Quarterly Oil Price Outlook:

Transcription

1 Quarterly Oil Price Outlook: Stratas Webinar June 28, 2016 UPSTREAM MIDSTREAM DOWNSTREAM FUEL & TRANSPORT

2 Webinar Agenda Overview of Short Term Outlook Service Recent Happenings Highlights of Changes Market Fundamentals Outlook Price Outlook Methodology Stratas Advisors. All rights reserved. 2

3 Short Term Service Overview

4 Short Term Outlook Product Overview Global, integrated view, covering oil, oil products, petrochemicals, natural gas and NGLs Robust, analytical methodology Fully interactive data visualization and data downloads Quarterly forecast release with daily and weekly market commentary Stratas Advisors. All rights reserved. 4

5 Short Term Outlook Product Coverage Global coverage U.S. Europe Middle East Asia Forecasts for 8 quarters Monthly prices Updated quarterly Price set covers the entire spectrum Crude oils NGLs and feedstock Refined products Base petrochemicals Biofuels Forecasted margins Refinery Weekly analysis and commentary Crude oils Marker crudes Regional crudes API and sulfur ranges NGLs & Feedstock Ethane Propane Butane Naphtha Refined Products LPG Gasoline Jet fuel Diesel HFO Base Petrochemicals Olefins (Ethylene, Propylene) Aromatics (Benzene, Xylenes, Toluene) Stratas Advisors. All rights reserved. 5

6 Quarterly Review What has happened since our last forecast? Demand growth stronger than anticipated, driven by US and India Recession fears in China and US have all but evaporated Supply disruptions have tightened the global market to being balanced Prices have almost doubled since February Brexit strengthened the dollar substantially, killing upward price momentum and reducing likelihood of a rate hike this year US Shale is seeing resurgence but only in specific plays STACK, Permian; focus on cost reduction Iran came back aggressively but hit operational challenges OPEC remains fragmented Stratas Advisors. All rights reserved. 6

7 What s Driving Recent Changes in Crude Prices? US Dollar driving more than 28% of recent price changes US Dollar 28.3% Brent Price Forecast Factors Non-OPEC Crude Production 15.6% Non- OECD Demand 12.6% OPEC Crude Prod. 12.4% World GDP 11.8% Unplanned Prod Disrupt. 10.2% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Brexit vote, rate hike anticipation primary drivers of recent price volatility Decision of UK to leave EU is likely to keep the dollar as a primary driver Stratas Advisors. All rights reserved. 7

8 % of Short Positions Market Sentiment Continues to Rise NYMEX (WTI) and Brent (ICE) combined WTI Price Longs 10% 36% WTI Price (USD/bbl) Shorts 10% Source: Reuters, CFTC, NYMEX, ICE Stratas Advisors. All rights reserved. 8

9 Quarterly growth index (100 = 1Q2016) Demand Outlook Upward revision from 0.8 mmb/d to 1.2 mmb/d for 2016 Forecast Non-OECD Annualized Growth ( ): 1.6% OECD Annualized Growth ( ): -0.2% Stratas Advisors. All rights reserved. 9

10 Quarterly growth index (100 = 1Q2016) Supply Outlook 1.3 mmb/d of incremental crude and NGL supply Forecast OPEC +850 Mb/d Non-OPEC +460 Mb/d Stratas Advisors. All rights reserved. 10

11 Mb/d Inventory Levels Beginning to Draw - Slowly Supply disruptions balancing market faster than expected Forecast Million Barrels Stratas Advisors. All rights reserved. 11

12 Pricing Outlook

13 Brent Price Outlook How have previous Stratas price outlooks held up for the last 12 months? Forecast Source: Bloomberg, Stratas Advisors Stratas Advisors. All rights reserved. 13

14 USD/bbl Brent / WTI Diff Higher Than Previous Forecast Higher volatility combined with higher US production likely to drive diff USD/bbl Stratas Advisors. All rights reserved. 14

15 USD/BBL Global Product Price Outlook US prices remain strong with rising demand Forecast Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Asia Diesel Asia Gasoline Asia Fuel Oil USGC Diesel USGC Gasoline USGC Fuel Oil Stratas Advisors. All rights reserved. 15

16 Wildcards and Risk Factors

17 Wildcards What are the key markers for disruption? Price Impact Nigeria production comes back online; Venezuela comes off; Iranian ramp-up Dollar/GBP/Euro relationship will continue to drive much higher volatility than forecast Speed, pace and break-evens of shale production across plays Stratas Advisors. All rights reserved. 17

18 Key Brent Price Sensitivities How will wildcards affect price outcomes? Stratas Advisors. All rights reserved. 18

19 Mb/d Market Balance Sensitivity Nigeria remains at 1.35 mmb/d Draws 600 mmb from inventories Forecast Million Barrels Stratas Advisors. All rights reserved. 19

20 Mb/d Market Balance Sensitivity Nigeria returns fully to 2.2 mmb/d Draws 259 mmb from inventories Forecast Million Barrels Stratas Advisors. All rights reserved. 20

21 Shale s diversity driving uncertainty Even with technology advances, breakeven prices range widely Brexit Impacts Stratas Advisors. All rights reserved. 21

22 Key Price Drivers Base case assumptions for key uncertainties Nigeria comes back on slowly but struggles to return to full production Venezuela undergoes (mostly) peaceful regime change with some supply minor disruption UK negotiates new trade deals with EU; Sterling and Euro rebound U.S. shale s return remains confined to Permian, SCOOP/STACK and core acreage of other plays; puts downward pressure on prices Iran supply struggles to clear 4 mmb/d within the next two years Market is tight, but inventories will dampen price increases Stratas Advisors. All rights reserved. 22

23 Modeling Methodology

24 Methodology Framework of the Short-term Price Forecast Modeling Step 1: Select Key Drivers & Data Transformation Non-stationary Crude Oil Price/Differential and Fundamental Drivers (Time Series) Unit Root Test / Data Transformation Stationary Step 2: Diagnostic Tests Optimal Lag Selection Test Granger-causality Test Optimal Lag Selection Test Input Different Assumptions and What if Scenarios Cointegration Test Step 3: Apply Forecasting Model Cointegration Vectors VECM Model (Vector Error Correction Model) No Cointegration Vectors VAR Model (Vector Autoregression) BVAR Model (Bayesian Vector Autoregression) Step 4: Evaluate Outcomes Out-of-Sample Forecasting Evaluate Model Accuracy based on MAPE(Mean Absolute Percentage Error) Stratas Advisors. All rights reserved. 24