2017 paceshow four more volatile years a wild card future ... · • shale oil is not a fad – it...
TRANSCRIPT
![Page 1: 2017 PACEshow Four More Volatile Years A Wild Card Future ... · • Shale oil is not a fad – it is a game changer! • This just in - - - VMT. ... Latin America, and Eurasia, prompted](https://reader034.vdocument.in/reader034/viewer/2022050608/5faf2f78da9611284e54358d/html5/thumbnails/1.jpg)
February 24, 2017Kansas City Convention Center
February 24, 2017Kansas City Convention Center
2017 PACEshowFour More Volatile Years
A Wild Card Future for Oil Marketers
Tom KlozaGlobal Head of Energy Analysis, OPIS
February 24, 2017Kansas City Convention Center
![Page 2: 2017 PACEshow Four More Volatile Years A Wild Card Future ... · • Shale oil is not a fad – it is a game changer! • This just in - - - VMT. ... Latin America, and Eurasia, prompted](https://reader034.vdocument.in/reader034/viewer/2022050608/5faf2f78da9611284e54358d/html5/thumbnails/2.jpg)
February 24, 2017Kansas City Convention Center
Some Kloza Credentials
February 24, 2017Kansas City Convention Center
![Page 3: 2017 PACEshow Four More Volatile Years A Wild Card Future ... · • Shale oil is not a fad – it is a game changer! • This just in - - - VMT. ... Latin America, and Eurasia, prompted](https://reader034.vdocument.in/reader034/viewer/2022050608/5faf2f78da9611284e54358d/html5/thumbnails/3.jpg)
February 24, 2017Kansas City Convention Center
The Man Who Nailed the 2015 Oil Price Plunge is Predicting a Dismal 2016
Kloza sees U.S. oil benchmark hitting $32 a barrel
“I would think that we are going to retest the lows…the market will be most severely tested in February, March and April when we get Iranian crude and we have refinery maintenance. I still think we hold at $32 [a barrel] or higher and before the end of the year is over maybe $55 [ a barrel],” Kloza said.
![Page 4: 2017 PACEshow Four More Volatile Years A Wild Card Future ... · • Shale oil is not a fad – it is a game changer! • This just in - - - VMT. ... Latin America, and Eurasia, prompted](https://reader034.vdocument.in/reader034/viewer/2022050608/5faf2f78da9611284e54358d/html5/thumbnails/4.jpg)
February 24, 2017Kansas City Convention Center
Responses from my Esteemed Friends & Colleagues
From: Fred Rozell[mailto:[email protected]]Sent: Thursday, December 31, 2015 6:10 PMTo: Tom KlozaSubject: Marketwatch Story
Tom,
I just saw the New Year’s Eve story on Marketwatch where you are described as “Man who Nailed the oil market in 2015.”
The only thing you ever nailed was the attached sign for your own special parking spot.
![Page 5: 2017 PACEshow Four More Volatile Years A Wild Card Future ... · • Shale oil is not a fad – it is a game changer! • This just in - - - VMT. ... Latin America, and Eurasia, prompted](https://reader034.vdocument.in/reader034/viewer/2022050608/5faf2f78da9611284e54358d/html5/thumbnails/5.jpg)
February 24, 2017Kansas City Convention Center
![Page 6: 2017 PACEshow Four More Volatile Years A Wild Card Future ... · • Shale oil is not a fad – it is a game changer! • This just in - - - VMT. ... Latin America, and Eurasia, prompted](https://reader034.vdocument.in/reader034/viewer/2022050608/5faf2f78da9611284e54358d/html5/thumbnails/6.jpg)
February 24, 2017Kansas City Convention Center
2017 Future Outlook
![Page 7: 2017 PACEshow Four More Volatile Years A Wild Card Future ... · • Shale oil is not a fad – it is a game changer! • This just in - - - VMT. ... Latin America, and Eurasia, prompted](https://reader034.vdocument.in/reader034/viewer/2022050608/5faf2f78da9611284e54358d/html5/thumbnails/7.jpg)
February 24, 2017Kansas City Convention Center
Beware of oil price experts!
![Page 8: 2017 PACEshow Four More Volatile Years A Wild Card Future ... · • Shale oil is not a fad – it is a game changer! • This just in - - - VMT. ... Latin America, and Eurasia, prompted](https://reader034.vdocument.in/reader034/viewer/2022050608/5faf2f78da9611284e54358d/html5/thumbnails/8.jpg)
February 24, 2017Kansas City Convention Center
OPIS’ Track Record for 2016 –Decent, but Mixed
• Refiners all thought alike on gasoline – that had consequences.
• Retail prices of year-ago discounts stretched for 832 days.
• Demand was strong – or was it?
• Average retail gasoline price was $2.12/gal
• U.S. motorist annual cost was just above $300-billion.
![Page 9: 2017 PACEshow Four More Volatile Years A Wild Card Future ... · • Shale oil is not a fad – it is a game changer! • This just in - - - VMT. ... Latin America, and Eurasia, prompted](https://reader034.vdocument.in/reader034/viewer/2022050608/5faf2f78da9611284e54358d/html5/thumbnails/9.jpg)
February 24, 2017Kansas City Convention Center
Have we lost the capacity to be surprised?
• Music
• Sports
• Television Icons
• Decathletes
• OPEC
![Page 10: 2017 PACEshow Four More Volatile Years A Wild Card Future ... · • Shale oil is not a fad – it is a game changer! • This just in - - - VMT. ... Latin America, and Eurasia, prompted](https://reader034.vdocument.in/reader034/viewer/2022050608/5faf2f78da9611284e54358d/html5/thumbnails/10.jpg)
February 24, 2017Kansas City Convention Center
Some Things to Ponder at the Start of 2017
• “Lower for Longer” will still be true, just not as low. The multi-year lows from last winter will not be repeated this year. Unless…GDP fails.
• Global oil supply and demand is balancing, but there is still a global bloated crude oil supply situation that is going to take time to work off.
• Shale oil is not a fad – it is a game changer!
• This just in - - - VMT.
• More rigs, fewer regs.
![Page 11: 2017 PACEshow Four More Volatile Years A Wild Card Future ... · • Shale oil is not a fad – it is a game changer! • This just in - - - VMT. ... Latin America, and Eurasia, prompted](https://reader034.vdocument.in/reader034/viewer/2022050608/5faf2f78da9611284e54358d/html5/thumbnails/11.jpg)
February 24, 2017Kansas City Convention Center
The Greatest Change is “Scale”
• 1995 – Open Interest across NYMEX & ICE was less than1-million contracts. Nowadays, exponentially higher.
• In late September, we traded more than 1.1-millionfutures contracts in November WTI alone. There aremany days where more than 6-million contractsexchange hands, representing trillions of dollars at risk.
• In October, we traded 57 day’s supply of gasoline inone wild session. And…by some estimates, somethingclose to 94% of the daily volume is often donebetween “machine & machine.”
• Nine of the ten largest funds are programmed andalgorithmic; very active at the close in WTI.
![Page 12: 2017 PACEshow Four More Volatile Years A Wild Card Future ... · • Shale oil is not a fad – it is a game changer! • This just in - - - VMT. ... Latin America, and Eurasia, prompted](https://reader034.vdocument.in/reader034/viewer/2022050608/5faf2f78da9611284e54358d/html5/thumbnails/12.jpg)
February 24, 2017Kansas City Convention Center
OPEC Production in February• OPEC crude production in January
2017 dropped by about 900,000b/d thanks mostly to compliancefrom Saudis, Kuwait, UAE and Iraq.
• OPEC production wont’ fall muchmore, barring unexpected supplydisruptions
• IHS assumes that the “Gulf 3” –Saudi Arabia, Kuwait and UAE – willkeep production at lower levelsthrough at least March 2017, afterwhich point they may boost outputto meet a seasonal rise in worlddemand, including their own.
• It’s still too early to say if OPEC willroll over it’s production agreementat its May 2017 meeting. Whathappens if the cuts are notextended?
-0.4
-0.2
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
Feb-
16M
ar-1
6A
pr-1
6M
ay-1
6Ju
n-16
Jul-1
6A
ug-1
6S
ep-1
6O
ct-1
6N
ov-1
6D
ec-1
6Ja
n-17
Feb-
17M
ar-1
7A
pr-1
7M
ay-1
7Ju
n-17
Change in OPEC crude oil production from January 2016
Notes: Production data behind the January-June 2017 data points are outlooks.Source: IHS © 2017 IHS
Mill
ion
barr
els
per d
ay
![Page 13: 2017 PACEshow Four More Volatile Years A Wild Card Future ... · • Shale oil is not a fad – it is a game changer! • This just in - - - VMT. ... Latin America, and Eurasia, prompted](https://reader034.vdocument.in/reader034/viewer/2022050608/5faf2f78da9611284e54358d/html5/thumbnails/13.jpg)
February 24, 2017Kansas City Convention Center
U.S. oil supply hit bottom, and is set to push higher even with oil prices in the $50s
• IHS estimates that U.S. crude oil productionbottomed out in 3Q 2016 at about 8.7MMb/d–earlier and higher than previously expected.
• U.S crude production rises through the end of2017 and 2018, even with WTI prices in the$50s.
• Expect higher output from U.S. this year andnext, with most of the additional crudecoming from West Texas and New Mexico.
• Higher-than-expected oil prices in recentmonths have led to an increase in drilling,which is leading output to track higher thanprior views.
• Next year, inflation will return to the fields,and the need to cover more depletion fromthe larger number of wells completed in 2017,portends slower output growth in 2018
7.0
7.5
8.0
8.5
9.0
9.5
10.0
Jan-
13A
pr-1
3Ju
l-13
Oct
-13
Jan-
14A
pr-1
4Ju
l-14
Oct
-14
Jan-
15A
pr-1
5Ju
l-15
Oct
-15
Jan-
16A
pr-1
6Ju
l-16
Oct
-16
Jan-
17A
pr-1
7Ju
l-17
Oct
-17
Jan-
18A
pr-1
8Ju
l-18
Oct
-18
HistoryCurrent outlook (January 2017)Previous outlook (December 2016)
Monthly US crude oil production
Source: IHS, EIA © 2017 IHS
Mill
ion
barr
els
per d
ay
![Page 14: 2017 PACEshow Four More Volatile Years A Wild Card Future ... · • Shale oil is not a fad – it is a game changer! • This just in - - - VMT. ... Latin America, and Eurasia, prompted](https://reader034.vdocument.in/reader034/viewer/2022050608/5faf2f78da9611284e54358d/html5/thumbnails/14.jpg)
February 24, 2017Kansas City Convention Center
Global oil inventories to all but stop buildingDays of demand cover set to decline toward a more normal range by 2018
• The OPEC production agreement reached in November 2016 is intended to “accelerate the ongoing drawdown of the stock overhang,” according to a statement from the group.
• Our global liquids balance implies little reduction in absolute global oil inventories in 2017-18. As such, absolute stock levels will still be significantly higher than pre-2014 level.
• Global oil has a gelatinous belly, but it will get taller. Meanwhile, exports provide liposuction for North America but complicate the world picture.
52
54
56
58
60
62
64
66
0
1000
2000
3000
4000
5000
6000
7000
200720072007200720072007 200820082008200820082008 200920092009200920092009 201020102010201020102010 201120112011201120112011 201220122012201220122012 201320132013201320132013 201420142014201420142014 201520152015201520152015 201620162016201620162016 201720172017201720172017 2018
Crude Refined productsOutlook total Global inventory as days demand
Global oil storage
Source: EIA, IEA, JODI, IHS © 2017 IHS
Mill
ion
barr
els
Day
sde
man
d co
ver
![Page 15: 2017 PACEshow Four More Volatile Years A Wild Card Future ... · • Shale oil is not a fad – it is a game changer! • This just in - - - VMT. ... Latin America, and Eurasia, prompted](https://reader034.vdocument.in/reader034/viewer/2022050608/5faf2f78da9611284e54358d/html5/thumbnails/15.jpg)
February 24, 2017Kansas City Convention Center
Global Demand Keys:NGLs and commodity exporters to push growth into higher gear
• The pace of world liquids demand growth will quicken in 2017-18. IHS projects thatglobal liquids demand will rise by 1.6 MMb/d in 2017 and 1.7 MMb/d in 2018 – anacceleration from 1.3 MMb/d of gains in 2016. Two drivers of the acceleration are:a pick-up in global NGLs growth, spurred by an expansion of petrochemical andethane-cracking capacity; and a recovery in refined product demand growth innatural resource-exporting countries in the Middle East, Latin America, and Eurasia,prompted by higher oil prices (with Dated Brent expected to average about$14/bbl higher in 2017 than 2016). China and India are expected to continue toanchor global oil demand growth.
• Much of the increase comes from NGL where global demand growth could swellby 500,00 b/d each year in 2017 and 2018. NGL demand growth is concentrated inthose countries with sizeable and/or growing petrochemical and ethane-crackingcapacity (e.g. the United States, Middle East and China), or where LPGs make up ameaningful share of the domestic demand mix (e.g. India).
• Higher commodity prices – and the economic momentum that they generate – willenable commodity exporters to post relatively strong oil demand growth for 2017.Examples: they’ll be driving more in Middle Eastern countries, Russia, and Brazil.
![Page 16: 2017 PACEshow Four More Volatile Years A Wild Card Future ... · • Shale oil is not a fad – it is a game changer! • This just in - - - VMT. ... Latin America, and Eurasia, prompted](https://reader034.vdocument.in/reader034/viewer/2022050608/5faf2f78da9611284e54358d/html5/thumbnails/16.jpg)
February 24, 2017Kansas City Convention Center
Beyond OPEC:U.S. returns to growth, as does some of non-OPEC
• With higher prices, the return of U.S. output growthand projects planned before the 2014 price crashstill coming on stream, non-OPEC crude output willmove from a 2016 decline of 1.3 MMb/d to growthof 0.6 MMb/d in 2017 and 0.4 MMb/d in 2018.
• Major output gains are confined to a small set ofcountries: the United States, Russia, Canada,Kazakhstan and the UK.
• Output gains in 2017 will only be slightly hamperedby the 11 non-OPEC countries that agreed inDecember 2016 to reduce output by 558,000 b/dduring 1H 2017.o Russia’s promised 300,000 b/d cut is the key one and is
already underway, but much of the reduction seen sofar is due to very cold temperatures hindering oiloperations. In the first seven days of January 2017,output was about 100,000 b/d below the level inDecember 2016.
o Oman has made its 45,000 b/d reduction.o Normal decline counts toward the agreed-to-cuts, so
we continue to assume that countries where output isfalling – such as Mexico and Azerbaijan – areexpected to make their “contribution” to the broadernon-OPEC cut.
o Other non-OPEC producers party to the agreementmay elect to reduce output, but tracking will bedifficult given the small sized of the agreed cuts.
-1.0
-0.8
-0.6
-0.4
-0.2
0.0
0.2
0.4
0.6
0.8
1.0
Rus
sia
Can
ada
Bra
zil
Kaz
akhs
tan
Uni
ted
Kin
gdom
Nor
way
Om
an
Arg
entin
a
Aze
rbai
jan
Uni
ted
Sta
tes
Indi
a
Col
ombi
a
Mex
ico
Chi
na
2016 2017 2018
Annual change in crude oil production for selected non-OPEC countries, 2016–18
Source: IHS
Mill
ion
barr
els
per d
ay
© 2017 IHS
![Page 17: 2017 PACEshow Four More Volatile Years A Wild Card Future ... · • Shale oil is not a fad – it is a game changer! • This just in - - - VMT. ... Latin America, and Eurasia, prompted](https://reader034.vdocument.in/reader034/viewer/2022050608/5faf2f78da9611284e54358d/html5/thumbnails/17.jpg)
February 24, 2017Kansas City Convention Center
Goldman Sachs:Alternative Facts?
• A price of $59 bbl might be the top of the 2017 market; anything beyond that inspires the resurrection of shale.
• OPEC compliance is quite high. The U.S. is sloppy, but the “rest of the world is already showing signs of tightness.”
• PMI numbers in January were the strongest in six years. Imply that worldwide GDP growth could be 4.4%. If accurate, the calculus for global demand growth isn’t 1.5 million b/d, but instead something closers to 2.2 million b/d.
• Gasoline demand wasn’t down 460,000 b/d in January, but more like 85,000 b/d. Blame Mexico, high December refinery runs, and other transient factors. OPIS surveys say otherwise.
• Gasoline demand growth this year will be around 60,000 b/d. Expect 2016 final numbers to be around +150,000 b/d.
![Page 18: 2017 PACEshow Four More Volatile Years A Wild Card Future ... · • Shale oil is not a fad – it is a game changer! • This just in - - - VMT. ... Latin America, and Eurasia, prompted](https://reader034.vdocument.in/reader034/viewer/2022050608/5faf2f78da9611284e54358d/html5/thumbnails/18.jpg)
February 24, 2017Kansas City Convention Center
Observations on Refining Trends
• Another 200,000 b/d of refining capacity came online in 2016, bringing the 21st century addition to 2-million b/d. Most of the new additions were tilted toward diesel yield. No increase in 2017, however.
• Worldwide additions have been brisk, but mainly in Middle Eastern and Asian locations. Why build a new South American refinery? Wraparound deals may be coming.
• The big battle in next ten years is for octane. Hundreds of billions of dollars at stake.
![Page 19: 2017 PACEshow Four More Volatile Years A Wild Card Future ... · • Shale oil is not a fad – it is a game changer! • This just in - - - VMT. ... Latin America, and Eurasia, prompted](https://reader034.vdocument.in/reader034/viewer/2022050608/5faf2f78da9611284e54358d/html5/thumbnails/19.jpg)
February 24, 2017Kansas City Convention Center
2017 Gasoline Dynamics
![Page 20: 2017 PACEshow Four More Volatile Years A Wild Card Future ... · • Shale oil is not a fad – it is a game changer! • This just in - - - VMT. ... Latin America, and Eurasia, prompted](https://reader034.vdocument.in/reader034/viewer/2022050608/5faf2f78da9611284e54358d/html5/thumbnails/20.jpg)
February 24, 2017Kansas City Convention Center
2015 and 2016 NYMEX RBOB and ULSD Crack Spreads
0
5
10
15
20
25
30
35
40
45
50
1/2/15 3/2/15 5/2/15 7/2/15 9/2/15 11/2/15 1/2/16 3/2/16 5/2/16 7/2/16 9/2/16 11/2/16
NYMEX RBOB/ULSD CRACK SPREAD
RBOB CRACK ULSD CRACK
![Page 21: 2017 PACEshow Four More Volatile Years A Wild Card Future ... · • Shale oil is not a fad – it is a game changer! • This just in - - - VMT. ... Latin America, and Eurasia, prompted](https://reader034.vdocument.in/reader034/viewer/2022050608/5faf2f78da9611284e54358d/html5/thumbnails/21.jpg)
February 24, 2017Kansas City Convention Center
Just-in-Time:Still the Major North American Metric
• Shallow product inventoriesare quick-to-fill, but alsoquick-to-empty.
• Storage per capita is amere fraction of what itwas in 1975-1985,
• Just-in-time reigns supremefor gasoline seasonally, butdiesel seasonally is verymuch weather-dependent.
![Page 22: 2017 PACEshow Four More Volatile Years A Wild Card Future ... · • Shale oil is not a fad – it is a game changer! • This just in - - - VMT. ... Latin America, and Eurasia, prompted](https://reader034.vdocument.in/reader034/viewer/2022050608/5faf2f78da9611284e54358d/html5/thumbnails/22.jpg)
February 24, 2017Kansas City Convention Center
Population Changes – Not Very Subtle
1980 Population11.43 Million
Current Population
12.8 Million*
* IL actually lost more people than any other state, with that trend beginning in 2014. Estimates are that the 2016 population declined by 38,000.
Illinois
![Page 23: 2017 PACEshow Four More Volatile Years A Wild Card Future ... · • Shale oil is not a fad – it is a game changer! • This just in - - - VMT. ... Latin America, and Eurasia, prompted](https://reader034.vdocument.in/reader034/viewer/2022050608/5faf2f78da9611284e54358d/html5/thumbnails/23.jpg)
February 24, 2017Kansas City Convention Center
Population Changes – Not Very Subtle
Iowa
1980 Population2.91 Million
Current Population3.2 Million
![Page 24: 2017 PACEshow Four More Volatile Years A Wild Card Future ... · • Shale oil is not a fad – it is a game changer! • This just in - - - VMT. ... Latin America, and Eurasia, prompted](https://reader034.vdocument.in/reader034/viewer/2022050608/5faf2f78da9611284e54358d/html5/thumbnails/24.jpg)
February 24, 2017Kansas City Convention Center
Population Changes – Not Very Subtle
Wisconsin
1980 Population4.7 Million
Current Population5.8 Million
![Page 25: 2017 PACEshow Four More Volatile Years A Wild Card Future ... · • Shale oil is not a fad – it is a game changer! • This just in - - - VMT. ... Latin America, and Eurasia, prompted](https://reader034.vdocument.in/reader034/viewer/2022050608/5faf2f78da9611284e54358d/html5/thumbnails/25.jpg)
February 24, 2017Kansas City Convention Center
Population Changes –
North Dakota
1980 Population653,000
Current Population
790,700
![Page 26: 2017 PACEshow Four More Volatile Years A Wild Card Future ... · • Shale oil is not a fad – it is a game changer! • This just in - - - VMT. ... Latin America, and Eurasia, prompted](https://reader034.vdocument.in/reader034/viewer/2022050608/5faf2f78da9611284e54358d/html5/thumbnails/26.jpg)
February 24, 2017Kansas City Convention Center
Population Changes –
South Dakota
1980 Population691,000
Current Population
860,000
![Page 27: 2017 PACEshow Four More Volatile Years A Wild Card Future ... · • Shale oil is not a fad – it is a game changer! • This just in - - - VMT. ... Latin America, and Eurasia, prompted](https://reader034.vdocument.in/reader034/viewer/2022050608/5faf2f78da9611284e54358d/html5/thumbnails/27.jpg)
February 24, 2017Kansas City Convention Center
Population Changes –
Kansas
1980 Population2.4 Million
Current Population2.93 Million
![Page 28: 2017 PACEshow Four More Volatile Years A Wild Card Future ... · • Shale oil is not a fad – it is a game changer! • This just in - - - VMT. ... Latin America, and Eurasia, prompted](https://reader034.vdocument.in/reader034/viewer/2022050608/5faf2f78da9611284e54358d/html5/thumbnails/28.jpg)
February 24, 2017Kansas City Convention Center
Population Changes –
Nebraska
1980 Population1.52 Million
Current Population1.9 Million
![Page 29: 2017 PACEshow Four More Volatile Years A Wild Card Future ... · • Shale oil is not a fad – it is a game changer! • This just in - - - VMT. ... Latin America, and Eurasia, prompted](https://reader034.vdocument.in/reader034/viewer/2022050608/5faf2f78da9611284e54358d/html5/thumbnails/29.jpg)
February 24, 2017Kansas City Convention Center
Population Changes –
Missouri
1980 Population4.9 Million
Current Population6.1 Million
![Page 30: 2017 PACEshow Four More Volatile Years A Wild Card Future ... · • Shale oil is not a fad – it is a game changer! • This just in - - - VMT. ... Latin America, and Eurasia, prompted](https://reader034.vdocument.in/reader034/viewer/2022050608/5faf2f78da9611284e54358d/html5/thumbnails/30.jpg)
February 24, 2017Kansas City Convention Center
Driving Factors for Gasoline this Year
• Demand – 2016 may go down in the record books as the year with the highest demand. But it will be a lot closer than everyone thought in the first half of 2016. Blowout turns into a photo finish.
• Refiners are going to be more “careful.” Got caught up in strong demand measurements and tilted output to “max gasoline.” Discounts at the rack in sloppy markets.
• Supplies could be managed much better this year. At times, gasoline will operate at deficits to 2016. Should bring supplies back in tighter balance and bring imports back to the traditional spots. Not necessarily shortages, but could create some tight times.
• Exports will play a big role this year.
![Page 31: 2017 PACEshow Four More Volatile Years A Wild Card Future ... · • Shale oil is not a fad – it is a game changer! • This just in - - - VMT. ... Latin America, and Eurasia, prompted](https://reader034.vdocument.in/reader034/viewer/2022050608/5faf2f78da9611284e54358d/html5/thumbnails/31.jpg)
February 24, 2017Kansas City Convention Center
2016 OPIS Spot Gasoline Peaks and Valleys
Market/Key Product High Diff
Low Diff
High/Low Difference
High Price
Low Price
High/Low Difference
New York Harbor RBOB 11.25 -30 41.25 168.8 84.14 84.66
Gulf Coast CBOB 9.25 -34.875 44.125 165.23 75.14 90.09
Chicago RBOB 50 -36.75 86.75 211.98 53.89 158.09
Group 3 Sub-Octane 8.375 -30.5 38.875 164.2 60.89 103.31
Los Angeles CARBOB 55 -35 90 184.07 85.17 98.9
San Francisco CARBOB 38.75 -14 52.75 174.66 88.39 86.27
Pacific Northwest Sub-Octane 38 -18.5 56.5 176.99 85.37 91.62
NYMEX RBOB Futures Settlement 168.2 94.09 74.11
![Page 32: 2017 PACEshow Four More Volatile Years A Wild Card Future ... · • Shale oil is not a fad – it is a game changer! • This just in - - - VMT. ... Latin America, and Eurasia, prompted](https://reader034.vdocument.in/reader034/viewer/2022050608/5faf2f78da9611284e54358d/html5/thumbnails/32.jpg)
February 24, 2017Kansas City Convention Center
Can we really trust demand figures?Here’s what OPIS saw last year (2016 vs. 2015)
-0.9%
0.3%
1.2%1.3%
1.8%
0.2%
-1.5%
-1.0%
-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
Northeast Southeast Mid Continent Southwest West USA
Change vs 2015
![Page 33: 2017 PACEshow Four More Volatile Years A Wild Card Future ... · • Shale oil is not a fad – it is a game changer! • This just in - - - VMT. ... Latin America, and Eurasia, prompted](https://reader034.vdocument.in/reader034/viewer/2022050608/5faf2f78da9611284e54358d/html5/thumbnails/33.jpg)
February 24, 2017Kansas City Convention Center
Some 2017 Gasoline Conclusions
• Retail prices will resemble 2015…Front loaded. Can see a high in the $2.89/gal area. In the 2nd half of the year, a low in the $2.09/gal neighborhood. For the year, we should average between $2.409 –2.49/gal.
• Flat will be the word for demand…2016 should be a record year, but it will be close. See 2017 gasoline demand as flat to maybe a notch lower.
• Already shaping up to be a more traditional year. Believe the 11/14/16 RBOB futures low of $1.2684/gal appears to be safe. Applying a typical 57% rally, RBOB futures will peak near $1.99/gal.
• With assorted blips, burps and outages from refineries, some spot markets will top $2/gal this spring.
• Exports should see some new records. Mexico, Latin America and South America should be the largest recipients. If refinery operations are smooth, more exports from the West Coast.
![Page 34: 2017 PACEshow Four More Volatile Years A Wild Card Future ... · • Shale oil is not a fad – it is a game changer! • This just in - - - VMT. ... Latin America, and Eurasia, prompted](https://reader034.vdocument.in/reader034/viewer/2022050608/5faf2f78da9611284e54358d/html5/thumbnails/34.jpg)
February 24, 2017Kansas City Convention Center
An equally important wild card:U.S. Weekly Refined Products Exports
1266
1049968
1137
13031355
1278
860821
923
1120 11261165
1048
841
1128
1321
1130
1416
1200
156225
102 129187
229
70 88 97 93 77 84 88 104
245 223 189275
184 149
454
549
655
553606
547
727805
644
811 794
1069
960874 879
992
1131
795
1149
996
AU
G 1
9, 2
016
AU
G 2
6, 2
016
SEP
02, 2
016
SEP
09, 2
016
SEP
16, 2
016
SEP
23, 2
016
SEP
30, 2
016
OC
T 07
, 201
6
OC
T 14
, 201
6
OC
T 21
, 201
6
OC
T 28
, 201
6
NO
V 0
4, 2
016
NO
V 1
1, 2
016
NO
V 1
8, 2
016
NO
V 2
5, 2
016
DEC
02,
201
6
DEC
09,
201
6
DEC
16,
201
6
DEC
23,
201
6
DEC
30,
201
6
Weekly U.S. Exports of Total Distillate (Thousand Barrels per Day)
Weekly U.S. Exports of Kerosene-Type Jet Fuel (Thousand Barrels per Day)
Weekly U.S. Exports of Finished Motor Gasoline (Thousand Barrels per Day)Source: EIA
![Page 35: 2017 PACEshow Four More Volatile Years A Wild Card Future ... · • Shale oil is not a fad – it is a game changer! • This just in - - - VMT. ... Latin America, and Eurasia, prompted](https://reader034.vdocument.in/reader034/viewer/2022050608/5faf2f78da9611284e54358d/html5/thumbnails/35.jpg)
February 24, 2017Kansas City Convention Center
Has Diesel Lost its Mojo?
![Page 36: 2017 PACEshow Four More Volatile Years A Wild Card Future ... · • Shale oil is not a fad – it is a game changer! • This just in - - - VMT. ... Latin America, and Eurasia, prompted](https://reader034.vdocument.in/reader034/viewer/2022050608/5faf2f78da9611284e54358d/html5/thumbnails/36.jpg)
February 24, 2017Kansas City Convention Center
No Longer the Magic Molecule
24.9722.92
28.07
11.94
15.54
34.47
39.10
32.19
29.37
25.84
12.50
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
40.00
45.00
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 YTD
![Page 37: 2017 PACEshow Four More Volatile Years A Wild Card Future ... · • Shale oil is not a fad – it is a game changer! • This just in - - - VMT. ... Latin America, and Eurasia, prompted](https://reader034.vdocument.in/reader034/viewer/2022050608/5faf2f78da9611284e54358d/html5/thumbnails/37.jpg)
February 24, 2017Kansas City Convention Center
A comeback for diesel…but not all the way back
• Diesel should see some positive momentum generators for demand.o Increase U.S. oil drilling potential to add 100-150 kb/day to current demand.o President Trump’s infrastructure kick. This should help diesel demand (asphalt,
too).o Expectations for stronger global GDP means more construction and demand.
• Refiners managed distillate output better than gasoline in 2016. Late December saw total distillate inventories dip below previous year.
• Exports. It’s not just gasoline, refiners need a vibrant export market. Keep an eye on the rest of the western hemisphere. And PDVSA and Mexico.
![Page 38: 2017 PACEshow Four More Volatile Years A Wild Card Future ... · • Shale oil is not a fad – it is a game changer! • This just in - - - VMT. ... Latin America, and Eurasia, prompted](https://reader034.vdocument.in/reader034/viewer/2022050608/5faf2f78da9611284e54358d/html5/thumbnails/38.jpg)
February 24, 2017Kansas City Convention Center
2016 OPIS ULSD Peaks and Valleys
Market/Key Product High Diff Low Diff High/Low Difference High Price Low Price High/Low
Difference
New York Harbor ULSD 2.75 -5.25 8 170.43 85.32 85.11
Gulf Coast ULSD -0.25 -10.25 10 167.12 81.68 85.44
Chicago ULSD 6 -16.75 22.75 163.77 86.57 77.2
Group 3 ULSD 5.5 -12.5 18 165.37 84.32 81.05
Los Angeles CARB Diesel 14.5 -7 21.5 177.195 90.28 86.915
San Francisco CARB Diesel 18.5 -8 26.5 178.32 90.57 87.75
Pacific Northwest ULSD 25 -5 30 177.82 88.51 89.31
NYMEX ULSD Futures Settlement 170.43 86.57 83.86
![Page 39: 2017 PACEshow Four More Volatile Years A Wild Card Future ... · • Shale oil is not a fad – it is a game changer! • This just in - - - VMT. ... Latin America, and Eurasia, prompted](https://reader034.vdocument.in/reader034/viewer/2022050608/5faf2f78da9611284e54358d/html5/thumbnails/39.jpg)
February 24, 2017Kansas City Convention Center
The Next 12-25 Years -Perhaps
![Page 40: 2017 PACEshow Four More Volatile Years A Wild Card Future ... · • Shale oil is not a fad – it is a game changer! • This just in - - - VMT. ... Latin America, and Eurasia, prompted](https://reader034.vdocument.in/reader034/viewer/2022050608/5faf2f78da9611284e54358d/html5/thumbnails/40.jpg)
February 24, 2017Kansas City Convention Center
Americans will drive more…on less
20
22
24
26
28
30
32
34
36
2000
2200
2400
2600
2800
3000
3200
3400
3600
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035
Com
bined MPG
of Registered LDV
sBi
llion
Mile
s D
rive
n
Miles Traveled and Fuel Economy
MPG VMT
2016-2025Miles Driven: +17.1%
MPG: +55.8%
![Page 41: 2017 PACEshow Four More Volatile Years A Wild Card Future ... · • Shale oil is not a fad – it is a game changer! • This just in - - - VMT. ... Latin America, and Eurasia, prompted](https://reader034.vdocument.in/reader034/viewer/2022050608/5faf2f78da9611284e54358d/html5/thumbnails/41.jpg)
February 24, 2017Kansas City Convention Center
U.S. gasoline demand will drop
5000
5500
6000
6500
7000
7500
8000
8500
9000
9500
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035
Thou
sand
Bar
rels
per
Day
Gasoline Demand
![Page 42: 2017 PACEshow Four More Volatile Years A Wild Card Future ... · • Shale oil is not a fad – it is a game changer! • This just in - - - VMT. ... Latin America, and Eurasia, prompted](https://reader034.vdocument.in/reader034/viewer/2022050608/5faf2f78da9611284e54358d/html5/thumbnails/42.jpg)
February 24, 2017Kansas City Convention Center
What did Americans by in 2015?
Diesel, 2.78%
Electric, 0.41%
Gasoline, 94.37%
Hybrid, 2.17%Plug In, 0.25%
![Page 43: 2017 PACEshow Four More Volatile Years A Wild Card Future ... · • Shale oil is not a fad – it is a game changer! • This just in - - - VMT. ... Latin America, and Eurasia, prompted](https://reader034.vdocument.in/reader034/viewer/2022050608/5faf2f78da9611284e54358d/html5/thumbnails/43.jpg)
February 24, 2017Kansas City Convention Center
What did they buy in 2016?
Diesel, 2.63%
Electric, 0.34%
Gasoline, 94.83%
Hybrid, 1.84%
Plug In, 0.35%
![Page 44: 2017 PACEshow Four More Volatile Years A Wild Card Future ... · • Shale oil is not a fad – it is a game changer! • This just in - - - VMT. ... Latin America, and Eurasia, prompted](https://reader034.vdocument.in/reader034/viewer/2022050608/5faf2f78da9611284e54358d/html5/thumbnails/44.jpg)
February 24, 2017Kansas City Convention Center
Why the rush to AV?Autonomous Benefits:• Safety –
o 35,000 U.S. deaths/yro Up 9.3% in 2015
• Environment –o 3.1B gallons wasted
• Societal –o Mobility for immobile
![Page 45: 2017 PACEshow Four More Volatile Years A Wild Card Future ... · • Shale oil is not a fad – it is a game changer! • This just in - - - VMT. ... Latin America, and Eurasia, prompted](https://reader034.vdocument.in/reader034/viewer/2022050608/5faf2f78da9611284e54358d/html5/thumbnails/45.jpg)
February 24, 2017Kansas City Convention Center
Some Observations on Renewable Identification Numbers (RINsanity)…
• The RFS is not going away; 2017 volumes may be a plateau. The industry is divided, nearly 50-50 on the prospect for a tweak lower in renewable targets.
• The current price around 50cts for D6 2017 Ethanol RINs, reflect that downside risk. If President Trump, EPA Administrator Pruitt and Carl Icahn leave volumes untouched, D6 RINs will rise by 10cts or so immediately.
• Consensus view of perhaps 60/40 is that the blenders’ tax credit for biodiesel will not be reinstated. If that is true, D4 RINs will probably rise to perhaps 70cts or more above D6 RINs, or above $1.20.
• Although some talk mentions 50-50 possibility of moving the obligation to the rack, we think odds are that point remains the same.
• Refiner costs for RINs are mostly included in the wider cracks for gasoline (and even diesel) that have prevailed since RFS began.
• High RIN costs are the real lever for adoption of E15 and higher blends. Rollout of E15 has been slowed by RIN drive.
![Page 46: 2017 PACEshow Four More Volatile Years A Wild Card Future ... · • Shale oil is not a fad – it is a game changer! • This just in - - - VMT. ... Latin America, and Eurasia, prompted](https://reader034.vdocument.in/reader034/viewer/2022050608/5faf2f78da9611284e54358d/html5/thumbnails/46.jpg)
February 24, 2017Kansas City Convention Center
Absolutely Final Thoughts• Liquid fuels clearly dominate – what happens
to CAFÉ?• Electric gains, but fractionally through middle
of next decade.• Autonomous vehicles will arrive, but will they
be embraced?• Cheap Oil slows down the process.• Time-saving bumps up inside sales, but only for
top quartile stores.• Huge differences between Metro, Suburban
and Rural.
![Page 47: 2017 PACEshow Four More Volatile Years A Wild Card Future ... · • Shale oil is not a fad – it is a game changer! • This just in - - - VMT. ... Latin America, and Eurasia, prompted](https://reader034.vdocument.in/reader034/viewer/2022050608/5faf2f78da9611284e54358d/html5/thumbnails/47.jpg)
February 24, 2017Kansas City Convention Center
What was the most amazing craze of 2016?
![Page 48: 2017 PACEshow Four More Volatile Years A Wild Card Future ... · • Shale oil is not a fad – it is a game changer! • This just in - - - VMT. ... Latin America, and Eurasia, prompted](https://reader034.vdocument.in/reader034/viewer/2022050608/5faf2f78da9611284e54358d/html5/thumbnails/48.jpg)
February 24, 2017Kansas City Convention Center
Come visit OPIS inNew Jersey
![Page 49: 2017 PACEshow Four More Volatile Years A Wild Card Future ... · • Shale oil is not a fad – it is a game changer! • This just in - - - VMT. ... Latin America, and Eurasia, prompted](https://reader034.vdocument.in/reader034/viewer/2022050608/5faf2f78da9611284e54358d/html5/thumbnails/49.jpg)
February 24, 2017Kansas City Convention Center
Appendices for further reading
![Page 50: 2017 PACEshow Four More Volatile Years A Wild Card Future ... · • Shale oil is not a fad – it is a game changer! • This just in - - - VMT. ... Latin America, and Eurasia, prompted](https://reader034.vdocument.in/reader034/viewer/2022050608/5faf2f78da9611284e54358d/html5/thumbnails/50.jpg)
February 24, 2017Kansas City Convention Center
2015 Unl Margins by County
![Page 51: 2017 PACEshow Four More Volatile Years A Wild Card Future ... · • Shale oil is not a fad – it is a game changer! • This just in - - - VMT. ... Latin America, and Eurasia, prompted](https://reader034.vdocument.in/reader034/viewer/2022050608/5faf2f78da9611284e54358d/html5/thumbnails/51.jpg)
February 24, 2017Kansas City Convention Center
2016 Unl Margins by County
![Page 52: 2017 PACEshow Four More Volatile Years A Wild Card Future ... · • Shale oil is not a fad – it is a game changer! • This just in - - - VMT. ... Latin America, and Eurasia, prompted](https://reader034.vdocument.in/reader034/viewer/2022050608/5faf2f78da9611284e54358d/html5/thumbnails/52.jpg)
February 24, 2017Kansas City Convention Center
2015 Dsl Margins by County
![Page 53: 2017 PACEshow Four More Volatile Years A Wild Card Future ... · • Shale oil is not a fad – it is a game changer! • This just in - - - VMT. ... Latin America, and Eurasia, prompted](https://reader034.vdocument.in/reader034/viewer/2022050608/5faf2f78da9611284e54358d/html5/thumbnails/53.jpg)
February 24, 2017Kansas City Convention Center
2016 Dsl Margins by County
![Page 54: 2017 PACEshow Four More Volatile Years A Wild Card Future ... · • Shale oil is not a fad – it is a game changer! • This just in - - - VMT. ... Latin America, and Eurasia, prompted](https://reader034.vdocument.in/reader034/viewer/2022050608/5faf2f78da9611284e54358d/html5/thumbnails/54.jpg)
February 24, 2017Kansas City Convention Center
The U.S. Consumer Wallet
364.5
395.6
447.1
323.3
383.5
473.7 478.5467.9
453.5
336.0
299.0
250
300
350
400
450
500
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Estimated Annual Dollars Spent On Gasoline
![Page 55: 2017 PACEshow Four More Volatile Years A Wild Card Future ... · • Shale oil is not a fad – it is a game changer! • This just in - - - VMT. ... Latin America, and Eurasia, prompted](https://reader034.vdocument.in/reader034/viewer/2022050608/5faf2f78da9611284e54358d/html5/thumbnails/55.jpg)
February 24, 2017Kansas City Convention Center
Thank You
Questions? Discussion
Contact InformationTom Kloza
Phone: 732-730-2558Email: [email protected]
Twitter: @tomkloza