barrels
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Top Oil Consumers (2005)Top Oil Consumers (2005)
Where are the worlds top consumers of oil?
FSU5%
Japan6%
China9%
United States25%
Other49%
India3%
Germany3%
Source: JPMorgan Energy Strategy, BP Statistical Handbook (June 2006)
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US Gasoline Demand & Exploration Based on Fuel EfficiencyUS Gasoline Demand & Exploration Based on Fuel Efficiency
US gasoline: 12% of global demand and growing
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1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013
In million b/d
Historical Gasoline DemandExtrapolation at today's MPGAt 22 MPGAt 24 MPGAt 26 MPGAt 28 MPGAt 30 MPGAt 30 MPG With Staggered Fleet Turnover
Source: JPMorgan Energy Strategy , EIA
270 kbd
1.4 mbd
2.2 mbd
2.8 mbd
3.4 mbd
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Who are the worlds top producers of crude oil?
The worlds biggest producers are not necessarily the same as the worlds biggest exporters. For example, the US and China produce a lot of oil, but export very little given high domestic demand
OPEC members Saudi Arabia and Iran are the worlds biggest exporters of crude oil
2005 Averages2005 Averages
Note: Bold = OPEC membersSource: JPMorgan Energy Strategy, IEA
Volume in kbd
Producer Volume Share of Global Production Russia 9,185 12.5% Saudi Arabia 9,063 12.4% United States 5,131 7.0% Iran 3,879 5.3% China 3,617 4.9% Mexico 3,334 4.6% Venezuela 2,706 3.7% Norway 2,506 3.4% UAE 2,458 3.4% Nigeria 2,405 3.3% Kuwait 2,133 2.9% Iraq 1,813 2.5% Canada 1,805 2.5% Libya 1,640 2.2% Brazil 1,634 2.2% UK-offshore 1,560 2.1% Algeria 1,345 1.8% Angola 1,245 1.7% Kazakhstan 1,025 1.4% Indonesia 942 1.3% Qatar 796 1.1% Malaysia 727 1.0% Oman 722 1.0% Argentina 665 0.9% India 663 0.9% Other 10,206 13.9%
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What is OPECs role
OPEC does not set prices. OPEC sets production quotas. Currently 10 of the cartels 11 members are subject to group quotas; Iraq is exempt. Saudi Arabia is by far the groups biggest and most influential member
What is OPECs ideal price?
Contrary to popular believe, it is not to OPECs advantage to target as high an oil price as possible. The cartel wants to maximize revenues, but needs consumers as much as consumers need OPEC oil. At very high oil prices, OPEC faces two risks:
1. High oil prices could reduce economic growth and oil demand growth
2. High oil prices could encourage higher-cost non-OPEC producers to make investments that would increase global oil supply, and reduce OPECs market share
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A little history. . .
US Refiner Acquisition Price of Imported CrudeUS Refiner Acquisition Price of Imported Crude
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006
In US$/bbl
Nominal Real
Source: JPMorgan Energy Strategy, EIA
Gulf War I
Iran-Iraq War
Netback Pricing
Non-OPEC competition grows, price war
Exxon Valdez spill
Soviet Union collapse Asian Crisis
9/11
Venezuela Crisis, Gulf War II, Nigeria strike
Hurricane Ivan
Nigerian strike, cold winter
Hurricane Katrina & Rita
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Until this bull run, loss of market share was a real concern for OPEC
Shifting Market ShareShifting Market Share
34%
35%
36%
37%
38%
39%
40%
41%
42%
'95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '065.5
6.5
7.5
8.5
9.5
10.5
11.5
12.5
OPEC Share of Global Production
Saudi Oil Production
FSU Oil Production
OPEC Share of Global Oil Production (%) FSU/Saudi Oil Production (mbd)
Source: JPMorgan Energy Strategy , IEA, OPEC
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Keeping the cartel together can be tough, too
The Prisoners (OPEC Members) DilemmaThe Prisoners (OPEC Members) Dilemma
Source: JPMorgan Energy Strategy
Cut Production Cheat on Quotas
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(10,1) (3,3)
OPEC MEMBER #1
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All members have an incentive to cheat, even though they
would all be better off sticking to quotas
The best outcome for
the group as a whole, but hard to achieve. . .
Given the chance that other members mightcheat, and the non-
cheater could end up in his worst case
scenario, all members have an incentive to
cheat themselves
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Agenda
Page
Oil & Gas Basics_20061020_book
References, Websites and Data Releases to Watch
Natural Gas Specifics
Whats the Story This Year?
The Big Picture: Macro Oil Fundamentals
Oil Specifics
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Short- to medium-term drivers for the oil market
Ongoing oil buying interest from consumers and investors
Iran noise; major Nigerian disruptions Call on OPEC crude still topping 30 million
b/d in 2007
OPEC showing commitment to a $50-55 basket price
Comfortable oil inventories Hurricane season less eventful than expected?
Warm weather this winter to follow?
Global oil demand growth moderating; slower economic growth ahead
Downstream investment should start to hit the market in 2007-08
Reassessment of investors commodities allocations down the road as returns falter and interest rates rise?
Current JPMorgan Price ForecastsCurrent JPMorgan Price Forecasts
2006 crude forecasts as of May 2, 2006, 2007 crude forecasts as of Aug. 9, 2006.Natural gas forecast as of March 2, 2006 *Actual to date prices as of October 6, 2006Note: All values are period averages. WTI & Brent in $/bbl; natural gas in $/MMBtuSource: JPMorgan Energy Strategy
1Q06 2Q06 3Q06 4Q06 2005 2006 2007WTI Forecast 65.00 67.39 64.05
WTI Actual* 63.48 70.72 70.60 59.90 56.70
Brent Forecast 64.00 67.05 63.05
Brent Actual* 62.71 70.43 71.00 59.78 55.25
Natural Gas Forecast 7.67 7.32 7.50
Natural Gas Actual 7.84 6.65 6.18 6.02 9.02
Crude Oil Price History, Forwards & Forecast RangeCrude Oil Price History, Forwards & Forecast Range
US$/bbl
$0
$20
$40
$60
$80
$100
'95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13
JPM Probable RangeJPM Possible RangeHistoryForward CurveJPM Forecast
Source: JPMorgan Energy Strategy
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The crude oil market today
Crude Oil Price History & ForwardsCrude Oil Price History & Forwards
$5
$15
$25
$35
$45
$55
$65
$75
1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
WTI Brent
In US$/bbl
Source: JPMorgan Energy Strategy
$0
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This has been a refined products driven market
Heating Oil Crack + ForwardsHeating Oil Crack + Forwards Gasoline Crack + ForwardsGasoline Crack + Forwards
US$/bbl
$0
$2
$4
$6
$8
$10
$12
$14
$16
$18
$20
'95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10
Heat Crack FwdsHeat Crack
Source: JPMorgan Energy Strategy
US$/bbl
$0
$2
$4
$6
$8
$10
$12
$14
$16
$18
$20
'95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10
Gasoline CrackGasoline Crack Fwds
Source: JPM organ Energy Strategy
Although demand growth has moderated, we dont think the products story is over yet. New refinery capacity additions will pressure these markets by 20072008, but not yet this year. Spec changes in the US will be supportive psychologically if not physically
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Commercial oil inventories Crude levels remain healthy
Total OECD Commercial InventoriesTotal OECD Commercial Inventories A 7 million bbl build in refined product inventories offset a 7 mb draw from crude. The level of crude remains much more comfortable than the level of refined product stocks
Regionally in August, builds in the US and Japan offset draws in Europe and other areas
In days of demand cover
48
50
52
54
56
58
60
Jun-99 Jun-00 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06
Winter Summer Linear Trend
Source: JPMorgan Energy Strategy , IEA, Gov n't & industry sources
0
Total OECD Crude InventoriesTotal OECD Crude Inventories Total OECD Product InventoriesTotal OECD Product Inventories
In billion bbl In billion bbl
0.90
0.95
1.00
1.05
1.10
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Five-Year RangeFive-Year Average20052006
Note: Latest month is to-date only , not full-month projectionSource: JPMorgan Energy Strategy , IEA, Gov n't & industry sources
1.44
1.49
1.54
1.59
1.64
1.69
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Five-Year RangeFive-Year Average20052006
Note: Latest month is to-date only , not full-month projectionSource: JPMorgan Energy Strategy , IEA, Gov n't & industry sources
0.00 0.00
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Hurricanes hammer US Gulf refineries
Hurricane Impacts in PerspectiveHurricane Impacts in Perspective
Roughly a quarter of US refining capacity was offline at peak during last years unprecedented hurricane season. Much of the hurricane-affected capacity had normalized by early 2006 with a few major exceptions
As of May 3, 325,000 b/d, or 22%, of Gulf of Mexico oil production remains offline, according to MMS reporting
Gulf of Mexico Crude Shut In (in mbd) In US$
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
28-Aug-05 27-Sep-05 27-Oct-05 26-Nov-05 26-Dec-05 25-Jan-06 24-Feb-06 26-Mar-06 25-Apr-06 25-May-06$(5)
$-
$5
$10
$15
$20
$25
$30
$35
Source: JPMorgan Energy Strategy, EIA, government and country sources
Actual Refinery Loss Minus Gulf of Mexico Crude Shut InProjected Refinery Loss Minus Gulf of Mexico Crude Shut In
Gasoline CrackHeating Oil Crack
Gasoline Crack FwdNYMEX Heating Oil Crack Fwd
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US refinery maintenance: Looking ahead to the fall
While the US planned refinery maintenance program for October looks to be heavier this year than last year, unplanned outages are minimal compared to 2005. Planned maintenance is set to average 798 kbd offline in October, compared to 527 kbd offline in October of last year. Unplanned outages of several hundred thousand barrels for October 2006 compared to more than 2 million b/d lost in October 2005
US Planned & Unplanned Refinery ShutdownsUS Planned & Unplanned Refinery Shutdowns
Average Offline Capacity Per Month (in million b/d)
0.0
0.3
0.6
0.9
1.2
1.5
1.8
2.1
2.4
2.7
Mar-02 Jul-02 Nov-02 Mar-03 Jul-03 Nov-03 Mar-04 Jul-04 Nov-04 Mar-05 Jul-05 Nov-05 Mar-06 Jul-06 Nov-06
UnplannedPADD I (East Coast)PADD II (Midwest)PADD III (Gulf)PADD IV (Rockies)PADD V (West Coast)
Source: JPMorgan Energy Strategy , IIR
Hurricane Katrina & Rita
Hurricane Ivan
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Gasoline: An easier problem to solve in the Atlantic Basin
Net Gasoline Balances By RegionNet Gasoline Balances By Region Net Gasoil Balances By RegionNet Gasoil Balances By Region
Regional production minus regional consumption (in kbd)
-600
-500
-400
-300
-200
-100
0
100
200
300
400
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
AsiaEuropeNorth AmericaTotal OECD
Source: JPM organ Energy Strategy , IEA
Regional production minus regional consumption (in kbd)
-1,000
-800
-600
-400
-200
0
200
400
600
800
1,000
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
OECD AsiaOECD EuropeOECD North AmericaTotal OECD
Source: JPM organ Energy Strategy , IEA
Europe has always been structurally long gasoline but has become more so as vehicle demand shifts to diesel. The Atlantic Basin is now long gasoline. . .but shorter and shorter distillate
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Changes to diesel specs: Lower sulfur limits to challenge supply chain
Changes to Diesel Sulfur LimitsChanges to Diesel Sulfur Limits The US diesel sulfur limit drops by 97% this year to 15 ppm
US refiners were required to meet the new standard by June 1; pipeline operators must meet the 15 ppm limit by Sept. 1; retailers must offer 15 ppm by Oct. 15
Dramatic changes to diesel standards underscore the challenge of not only making the fuel but also distributing it to customers. While US refiners have successfully ramped up ULSD production and inventories of the new spec have climbed steadily, there are still logistical challenges associated with the storage and transport of the cleaner fuel
Ultra-low sulfur diesel is so much cleaner than others in the distillate family (heating oil, jet, kerosene) that operators will be challenged in how they batch/order the fuels in the pipe. Test flows have shown that the sulfur in ULSD will have to be far lower/cleaner in order to deliver fuel at the government-set limit to consumers. Separate storage tanks will also be required for distribution of ULSD
* Implemented in Beijing July 2005 ahead of 2008 Olympics; to be enforced nationwide 2010** Implemented in major cities in 2005; to be enforced nationwide in 2010Source: JPMorgan Energy Strategy, government & press reports
In ppm 2003 2004 2005 2006 2007 2009 2010US 500 15
Europe 500 350 50 10
Canada 500 15
China* 500 350
India** 2,500 500 350 50
Brazil 5,000 2,000 500 50
Japan 50 10
S Korea 430 30 10
US Diesel Inventories By Sulfur ContentUS Diesel Inventories By Sulfur Content
Million bbl
0
20
40
60
80
Feb'05 Apr'05 Jun'05 Aug'05 Oct'05 Dec '05 Feb'06 Apr'06 Jun'06 Aug'06
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Changes to gasoline specs: Sulfur limits and oxygenate requirements
Changes to Gasoline Sulfur LimitsChanges to Gasoline Sulfur Limits
* Implemented in Beijing July 2005 ahead of 2008 Olympics; to be enforced nationwide 2010
** Implemented in major cities in 2005; to be enforced nationwide in 2010Source: JPMorgan Energy Strategy, government & press reports
RFG Inventories vs. RBOB/Alcohol StocksRFG Inventories vs. RBOB/Alcohol Stocks
Major US gasoline spec changes slated for 2006: lower sulfur content limit and the elimination of the oxygen content standard, which will impact MTBE use
While market concern, over the what is in effect an MTBE phase-out, has been dramatic, these worries are overdone. We are experiencing some hiccups along the supply chain during the present transition period, but these should work themselves out as the US has proven itself to be quite capable of blending components up to standard
In ppm 2004 2005 2006 2008 2009European Union 150 50 10US 120 90 30China* 500 150India** 500 150Japan 50 10South Korea 130 50Brazil** 400 80
In million bbl
5
10
15
20
25
30
35
Jul-04 Oct-04 Jan-05 Apr-05 Jul-05 Oct-05 Jan-06 Apr-06
Finished RFG RBOB w/ Alcohol
Source: JPM organ Energy Strategy , EIA
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Phasing out MTBE. . . phasing in ethanol
2005 US Energy Policy Act eliminated the national oxygen content standard in gasoline while not explicitly banning MTBE it effectively phases out the gasoline additive MTBE and phases in the use of renewable fuels
MTBE has been found to contaminate groundwater, opening up MTBE-makers up to lawsuits
Most of the industry are using ethanol because it replaces octane and clean-burning properties of MTBE and it is in compliance with renewable fuel standard
Because of ethanols affinity to water, it cannot be transported by pipeline after mixing with gasoline
Reformulated gasoline for oxygenate blending (RBOB) is blended with ethanol in the tank, after it has been transported separately by pipe
States such as New York and California have already successfully phased out MTBE in favor of ethanol
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Short- to medium-term drivers for the oil market
Bullish
Ongoing oil buying interest from consumers and investors
Iran noise; major Nigerian disruptions
Call on OPEC crude still topping 30 million b/d in 2007
OPEC showing commitment to a $50-55 basket price
Bearish
Comfortable oil inventories
Hurricane season less eventful than expected. Warm weather this winter to follow?
Global oil demand growth moderating; slower economic growth ahead
Downstream investment should start to hit the market in 2007-08
Reassessment of investors commodities allocations down the road as returns falter and interest rates rise?
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Mean reversion (at least to the $20) is out the window
Front-month NYMEX West Texas Intermediate with Snapshot in Time Future StripsFront-month NYMEX West Texas Intermediate with Snapshot in Time Future Strips
We are now assuming a new long-term average of $40
In US$/bbl
$-
$10
$20
$30
$40
$50
$60
$70
$80
'94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07
Source: JPM organ Energy Strategy
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Todays crude curve: Contango in the front, backwardation further out
West Texas Intermediate CurveWest Texas Intermediate Curve
In US$/bbl
$56
$58
$60
$62
$64
$66
$68
$70
Nov06 May07 Nov07 May08 Nov08 May09 Nov09 May10 Nov10 May11 Nov11 May12 Nov12
Source: JPM organ Energy Strategy
$0
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A new paradigm contango at $70!
WTI Flat Price vs. Backwardation (in US$/bbl)WTI Flat Price vs. Backwardation (in US$/bbl)
We see contango as sustainable at these price levels. However, a compelling move lower (sub $50) could see backwardation return
$(2)
$(1)
$-
$1
$2
$3
$4
'86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06$(5)
$5
$15
$25
$35
$45
$55
$65
$75
Source: JPM organ Energy Strategy
M01-M02 NYMEX WTI M01 NYMEX WTI
Backwardation
Contango
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WTI backwardation vs. flat price
WTI Backwardation vs. Flat PriceWTI Backwardation vs. Flat Price
Source: JPMorgan Energy Strategy
We see contango as sustainable at these price levels. However, a compelling move lower (sub $50) could see backwardation return
M01 NYMEX WTI (in US$/bbl)
$-
$10
$20
$30
$40
$50
$60
$70
$80
$90
$(8) $(6) $(4) $(2) $- $2 $4 $6 $8 $10 $12M02-M24 NYMEX WTI (US$/bbl)
1996-2002 2004-present 10/13/2006
$0
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Change in the balance of energy market participation
At the end of the day, supply and demand determine price. Past 2 yeas had a good fundamentals story But if there has a been a paradigm shift in this market, it is a shift in the balance of participation
Up significantly Major inflow of money and interest in commodities as an asset class that really did not exist in a meaningful way 3 years ago
Buyers Institutionals enter the market almost exclusively from the long side via products like Commodities Indices and oil-linked notes
Passive Take long-term, generally directional views. Tend not to enter or exit positions on short-term price fluctuations
New Institutional investors have really only started to participate in the energy space in the past ~3 years
Institutional Investors
(Pension funds, mutual funds, retail investors)
Up Generally more dollars in energy, but also more sophisticated and varied involvement in full range of energy products
Buyers or Sellers Depending on view of the market. On average in recent years, hedge funds more long than short given price trend.Funds may participate in any part of the curve and have shown particular interest in owning deferred price and volatility, adding liquidity and price clarity to that part of the curve
Active Take proprietary risk daily. May have long or short term views, and take directional or relative value positions in the full range of energy products
Old and New Not new to energy per se but more professional and putting more money towards this space in the last ~3 years
Macro Hedge Funds
No significant changeBuyers or Sellers Depending on market trend
Active Fast moving, directional, tend to enter and exit positions quickly
Old CTAs have traded energy for years
Trend Players
(Commodity Trading Advisors)
No significant change, though interest has arguably increased with price
Buyers or Sellers Depending on customer business and view of the market. Depending on customer business, banks may make markets as far as 10+ years into the future
Active Trade daily making markets (flow and structured business) and/or taking risk (proprietary trading). May have long or short term prop views
Old Although the mix of banks in energy changes, banks have been market-makers and risk takers in energy since the inception of these markets
Financial institutions
(Banks)
Up If anything consumers have hedged more actively as prices have risen, though options rather than swaps have been the preferred vehicle for upside protection with downside participation
Buyers The natural buyers in the energy markets. Consumers typically hedge 1-3 years into the future, but increasingly more sophisticated hedgers may go out as far as 5-7 years in products with sufficient liquidity
Active May trade anywhere from daily to annually depending on hedging program
Old Energy consumers have been actively hedging with derivatives since the early-1990s
Energy Consumers
(Utilities, airlines, railroads, industrials)
Down Significantly less day-to-day tactical hedging at high prices. Remaining deals large, occasional, one-off M&A related strategic hedges. Options strategies generally preferred over swaps, for downside protection with upside exposure
Sellers The natural sellers in the energy markets. Producers typically hedge 2-3 years out but can now find sufficient liquidity to hedge as much as 7 years out
Active May trade anywhere from daily to annually depending on hedging program
Old Energy producers have been actively hedging with derivatives since the early-1990sEnergy Producers
(E&P companies)
Activity vs. 3 Years Ago?Buyers or Sellers? Where on the Curve?Active or Passive?Old or New?Participant
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Medium-term drivers of oil price have not gone away yet
Key fundamental drivers have supported oil prices in recent years that are still with us today
For the past several years, we have seen a refined products-led market. In other words, as much as crude oil prices have increased, prices for refined products such as gasoline and diesel have gone up even more
This had been in large part a demand story. Demand growth has been strong particularly in 2004, and particularly in the US and non-OECD Asia. Importantly, demand growth is disproportionately for light-end products, notably diesel, which is a type of distillate
The oil industry cycles through periods of over- and under-investment. Refining and distribution (e.g. pipelines, tankers, terminals) are particularly pronounced examples of how years of under-investment due to poor margins can lead to capacity constraints down the road
While under-investment in refining and distribution is not a permanent market feature, it is also not a driver that can be reversed overnight. We see tight downstream capacity influencing price until at least 200708, unless demand growth falters significantly
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Is the demand story over?
Historical Oil Demand GrowthHistorical Oil Demand Growth
Source: JPMorgan Energy Strategy
Demand growth has moderated relative to 2004. We see this trend continuing for the balance of the year
%yoy, 3 month rolling average
-5%
0%
5%
10%
15%
20%
25%
30%
Apr-98 Mar-99 Feb-00 Jan-01 Dec-01 Nov-02 Oct-03 Sep-04 Aug-05 Jul-06 Jun-07
OECD Demand Growth/Contraction Non-OECD Demand Growth/Contraction OECD ProjectNon-OECD Project Global Demand Growth Historical Average Rate of Global GrowthWorld Project
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Light-end products dominate global oil demand growth
Global Oil Demand Growth by Major ProductGlobal Oil Demand Growth by Major Product
Dieselization and tightening global fuel specs will continue to dictate the global oil demand growth profile we see this trend continuing even as total demand growth eases
In kbd
-500
250
1,000
1,750
2,500
3,250
2000 2001 2002 2003 2004 2005
Gasoline Distillate Jet/Kero Fuel Oil Heavy Light
Source: JPM organ Energy Strategy , IEA, gov ernment & industry sources
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Energy intensity in emerging economic powers moderates as they grow
Energy Intensity/GDP China & JapanEnergy Intensity/GDP China & Japan
Oil bbl consumed per US$1,000 GDP
0
1
2
3
4
5
6
7
8
0 1,000 2,000 3,000 4,000 5,000
GDP (in billion current US$)
Japan China
Source: JPM organ Energy Strategy , BP Statistical H andbook
Find from same publication (above)
Energy Intensity Declines As GDP IncreasesEnergy Intensity Declines As GDP Increases
0
1
2
3
4
5
6
7
8
9
250 5,250 10,250 15,250 20,250 25,250GDP (in billion current US$)
OECD Non-OECD
Oil bbl consumed per US$1,000 GDP
Source: JPM organ Energy Strategy , BP Statistical H andbook
Chinese oil demand growth will continue to be significant to the global balance, especially in the lead-up to the Beijing Olympics. But the energy intensity to growth ratio does moderate as countries get richer
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The cycle of investment
OECD Oil Demand vs. Refinery CapacityOECD Oil Demand vs. Refinery Capacity
In million b/d
20
25
30
35
40
45
50
55
'83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05
Refined Products Import GapRefinery CapacityOil Demand
Source: JPM Energy Strategy , IEA, EIA
Downstream investment, or lack thereof, is cyclical and tends to over-shoot in both directions
Theres no reason to think that this investment cycle wont eventually be the same
OECD demand exceeds OECD refinery capacity. That means that, increasingly, spare refinery capacity is in the non-OECD. That means that just like crude production most of the worlds refined products production is geographically far away from most of the worlds consumption
0
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Energy infrastructure/distribution capacity is still a constraint
Global Oil Demand Supplied By International TradeGlobal Oil Demand Supplied By International Trade
More refined products, in particular, have to travel greater distances to their end user. Ports, pipes, tankers, etc. are all an issue will they see the investment boom that refining is seeing?
Oil Trade:Oil Demand
30%
35%
40%
45%
50%
55%
60%
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
1985-89: 44%
1990-94: 51%
1995-99: 55%2000-04: 58%
Source: JPMorgan Energy Strategy, BP Statistical Handbook
Crude Refined Products 1987-1995 3.6% 1.8% 1996-2005 2.5% 3.8% 2001-2005 1.7% 5.4%
Growth In Waterborne Crude & Products Transport
Source: Clarkson's Shipping Review
0%
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Non-OPEC production has disappointed in recent years
Historical Oil Supply GrowthHistorical Oil Supply Growth
%yoy, 3 month rolling average
-10%
-5%
0%
5%
10%
15%
20%
25%
Mar-98 Jul-99 Nov-00 Mar-02 Jul-03 Nov-04 Mar-06 Jul-07
OPEC Supply Growth/Contraction Non-OPEC Supply Growth/ContractionGlobal Supply Growth Historical Average Rate of Global Growth
Source: JPMorgan Energy Strategy, IEA
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OPEC sails through three bull years
OPEC Crude Production & Group QuotaOPEC Crude Production & Group Quota
OPECs market relevance has waned. The group hasnt had to cut production or show any discipline since March 2004
In million b/d
20
21
22
23
24
25
26
27
28
29
Oct-02 Mar-03 Aug-03 Jan-04 Jun-04 Nov-04 Apr-05 Sep-05 Feb-06 Jul-06
OPEC-10 Wellhead Production of Crude
Quota
Source: JPMorgan Energy Strategy , IEA
0
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Sliding OPEC spare capacity, but capacity additions in the pipeline
OPEC Spare Capacity vs. PriceOPEC Spare Capacity vs. PriceExpected Additions to OPEC Capacity* (in kbd)Expected Additions to OPEC Capacity* (in kbd)
* Excluding declinesNote: This is not a complete list and is subject to changeSource: JPMorgan Energy Strategy, government
reports, media reports
In kbd
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
Aug-97 Feb-99 Aug-00 Feb-02 Aug-03 Feb-05 Aug-06$-
$10
$20
$30
$40
$50
$60
$70
$80Spare Capacity Nymex WTI Price
Source: JPMorgan Energy Strategy
US$/bbl 2006Saudi Arabia 300Iran 160Nigeria 265Algeria 50Venezuela 75Libya 150UAE 200
2007Saudi Arabia 500Nigeria 220Algeria 140
2008Saudi Arabia 300Nigeria 1,130Indonesia 180
2009-2010Saudi Arabia 1,200Algeria 100Qatar 525
2006 1,2002007 8602008 1,6102009-2010 1,8252006-2010 Total 5,495
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Top geopolitical hotspots: No strangers to disruptions
In million b/d
0
1
2
3
4
5
6
'67 '69 '71 '73 '75 '77 '79 '81 '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05Source: JPMorgan Energy Strategy , BP Statistical Handbook
Iranian Revolution
In million b/d
0
1
2
3
4
'67 '69 '71 '73 '75 '77 '79 '81 '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05Source: JPMorgan Energy Strategy , BP Statistical Handbook
Iran-Iraq War
Gulf War I
Gulf War II
In million b/d
0
1
2
3
'79 '81 '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05Source: JPMorgan Energy Strategy , BP Statistical Handbook
Strike cripples production
NigeriaNigeria
IranIran
VenezuelaVenezuela
IraqIraq
In million b/d
0
1
2
3
4
'67 '69 '71 '73 '75 '77 '79 '81 '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05Source: JPMorgan Energy Strategy , BP Statistical Handbook
Strike cripples production
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Oil production: An inherently risky business
OECD Reserves as % of GlobalOECD Reserves as % of Global
More and more of the worlds remaining oil reserves are in geopolitically risky parts of the world, and thats not going to change
OECD Reserves: Global Reserves
0%
5%
10%
15%
20%
25%
'81 '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05
Source: JPM organ Energy Strategy , BP Statistical Handbook
Oil Reserves by Risk of LocationOil Reserves by Risk of Location
050
100150200250300350400450500
0-1 1-2 2-3 3-4 4-5 5-6 6-7 7-8 8-9 9-10
Average of Country Risk Rating & Corruptionion Perception Index (0 = highest risk/most corrupt)
Total Reserves (in '000 billion bbl)
Source: JPMorgan Energy Strategy , BP Statistical Handbook, Transparency International, UNCTAD
5 = 329
More corrupt/risky Less corrupt/risky
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US oil dependency on the rise
US Oil Demand as % of Total US Energy DemandUS Oil Demand as % of Total US Energy Demand
Political rhetoric aside, oils share of US energy consumption is rising, the share of renewables has fallen slightly in each of the past 2 decades
US Oil Demand by Source (2004)US Oil Demand by Source (2004)
35%
37%
39%
41%
43%
45%
47%
49%
'50 '55 '60 '65 '70 '75 '80 '85 '90 '95 '00 '05
Source: JPM organ Energy Strategy , EIA
Coal, 23% Nuclear, 8%
Petroleum, 40%
Natural Gas, 23%
Renewable, 6%
Source: JPM organ Energy Strategy , EIA
0%
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US reliance on oil imports also on the rise
US Net Oil Imports As % Of Total US Oil DemandUS Net Oil Imports As % Of Total US Oil Demand
Foreign oil supplies are an ever growing percent of US demand. OPEC members supply just less than half of total US net oil imports and Middle East Gulf produces supply 20%
US Net Oil Imports By SourceUS Net Oil Imports By Source
0%
10%
20%
30%
40%
50%
60%
70%
'60 '63 '66 '69 '72 '75 '78 '81 '84 '87 '90 '93 '96 '99 '02 '05
Total Oil Imports, All SourcesFrom Mideast GulfFrom OPEC Members
Source: JPMorgan Energy Strategy, EIA
Other Non-Opec, 28%
Other Opec, 4%
Mexico, 12%Canada,
16%
UK, 3%
Venezuela, 11%
Nigeria, 8%
Mideast Gulf, 17%
Source: JPMorgan Energy Strategy, EIA
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Oil & Gas Basics_20061020_book
References, Websites and Data Releases to Watch
Natural Gas Specifics
Whats the Story This Year?
The Big Picture: Macro Oil Fundamentals
Oil Specifics
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How is gas different from oil?
Natural gas is a regional commodity, whereas oil is a global commodity
In other words, oil is fungible in a way that gas is not
Why? The physical properties of natural gas make it harder to transport, particularly inter-continentally. Most natural gas is transported in gaseous form via pipeline. This means that the US gas market is effectively a closed system
For this reason, regional gas markets are unrelated. For example, the UK gas market has no relationship to the US gas market. In fact, European natural gas is priced using an oil-referenced formula
The widespread adoption of liquefied natural gas (LNG) when and if it happens will change the gas market from a regional market to a global market. In other words, the development of LNG will make the gas market look more like the oil market
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The US natural gas market
Natural gas is transported in the U.S. through pipelines to different locations called Hubs
Hubs are market places where the physical commodity can be bought and sold. Different market places have different prices due to different supply and demand factors
Henry Hub is the most liquid physical natural gas market, because Henry Hub is where futures contracts are settled for the physical commodity. It is the market which is most closely represented by the NYMEX futures curve
Producers and consumers of natural gas have incentives to not only hedge their physical commodity exposure using futures contracts, but also to hedge the location (basis) risk associated with dealing in different markets across United States, Canada and Mexico
The basis market provides this added hedging ability
In the basis market hub locations trade at a differential to NYMEX futures contracts on a forward basis
Hence leading to the ability to buy the NYMEX +/ the appropriate basis differential forward to hedge a future sale of the physical commodity
Some of the most frequently quoted basis markets are: the Rocky Mountain region, the Houston Ship Channel Hub, AECO (Canada), and the Panhandle Hub
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Natural gas: How is it measured?
In the United States, natural gas derives its value from its British thermal unit (Btu) content, or heating capability
British thermal unit: a unit of heat equal to about 252 calories; quantity of heat required to rise the temperature of one pound of water one degree Fahrenheit
Volumetrically natural gas is measured in cubic feet (cf) on a 24-hour flowing basis, and consequently a standard conversion was adopted whereby 1 cf = 1,000 Btus, which allows for natural gas to be bought and sold in terms of its Btu value
Useful gas conversions:Useful gas conversions:
1 MMbtu = 1 million Btus
1 Mcf 1 MMBtu, depending upon the purity of the gas 1 MMcf = 1,000 MMBtu
10 MMcf = 10,000 MMBtu = 1 NYMEX contract
1 Bcf = 1 billion cubic feet = 1,000,000 MMBtu
1 Tcf = 1 trillion cubic feet
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Major market drivers
Weather is both a demand and supply factor
Summer storage injection season (AprilOctober) is influenced by cooling demand
Winter storage withdrawal season (NovemberMarch) is influenced by heating demand
Shoulder Months (March, April, May and September, October, November) are less weather sensitive
But hurricane disruptions most typically in the late-summer to fall can affect the supply side of the balance
Drought conditions in areas that depend on hydropower for electricity generation can also boost gas demand
Oil price is also a driver of gas price, because there is some degree of substitutability between the two fuels
Liquefied Natural Gas (LNG) is a minor factor in the gas market now, but will become increasingly important as the market develops. LNG will make the gas market more global
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The US needs LNG to meet growing gas demand
The long-term gas price will depend heavily on LNG to fill the growing disconnect between demand from residential, commercial, industrial and power generation consumers and North American sources of supply
The declining domestic production scenario makes LNG vital to satisfying projected US demand growth. . . or price will have to ration demand
In Tcf
500
700
900
1,100
1,300
1,500
1,700
1,900
2,100
2,300
2,500
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Lower-48 Production Canadian/Alaska Production Demand
Source: JPMorgan Energy Strategy , EIA
In Bcf/day
0
The growing US LNG supply gapThe growing US LNG supply gap
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US LNG terminal capacity
Imports by Terminal (Monthly)Imports by Terminal (Monthly)
In Bcf
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep
Everett (MA) Lake Charles (LA) Cove Point (MD) Elba Island (GA) Gulf Gateway (Offshore)
Source: JPM organ Energy Strategy , Waterborne LN G Report
Sustainable Capacity
Right now, LNG supply is the limiting factor for the US, not spare terminal capacity. LNG imports to the US should ramp up from late 2007 when new supplies from Trinidad and the Middle East come online contracted to meet US demand, likely to pressure US gas prices
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Winter natural gas storage trajectories
Winter Gas Storage TrajectoriesWinter Gas Storage Trajectories
In Bcf
500
1,000
1,500
2,000
2,500
3,000
3,500
7-Oct 1-Nov 26-Nov 21-Dec 15-Jan 9-Feb 6-Mar 31-Mar 25-Apr 20-May 14-Jun 9-Jul 3-Aug 28-Aug 22-Sep
200001 200102 200203 200304 200405 200506
Source: JPMorgan Energy Strategy , EIA
0
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Agenda
Page
Oil & Gas Basics_20061020_book
References, Websites and Data Releases to Watch
Natural Gas Specifics
Whats the Story This Year?
The Big Picture: Macro Oil Fundamentals
Oil Specifics
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Important data releases
EIA Weekly Petroleum Status Report (Wednesdays 10:30 AM)EIA Weekly Natural Gas Storage Report (Thursday 10:30 AM)
EIA Petroleum Supply Monthly Report (end of month)EIA Short Term Energy Outlooks (beginning of month)
IEA monthly Oil Market Report (~10th of the month)
Euroilstock inventory report (~10th of the month)
CFTC Commitment of Traders report (Fridays)
63RE
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Key websites
US Department of Energy, Energy information Administration
www.eia.doe.gov
Organization of Petroleum Exporting Countries
www.opec.org
BPs Statistical Review of World Energy
www.bp.com
New York Mercantile Exchange
www.nymex.com
Commodity Futures Trading Commission
www.cftc.gov
International Energy Agency
www.iea.org
64RE
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Bloomberg codes
Prices:Prices: News & Info:News & Info:
Main energy page NRG
EIA inventory data DOE
Global crude oil prices CRUD
Exchange menu CEM
Nymex WTI crude CL1 [cmdty]
Nymex heating oil HO1 [cmdty]
Nymex gasoline HU1 [cmdty]
Nymex natural gas NG1 [cmdty]
IPE Brent crude CO1 [cmdty]
IPE gasoil QS1 [cmdty]
Cash values for refined products USPD
EUPD
FEPD
Top energy pages OTOP
ETOP
TGAS
All energy news NI NRG
Oil news NI OIL
Gas news NI GAS
Power news NI ELC
Refinery news NI REF
OPEC NI OPEC
Energy glossary REFG
Keeping time IC
Calendars CDR
65RE
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Reuters codes
Prices:Prices: News & Info:News & Info:
Main energy page Q: ENERGY
EIA inventory data Q: EIAA
Nymex WTI crude Q: CLc1
Nymex heating oil Q: HOc1
Nymex gasoline Q: HUc1
Nymex natural gas Q: NGc1
IPE Brent crude Q: LCOc1
IPE gasoil Q: LGOc1
Cash values for Q: PRODUCT/1 refined products
Energy highlights Q: nTOPO or TOP/O
Link to energy codes O/CODES
All energy news O
Oil news OIL
Gas news NGS
OPEC news OPEC
EIA inventory report EIA/S
US refinery news REF/US
Energy glossary ENERGY/3
66RE
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Basic oil conversions
42 gallons = 1 barrel
159 liters = 1 barrel
7.33 barrels of crude = 1 ton
67RE
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