oil market update - new mexico legislature 092619 item 5 yucel nm...u.s. oil production growth...
TRANSCRIPT
Oil Market Update
Mine YücelSenior Vice President and Research Advisor
Federal Reserve Bank of Dallas
September 27, 2019
The views expressed in this presentation are strictly those of the presenter and do not necessarily reflect the positions of the Federal Reserve Bank of Dallas or the Federal Reserve System.
1
Energy Market Overview
• Geopolitical risks have risen considerably• Market was relatively balanced before the attack on Saudi
oil facilities• WTI around $57 despite the attack, OPEC+ cuts and
significant production declines in Iran and Venezuela • Slower global economic growth dampening oil demand• US oil production flattening as rig count sputters• New Mexico oil output near record highs• U.S. natural gas output still going strong• Energy trade important for U.S.
2
Disruption in Saudi productionNot much impact on U.S. imports
SOURCE:EIA,Oil Daily
6.352%
3.328%
2.420%
Disruption in Saudi Oil Supply (MB/D)
Additional Capacity Recovered Disrupted
0.68%
3.854%0.5
8%
1.014%
1.217%
US Crude Oil Imports (MB/D)
Saudi Arabia Canada Mexico
OPEC excl SA Other
3
WTI Prices
0
20
40
60
80
100
120
14 15 16 17 18 19
$/Barrel
$63.10
NOTE:Prices are average of daily figures for week ending on 9/13/19. Square red mark represent closing price on 9/16, the blue square mark represents closing price on 9/25.SOURCE:EIA;Chicago Mercantile Exchange;Bloomberg
$56.19$57.29
4
Balanced market in 2019
1.1
0.1
1.3
0.50.2
0.3 0.4
1.3
0.5
1.1
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
Million Barrels Per Day, Change in Annual Average
Increases in Iraq, Libya, and Nigeria
Supply IncreaseSupply DecreaseDemandBalance
Involuntary cut
Source: Federal Reserve Bank of Dallas; International Energy Agency
Voluntary cut
5
Undersupply in 2019 if Saudi outage longer
1.1
-0.7
1.30.5
0.20.3 1.2
1.3
0.5 1.1
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
Million Barrels Per Day, Change in Annual Average
Increases in Iraq, Libya, and Nigeria
Supply IncreaseSupply DecreaseDemandBalance
Involuntary cut
NOTE: Saudi production assumed at 7.3 mb/d through Dec-19; Genscape (9/23) reported 3.3 out of 5.7 mb/d disrupted production is back. Source: Federal Reserve Bank of Dallas; Genscape; International Energy Agency 6
Market slightly oversupplied in 2020
0.10.6
1.0
0.3
0.4
0.30.2
0.10.3
0.2
1.3
0.0
0.5
1.0
1.5
2.0
2.5
Million Barrels Per Day, Change in Annual AverageSupply IncreaseSupply DecreaseDemandBalance
Assuming OPEC extends cut through end of 2020
Source: Federal Reserve Bank of Dallas; International Energy Agency 7
U.S. oil production growth slowing
SOURCES: Baker Hughes; EIA
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
11.5
12.5
13.5
2009 2011 2013 2015 2017 2019 2021
MB/D Rig count
U.S. crude oil production
U.S. oil rig count
719(Sep 20)
8
Crude Oil Production by State
Note: Data shown are monthly for June 2019.Source: EIA
9
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12 Jan-14 Jan-16 Jan-18 Jan-20
Lower 48 Shale Lower 48 nonshale Gulf of Mexico Alaska
Shale eclipses other U.S. production
NOTES: Shale production estimate is from the EIA, based on Drillinginfo data. Lower 48 excludes Alaska and federal offshore areas. Alaska excludes federal offshore production.SOURCES: EIA; Drillinginfo
MB/D
10
Permian most prolific shale basin
SOURCE: EIA
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
PermianBasinEagle Ford
Bakken
Niobrara
Total oil production, MB/D
11
0
100
200
300
400
500
600
700
800
900
1 5 9 13 17 21 25 29 33 37 41 45 49 53 57
2014
2015
2016
2017
2018
2019
Months
Permian BasinBarrels per day
Higher initial production driven by longer laterals
5238
6093
6752
7774
87489059
4000
5000
6000
7000
8000
9000
10000
2014 2015 2016 2017 2018 2019*
Horizontal feet per well
Note: * is year to dateSource: WellDatabase, Federal Reserve Bank of Dallas.
12
Government, tourism, energy and health dominate New Mexico’s economy
13
Mining and construction fastest growing
14
1.2
-1.0
1.8
-0.3
1.3
4.0
1.50.6 0.0
15.2
2.64.2
0.4
-0.8
3.1 2.7
12.3
5.7
2.8
5.3
-4
0
4
8
12
16
Total Gov't.(22.2%)
Educ. &HealthServ.
(16.4%)
Trade,Trans., &
Util.(15.8%)
Prof. &Bus. Serv.(12.7%)
Leis. &Hosp.
(11.9%)
Constr.(5.9%)
FIRE(4.1%)
Mfg.(3.2%)
Mining &Logging(3.1%)
Job growth (percent)
2018
2019 YTD
Note: 2019 data YTD December 2018 through August 2019Source: Bureau of Labor Statistics
New Mexico oil production hitting highs
15Sources: Baker Hughes; U.S. Department of Energy.
0
100
200
300
400
500
600
700
800
900
1,000
0
20
40
60
80
100
120
'08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19
Number of active rigs Barrels/day (thousands)
Rig count
Production
New Mexico’s economy continues to depend on energy
16Note: Values prior to 1997 extrapolated from SIC coded data. Employment data only available to 1981. Sources: Bureau of Economic Analysis, Bureau of Labor Statistics.
0
1
2
3
4
5
6
7
0
2
4
6
8
10
12
14
16
18
20
'80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18
Percent Percent
Mining Share of GDP
Mining/Logging Share of Employment
Some states rely heavily on severance taxes
57.0
52.6
28.0
20.0
9.7 9.2
4.31.4 1.2
0
10
20
30
40
50
60
AK ND WY NM OK TX LA US CO
% of Total Tax Revenue
Source: US Census
Percent
17
Natural gas prices low
Note:Prices are weekly average ending on 9/13/19SOURCE:EIA
0
2
4
6
8
10
12
14
16
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
$2.68
Dollars per MMbtu, weekly
18
Natural gas production a record every year
SOURCE: EIA
0
20
40
60
80
100
120
1990 1995 2000 2005 2010 2015 2020
US Total
Marcellus (PA, OH, WV)
Texas
Billion cubic feet per day
19
Natural Gas Production by State
Note: Data shown are monthly for June 2019.Source: EIA
20
Crude Oil (mb/d) Natural Gas (bcf/d)
• World 81.61 • World 407.48
• U.S.* 12.40 • U.S. 98.09
• Russia 11.29 • Russia 66.82
• Saudi Arabia 9.75 • Iran 33.00
• Texas * 5.52 • Texas 24.48
• Iraq 4.81 • Qatar 22.33
• Canada ** 4.60 • Pennsylvania 18.73
• China 3.73 • Canada 16.80
• U.A.E 3.06 • China 16.39
• Brazil 2.94 • Norway 11.07
• Kuwait 2.64 • Saudi Arabia 8.33SOURCES: EIA; IEA; Oil and Gas Journalbcf/d: billion cubic feet per dayCrude oil data for Aug 2019; Natural gas data for June 2019;• * Based on average of preliminary weekly estimates for Aug 2019.
Global O&G Production
21
U.S. crude exports surge after lifting of export ban
0
0.5
1
1.5
2
2.5
3
3.5
2010 2020
Crude oil exports
Source: EIA
Mb/d
22
U.S. Total Product Imports and Exports
0
1
2
3
4
5
6
2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
Petroleum products exportsPetroleum products imports
Source: EIA
Mb/d, 3MMA
23
Bulk of U.S. natural gas exports go to Canada and Mexico
0
2
4
6
8
10
12
14
2006 2008 2010 2012 2014 2016 2018 2020
Total exportsExports to CanadaExports to Mexico
Source: EIA
Billion cubic feet per day, SA 3MMA
24
U.S. LNG exports rising
0
2
4
6
8
10
12
14
2001 2003 2005 2007 2009 2011 2013 2015 2017 2019
Total exportsPipeline exportsLNG exports
Source: EIA
Billion cubic feet per day, SA 3MMA
25
Energy Survey indicators weak in Q3
26
Index
SOURCE: Federal Reserve Bank of Dallas
-20
-10
0
10
20
30
40
50
60
70
80
BusinessActivity
CapitalExpenditures
Employment CompanyOutlook
Uncertainty End of YearPrice Forecast
($/barrel)
Q3 2018 Q4 2018 Q1 2019Q2 2019 Q3 2019
$60(2018)
$69(2018)
$57(2019)
Outlook
• Geopolitical risks have increased • Lower crude oil production growth in the U.S. in 2019 and
2020• Saudis trying to reassure markets and keep prices stable• US oil production growth weakening• Energy industry major driver for the New Mexico economy• U.S. energy exports continue to rise• Expect to see continued uncertainty and volatility in the
market.
27
www.dallasfed.org
28