bob tippee 2011 mid-year forecast
TRANSCRIPT
Oil & Gas Journal Midyear Forecast - 2011
Bob Tippee, EditorOil & Gas JournalEnergy Advocates
June 23, 2011
World oil demand
Million b/d Change
Midyear 89.3 +1.5%
Forecast & Review 88.0 +1.6%
OECD down slightly at 45.9 MM b/d; non-OECD up 3.5% at 43.4 MM b/d
World oil supply
Million b/d Change
Midyear 89.0 +1.7%
Forecast & Review 88.8 +1.7%
Non-OPEC: 53.3 MM b/d (+1.1%)OPEC NGL: 5.9 MMb/d (+10.2%)Stock change: -300 M b/d OPEC crude: 29.8 MM b/d (+1%)
Second-half problem (MMb/d)
Quarter 1 Quarter 2 Quarter 3 Quarter 4
Demand 88.7 88.1 90.0 89.3
Supply 88.6 87.7 89.3 89.0
Of which:
Non-OPEC 52.9 52.6 53.4 54.2
OPEC NGL 5.8 5.8 5.9 6.0
OPEC crude 29.9 29.2 30.0 30.0
Stocks -0.1 -0.5 -0.7 -0.1
The OPEC story
• World needs 30 MM b/d of OPEC crude in 2H
• OPEC production:
– 29.9 MM b/d average 1Q
– 29.2 MM b/d in May
• OPEC June 8 meeting
– Split interests: haves vs. have-nots
– No quota adjustment
– Unilateral production hikes by S. Arabia, others
IEA today: tapping strategic stocks
• Release 60 MM bbl in next month (2 MM b/d)
– North America 50%, Europe 30%, Asia 20%
• “…contribute to well-supplied markets and to ensuring a soft landing for the world economy” (Executive Director Nobuo Tanaka)
• Total storage: 1.6 billion bbl
• Reassess in 30 days
• In market by July; Saudi oil can take 3 months
Effect of IEA action
• 2 MM b/d jolt of supply
• Brent and WTI quickly dropped by 7%
• Muted (so far) condemnation from OPEC
• Policy shift: market lever vs. emergency supply
Price wild cards
• Saudi response to IEA stock draw
• Economic response – especially crisis economies of Europe
• Dollar vs. Euro
• Demand response
• Trader worries about shrunken cushions (inventories and idle production capacity)
Spare production capacity (EIA)
OECD stocks
US oil price
WTI discount to Brent was almost $20/bbl yesterday (June 22).
US energy demand
Quads Change
Midyear 98.7 quads +0.5%
Forecast & Review 98.7 quads +0.5%
Assumes real GDP growth of 2%Federal Reserve yesterday lowered GDP growth projection for 2011 to 2.7-2.9% from 3.1-3.3% in AprilFed raised unemployment rate projection to 8.6-8.9% from 8.4-8.7% in April
US oil demand
Million b/d Change
Midyear 19.24 +0.5%
Forecast & Review 19.2 +1.0%
US demand for key products
Million b/d Change
GASOLINE
Midyear 9.03 0
Forecast & Review 9.19 +1%
DISTILLATE
Midyear 3.85 +1.5%
Forecast & Review 3.84 +1.8%
US gas price
WTI:HH price ratio 22:1 yesterday (June 22) vs. BTU ratio of 6:1
US demand for gas
Trillion cubic feet Change
Midyear 24.4 +1%
Forecast & Review 23.7 +0.2%
US gas production
Trillion cubic feet Change
Midyear 23.7 +5.3%
Forecast & Review 22.3 -1.0%
US gas imports
Trillion cubic feet Change
Midyear 3.4 -9.4%
Forecast & Review 3.65 -1.9%
Canada -9%Mexico -83.%LNG -7%
Treasury: Percentage depletion=subsidy
“The President agreed at the G-20 Summit in Pittsburgh to phase out subsidies for fossil fuels so that the United States can transition to a 21st-century energy economy. Percentage depletion effectively provides a lower rate of tax with respect to a favored source of income. “
The Close the Big Oil Tax Loophole Act
• Foreign tax credit for dual-capacity taxpayers
• Domestic production deduction (Sect. 199)
• Current-year expensing of intangible drilling costs (IDCs)
• Percentage depletion
• Deduction for qualified tertiary injectants