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Outlook for 2011 Oil Markets: Why Oil Prices Will Stay in the Double Digits

Outlook for 2011 Oil Markets: Why Oil Prices Will Stay in the Double Digits David Knapp, Chief Energy Economist Energy Intelligence Group New York Energy Forum, February 3, 2011. On the Non-Sequitur of “Physical vs. Paper” Oil Demand, the Global Economy, Prices & Anti-Oil Policies

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Outlook for 2011 Oil Markets: Why Oil Prices Will Stay in the Double Digits

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  1. Outlook for 2011 Oil Markets: Why Oil Prices Will Stay in the Double Digits David Knapp, Chief Energy Economist Energy Intelligence Group New York Energy Forum, February 3, 2011

  2. On the Non-Sequitur of “Physical vs. Paper” Oil Demand, the Global Economy, Prices & Anti-Oil Policies Oil Supply, Non-Opec Growers vs. Decliners, Opec Non-Crude The Residual Calls on Opec and Saudi Crude Oil Inventories Levels and Asia’s Absorptive Capacity The Evolution of 2011 Crude Oil Prices and Differentials Outline

  3. Direction of causation with oil prices not provable either way Third factors interacting with both (economy, currency) Interrelationships between physical & paper are complex Common psychology underlies both Pricing power between crude & product markets ebbs & flows -- for both physical and paper markets The Non-Sequitur of “Physical vs. Paper”

  4. Uneven economic growth across countries and sectors German and US strength on currency/stimulus at the expense of PIIGS Relatively weak OECD economic & demand growth Jobless recoveries, debt crises, diminished stimulus, plus anti-oil policies for environmental & energy security reasons • Strong growth in Asia, led by China (but w/ policy uncertainty) Mideast Gulf also a significant contributor but not like summer Other non-OECD a mixed bag (FSU/CEE vs. LatAm) • Overall global demand growth for 2011 only 1.4 million b/d Oil Demand Issues

  5. Demand’s Mixed Bag

  6. Recovery and new fields give temporary non-Opec boost Brazil, Colombia, Ghana, Canada oil sands, India Ongoing growth in Opec NGLs & Other Qatar, Saudi Arabia, UAE, Nigeria Biofuels growing, but not as fast Big uncertainties about Russia and China Opec Mideast Gulf adds in Q3, offset to US Gulf storms Oil Supply Issues

  7. Non-Opec Grows Moderately

  8. Iraq contracts bring early fruit Nigerian politics less intrusive Angola fixes technical issues Saudis, UAE, Qatar need associated gas But, Venezuela and Iran could get worse “Unintentional” Opec Crude Growth

  9. Opec Growth Only Part Market-Driven

  10. More Supply Than Needed

  11. Big surplus expected in Q1, over 1.5 million b/d Supply stays ahead of demand in Q2 Biggest deficit in Q3, but not that big Mideast Gulf heat meets “normal” US GoM storms Q4 runs a half Q3 deficit, offering price support Small build for the year not too threatening but stocks are already high The Evolution of 2011 Balances

  12. Sloppy Oil Market Balances

  13. Days of forward OECD demand cover less relevant but still Opec’s barometer, still too high Extra oil expected to be going to non-OECD to support higher demand and to build base stocks Non-OECD strategic stocks also growing China aggressive program could depend on price Asian absorptive capacity has its limits Oil Inventory Issues

  14. Growing Share for Non-OECD *Oil at Sea, Independent commercial storage and floating inventories,, in million bbl.

  15. 2011 Outlook for Crude Prices

  16. 2011 Quarterly Price Outlook

  17. 2011 Monthly Price Outlook

  18. SUPPLEMENTAL DETAILON 2011 NON-OPEC OIL SUPPLY

  19. So. & Cent. America Leads

  20. FSU Chips In

  21. It’s Ghana Be An Up Year For Africa

  22. North America -- Losers Winning

  23. North Sea Declines Continue

  24. Asia Loses Ground Despite China Carryover

  25. Not Much Help From The Others

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