May 2018 Short-Term Energy Outlook for Williston Basin Petroleum Conference May 24, 2018 | Bismarck, N.D. by Dr. Linda Capuano Administrator U.S. Energy Information Administration Independent Statistics & Analysis www.eia.gov
Brent crude oil prices are forecast to average about $71/b in 2018 and $66/b in 2019, with WTI prices $5/b lower in both years Crude oil spot price dollars per barrel Annual Energy 120 Outlook ($100/b) forecast 100 80 Brent crude oil 60 40 WTI crude oil 20 0 price difference -20 2025 2014 2015 2016 2017 2018 2019 Source: EIA Short-Term Energy Outlook, May 2018, EIA Annual Energy Outlook 2018, and Thomson Reuters. Short-Term Energy Outlook 2 May 24, 2018
Various events could lead to physical changes to global supply or demand that could push future crude oil prices higher or lower than in the current STEO forecast Potential Events Reduction in Iranian oil production because of renewed sanctions Venezuela’s oil production declines faster than expected Increase Prices U.S. crude oil production rises more slowly than expected Major geopolitical or weather related unanticipated supply disruption U.S. crude oil production continues to increase faster than expected Decrease Prices Weaker than expected economic and oil demand growth OPEC increases production in 2019 following expiration of the supply reduction agreement Removal of price subsidies creates greater price sensitivity, reducing demand Short-Term Energy Outlook 3 May 24, 2018
EIA has four main reports estimating domestic crude oil production • Petroleum Supply Monthly Survey Data (PSM) • Weekly Petroleum Status Report (WPSR) • Short-Term Energy Outlook (STEO) • Drilling Productivity Report (DPR) Short-Term Energy Outlook 4 May 24, 2018
Main sources of monthly oil and natural gas data are the EIA-914 survey and state administrative data EIA-914 survey requires roughly 375 operators, representing a minimum of 85% of production, to report state-level oil and natural gas production • Data is report individually for 15 states (AR, CA, CO, KS, LA, MT, NM, ND, OH, OK, PA, TX, UT, WV, WY), the Federal GOM, and an other states group excluding AK • Responses due 40 days after the close of the production month. Published monthly 60 days after the close of the production month. • EIA forecasts are benchmarked to this data State agencies also collect and release state-level data, plus well or lease level production data • Available 45 days to 2 years (or more) after close of the production month • EIA uses this data for analysis of decline rates and sub-state production rates (e.g., how Eagle Ford differs from Permian within Texas) Short-Term Energy Outlook 5 May 24, 2018
Forecasts improved with expanded EIA-914 survey in 2015 because revisions to historical data dropped to generally less than half a percent % difference between PSM with first EIA-914 data and most recent data in the PSM 4% Expanded EIA-914 survey began January 2015 2% 0% -2% Expanded data -4% became available August 2015 -6% Source: U.S. Energy Information Administration Petroleum Supply Monthly (PSM). EIA-914 FAQs Short-Term Energy Outlook 6 May 24, 2018
Monthly average FracFocus well completion filings have substantially greater variation than production data U.S. reported completions and recompletions filings Percent change month over month 600 100% 80% 500 60% 400 40% 300 20% 200 0% 100 -20% 0 -40% Jan-15 Jan-16 Jan-17 Jan-18 Jan-15 Jan-16 Jan-17 Jan-18 U.S. Weekly Reported Fracs 5wk Average m/m change Source: FracFocus weekly reported completion and recompletion filings Short-Term Energy Outlook 7 May 24, 2018
Sample timeline of PSM and STEO oil and natural gas production data reporting and releases January February March April January 1-31 March 12 April 11 Oil and natural Operator reports are due for January EIA monthly forecast with gas is produced production EIA-914 survey January data is released in • 40 days after the last day of the the Short-Term Energy production month Outlook (STEO) • First Tuesday after the first March 30 Thursday of the month • March PSM (data through Jan) EIA releases January production in • February and March estimates the Petroleum Supply Monthly (PSM) • Last day of the month Short-Term Energy Outlook 8 May 24, 2018
Global oil markets are expected to be relatively balanced in 2018, with some inventory growth expected in 2019, putting modest downward pressure on oil prices Global liquid fuels market balance million barrels per day 106 forecast 104 102 100 world production 98 96 94 world consumption 92 90 88 2013-Q1 2014-Q1 2015-Q1 2016-Q1 2017-Q1 2018-Q1 2019-Q1 2 implied stock build 1 0 -1 implied stock draw -2 Source: EIA Short-Term Energy Outlook, May 2018. Short-Term Energy Outlook 9 May 24, 2018
Global oil supply growth is forecast to increase in 2018-19 compared with 2016-17, the United States and Canada are key drivers of the increase Annual change in total liquid fuels production million barrels per day 3.0 OPEC Countries North America 2.5 Eurasia Latin America 2.0 Other Non-OPEC World 1.5 1.0 0.5 0.0 -0.5 -1.0 2016 2017 2018 2019 Source: EIA Short-Term Energy Outlook, May 2018. Short-Term Energy Outlook 10 May 24, 2018
Crude oil and hydrocarbon gas liquids (HGL) production growth—particularly of ethane and propane—support total U.S. liquids production growth in 2018-19 U.S. total liquid fuels production Components of annual change million barrels per day million barrels per day 2.5 20 2.0 2.0 total production 1.6 15 1.5 1.0 0.8 10 0.5 0.0 -0.3 5 fuel ethanol & biodiesel HGL (ethane, propane, butane, pentanes) -0.5 crude oil (net change) -1.0 0 2016 2017 2018 2019 2016 2017 2018 2019 Source: EIA Short-Term Energy Outlook, May 2018. Short-Term Energy Outlook 11 May 24, 2018
Strong HGL consumption growth contributes to an expected increase in U.S. liquid fuels consumption growth in 2018 U.S. total liquid fuels consumption Components of annual change million barrels per day million barrels per day 0.6 22 0.499 0.5 total consumption 21 0.4 0.154 20 0.268 0.3 0.190 0.2 19 0.1 18 0.0 distillate fuel 17 HGL (ethane, propane, butane, pentanes) -0.1 gasoline other 16 -0.2 (net change) 2016 2017 2018 2019 2016 2017 2018 2019 Source: EIA Short-Term Energy Outlook, May 2018. Short-Term Energy Outlook 12 May 24, 2018
With strong expected growth in crude oil production and high levels of refinery runs, EIA forecasts that net imports of petroleum will continue to decline U.S. total crude oil and petroleum product trade million barrels per day 16 gross imports forecast 14 12 10 8 6 net imports 4 2 0 -2 -4 gross exports -6 -8 -10 Jan-05 Jun-05 Nov-05 Apr-06 Sep-06 Feb-07 Jul-07 Dec-07 May-08 Oct-08 Mar-09 Aug-09 Jan-10 Jun-10 Nov-10 Apr-11 Sep-11 Feb-12 Jul-12 Dec-12 May-13 Oct-13 Mar-14 Aug-14 Jan-15 Jun-15 Nov-15 Apr-16 Sep-16 Feb-17 Jul-17 Dec-17 May-18 Oct-18 Mar-19 Aug-19 Source: EIA Short-Term Energy Outlook, May 2018 and EIA Petroleum Supply Monthly. Short-Term Energy Outlook 13 May 24, 2018
Henry Hub prices are forecast to average $3.01/MMBtu in 2018 and $3.11/MMBtu in 2019 Henry Hub natural gas price dollars per million British thermal units 6.50 6.00 5.50 historical Henry Hub spot price 5.00 4.50 4.00 STEO forecast 3.50 3.00 2.50 2.00 1.50 1.00 0.50 0.00 2013 2014 2015 2016 2017 2018 2019 Source: EIA Short-Term Energy Outlook, May 2018, and Thomson Reuters. Short-Term Energy Outlook 14 May 24, 2018
EIA forecasts marketed natural gas production to grow by a record 7.4 Bcf/d on average in 2018 U.S. marketed natural gas production Components of annual change billion cubic feet per day billion cubic feet per day 9 100 8 Haynesville 7.4 90 Permian 7 total production Appalachia 80 6 other 5 3.3 70 (net change) 4 60 3 2 50 1.1 1 40 0 30 -1 -1.0 -2 20 -3 10 -4 0 -5 2016 2017 2018 2019 2016 2017 2018 2019 Source: EIA Short-Term Energy Outlook, May 2018. Short-Term Energy Outlook 15 May 24, 2018
The regular-grade gasoline retail price forecast averages $2.90 per gallon in summer 2018 compared with $2.41 per gallon last summer Regular-grade gasoline retail price dollars per gallon Brent crude oil price (summer avg) 4.00 Wholesale gasoline - crude oil price difference (summer avg) Retail - wholesale gasoline price difference (summer avg) 3.50 2018 Forecast 2015 Monthly retail price Avg. $2.90 Avg. $2.63 3.00 2016 2017 Avg. $2.41 Avg. $2.23 2.50 2.00 1.50 1.00 0.50 0.00 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Source: Short-Term Energy Outlook, May 2018. Short-Term Energy Outlook 16 May 24, 2018
Household transportation expenditures in 2018 are projected to be higher than last year but similar to the average expenditures over the past decade Average annual household expenditures on gasoline and motor oil dollars $3,000 forecast $2,500 $2,000 All consumer units $1,500 $1,000 $500 $0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: U.S. Bureau of Labor Statistics, Consumer Expenditure Survey; EIA Short-Term Energy Outlook, May 2018. Short-Term Energy Outlook 17 May 24, 2018
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