The US shifting its energy policy what are the implications? - PowerPoint PPT Presentation

The US shifting its energy policy – what are the implications? Effects in oil and gas markets Thina Margrethe Saltvedt, Chief Analyst Macro/Oil (Ph. D.) 19.10.2017

American stock market moved up significantly since the election day 8 th November, but what about oil prices? 2

What does Trump mean for the global oil market? Russia XL Keystone Iran Open up Venezuela federal land and offshore North Korea Increased export 3

Increasing tension on the Korean Peninsula 4 Source: Google maps

5 growth China net importer of oil and main trigger of global oil demand in % -40 -20 20 40 60 80 0 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 Mb/d 10 12 14 16 18 20 0 2 4 6 8 1Q2005 4Q2005 3Q2006 2Q2007 South Korea 1Q2008 4Q2008 3Q2009 2Q2010 Japan 1Q2011 4Q2011 3Q2012 China 2Q2013 1Q2014 4Q2014 3Q2015 2Q2016 1Q2017 4Q2017

Thousand barrels per day 1000 1200 1400 1600 1800 2000 6 especially for oil trade Trump new sanctions on Venezuela – but many loopholes 200 400 600 800 0 jan-2004 nov-2004 sep-2005 jul-2006 US Export product. rhs US Crude import. lhs US Product import, lhs maj-2007 mar-2008 jan-2009 nov-2009 sep-2010 jul-2011 maj-2012 mar-2013 jan-2014 nov-2014 sep-2015 jul-2016 0 50 100 150 200 250 Thousand barrels per day Thousand barrels per day 1000 1500 2000 2500 3000 3500 jan-84 aug-85 mar-87 Venezuela Crude Oil Production okt-88 maj-90 dec-91 jul-93 feb-95 sep-96 apr-98 nov-99 jun-01 jan-03 aug-04 Source: IEA, BP mar-06 okt-07 maj-09 dec-10 jul-12 feb-14 sep-15 apr-17

US still highly dependent on imported crude 12000 10000 Thousand barrels per day 8000 Norway Mexico 6000 Canada Venezuela Saudi Arabia 4000 US total 2000 0 Source: EIA 7

8 demand growth going forward Trump Boarder Adjustment Tax (BAT) could slow the oil USD per barrel 105 115 35 45 55 65 75 85 95 des. 13 mar. 14 jun. 14 sep. 14 des. 14 mar. 15 jun. 15 sep. 15 des. 15 mar. 16 jun. 16 sep. 16 des. 16 mar. 17 jun. 17 sep. 17 des. 17 mar. 18 jun. 18 Current forecast Forecast with BAT sep. 18 des. 18 mar. 19 jun. 19 sep. 19 des. 19 mar. 20 jun. 20 sep. 20 des. 20

US coal production has picked up by 15% in 2017 9 Source: EIA

US metallurgical export dependent on steel production in China 80000 70000 60000 50000 Index 40000 30000 20000 10000 0 2012-08-01 2011-10-01 2012-03-01 2013-01-01 2013-06-01 2013-11-01 2014-04-01 2014-09-01 2015-02-01 2015-07-01 2015-12-01 2016-05-01 2016-10-01 2017-03-01 2017-08-01 Thermal coal/Steam coal used to fuel power plants Metallurgical (or «met») coal, has a higher carbon content and used primarily to make steel. 10 Source: IEA and Bloomberg

North America’s share of metals demand limited 100% • North American consumption corresponds to only c. 10% 80% of the global demand 8% 8% • China still dominates global 10% 10% 10% metal’s market with c. 50% 60% share of the total demand 7% • Any major shift in metals 40% demand or prices is highly likely to require Chinese influence 20% • Almost no matter Trump does will have only limited, 0% temporary or slow impact on global metals demand and prices China Europe North America Asia ex China Others Source: Wood Mackenzie, World Steel Association, World Gold Council, Bloomberg, Nordea Markets 11

US natural gas export boosted by the shale revolution – no signs that the US will put the breaks on yet 12

US natural gas exports have risen sharply 13 Source: EIA

Norway and Russia will face stronger competition in the European market from a growing US LNG supply 500 Other Highly likely Forecast and 'likely' East Africa pre-FID 450 Russia 400 West Africa 350 Australia North America 300 North America 250 Russia Operational, under 200 Australia construction or Other 150 post-FID West Africa 100 North Africa 50 Indonesia 0 Malaysia 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Qatar Demand 14 Source: BNEF, Poten & Partners

Trump a victory for the oil market? 15 Source: Political cartoon

Last hurricane landfall in Texas was Ike in 2008 - there have ben many changes to the us oil industry since then - Gulf of Mexico accounts for nearly 20% of US crude production - 426k b/d production shut down or 25% of Gulf oil output - 26% natural gas production closed in - 112 platforms and 5 rigs evacuated - Shale oil production makes the US less vulnerable than it was after Katrina, Rita, Ike - Platforms, rigs, refineries and pipelines have been reinforced after Katrina - Delay crude/product shipments 16

Carbon Capture and Storage (CCS) technology – growing interest by both democrats and republicans 17 Source: Dagens Næringsliv and Aker Solutions

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US oil production soon to reach new highs kb/d 6 000 5 000 4 000 3 000 2 000 1 000 0 nov10 apr12 sep13 feb15 jul16 Bakken Eagle Ford Permian Niobrara 19 Source: EIA

US crude export continues to rise after Obama removed the ban 20

More flexible US shale oil had changed the price setting dynamics in the market – OPEC’s dominance is fading Supply t0 Price Demand Supply t1 Quantity 21

Disruptive technologies will change our demand for oil radically – with or without Trump’s permission Electris Truck Ampere: Electric battery ferry Battery technology 3D printing Car-sharing andautonomous vehicles Hyperloop 22 Source: Tine, SelfPlan, The Economist, Spiri, Automotive.com,

China considers to ban sales of petrol cars like Norway, France and the UK 23 Source: Bloomberg, The Observer

Costs of producing solar and wind power are falling sharply 24 Kilde: BNEF, CNBC

Distruptive technology will increase competition in the transport sector and the demand curve will shift Supply t0 Price Demand t0 Demand t1 Supply t1 Quantity 25

So who’s won the first round – fossil or green energy? 26

Thank you! Thina Margrethe Saltvedt Chief Analyst Macro/Oil (Ph. D.) thina.margrethe.saltvedt@nordea.com Mobile : +4790634075 Twitter: @ThinaSaltvedt Nordea Markets is the commercial name for Nordea’s international capital markets operation. The information provided herein is intended for background information only and for the sole use of the intended recipient. The views and other information provided herein are the current views of Nordea Markets as of the date of this document and are subject to change without notice. This notice is not an exhaustive description of the described product or the risks related to it, and it should not be relied on as such, nor is it a substitute for the judgement of the recipient. The information provided herein is not intended to constitute and does not constitute investment advice nor is the information intended as an offer or solicitation for the purchase or sale of any financial instrument. The information contained herein has no regard to the specific investment objectives, the financial situation or particular needs of any particular recipient. Relevant and specific professional advice should always be obtained before making any investment or credit decision. It is important to note that past performance is not indicative of future results. Nordea Markets is not and does not purport to be an adviser as to legal, taxation, accounting or regulatory matters in any jurisdiction. This document may not be reproduced, distributed or published for any purpose without the prior written consent from Nordea Markets.