Oil and natural gas market outlook and drivers · PDF fileOil and natural gas: market outlook...

www.eia.govU.S. Energy Information Administration Independent Statistics & Analysis

Oil and natural gas: market outlook and drivers

for

American Foundry Society

May 18, 2016 | Washington, DC

by

Howard Gruenspecht, Deputy Administrator

world supply and demand

million barrels per day

implied stock change


AFS | Oil and natural gas market outlook and drivers, May 18, 2016

Global supply has consistently exceeded demand since the start of 2014;

EIA forecasts a return to market balance in the second half of 2017

Source: EIA, Short-Term Energy Outlook, May 2016

2

Forecast

-3

-2

-1

0

1

2

3

4

5

6

82

84

86

88

90

92

94

96

98

100

2011-Q1 2012-Q1 2013-Q1 2014-Q1 2015-Q1 2016-Q1 2017-Q1

Implied stock change and balance (right axis)

World production (left axis)

World consumption (left axis)

0

20

40

60

80

100

120

Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct

Historical Spot Price

STEO Forecast

NYMEX Futures Price

Current 95% NYMEX futures price confidence interval

2013 2014 2015 2016 2017

WTI price

dollars per barrel

EIA expects WTI oil prices to remain low compared to recent history,

but the market-implied confidence band is very wide


3AFS | Oil and natural gas market outlook and drivers, May 18, 2016

U.S. tight oil production

million barrels of oil per day

U.S. dry shale gas production

billion cubic feet per day

The U.S. has experienced a rapid increase in natural gas and oil

production from shale and other tight resources

Sources: EIA derived from state administrative data collected by DrillingInfo Inc. Data are through February 2016 and represent EIA’s official

tight oil & shale gas estimates, but are not survey data. State abbreviations indicate primary state(s).


-2

-1.5

-1

-0.5

0

0.5

1

Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2014 2015 2016 2017

Total U.S. Production

Lower 48

Alaska

Federal Gulf of Mexico

U.S. crude oil production growth by area

change from fourth quarter, 2014 (million barrels per day)

Long lead times and past investment are contributing to growth from

the Gulf of Mexico as Lower 48 production declines



Source: EIA, Short-Term Energy Outlook and Drilling Productivity Report, May 2016; International Energy Agency

Crude supply trends outside the United States (red areas below) are key to future

oil market balance: geopolitical developments, exporter decisions, and the timing

and magnitude of supply effects stemming from reduced investment all matter


Forecast

-2

-1

0

1

2

3

4

5

6

7

8

9

76

78

80

82

84

86

88

90

92

94

96

98

2009 2010 2011 2012 2013 2014 2015 2016 2017

Change in U.S. consumption (right axis)

Change in China consumption (right axis)

Change in other consumption (right axis)

Total world consumption (left axis)

world liquid fuels consumption


annual change


EIA forecasts global liquids consumption growth at 1.2 million b/d in

2016 and 1.3 million b/d in 2017



0

1

2

3

4

5

6

7

Jan-12 Jun-12 Nov-12 Apr-13 Sep-13 Feb-14 Jul-14 Dec-14 May-15 Oct-15 Mar-16

2013 2014 2015 2016 2017

GDP growth in non-OECD countries

annual expectations by date of forecast

Non-OECD economic growth projections, a key driver of oil demand,

have been reduced over the course of recent STEO forecasts



Global Energy: Drivers and Projections


-4

-2

0

2

4

6

U.S. OECDEurope

Japan SouthKorea

China India Brazil MiddleEast

Africa Russia

Energy Intensity GDP per capita Population

average annual percent change (2012–40)

percent per year


Economic activity and population drive increases in energy use; energy

intensity (E/GDP) improvements moderate this trend

Source: EIA, International Energy Outlook 2016

10

0

50

100

150

200

250

1990 2000 2010 2020 2030 2040

Coal

Petroleum and other liquid fuels

Natural gas

Renewables

Nuclear

Coal with U.S. CPP

Renewables with

U.S. CPP

Share of

total energy

world energy consumption

quadrillion Btu


Renewables grow fastest, coal use plateaus, natural gas surpasses coal

by 2030, and oil maintains its leading share

Source: EIA, International Energy Outlook 2016 and EIA, Analysis of the Impacts of the Clean Power Plan (May 2015)

11

History Projections2012

33%

30%

28%

22%

23%

26%

12%

17%

4%

6%

22%

16%

0 10 20 30 40

OECD Europe

OECD Asia

OECD Americas

Africa

Non-OECD Europe and Eurasia

Non-OECD Americas

Middle East

Non-OECD Asia

2012

2020

2040

world petroleum and other liquid fuels consumption



Most of the growth in world oil consumption occurs in the non-OECD

regions — especially Asia


12

passenger-miles per capita (left-axis) and GDP per capita (horizontal-axis) for

selected country groupings 2010–40


Passenger-miles per person will rise as GDP per capita grows; travel

growth is largely outside the OECD


13

0

2,000

4,000

6,000

8,000

10,000

12,000

$0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000

OECD

China

Other

non-OECD Asia

Africa

India

0

10

20

30

40

50

60

2000 2010 2020 2030 2040

Non-OPEC crude and lease condensate

OPEC crude and lease condensate

Other liquids

world production of petroleum and other liquid fuels



Liquid fuels supplies from both OPEC and non-OPEC producers

increase through 2040


14


world natural gas consumption

trillion cubic feet


Non-OECD nations account for 76% of projected growth in natural gas

consumption


15

0

30

60

90

120

150

2012 2020 2025 2030 2035 2040

OECD Non-OECD

world change in natural gas production, 2012–40

trillion cubic feet


Non-OECD Asia, Middle East, and OECD Americas account for the

largest increases in natural gas production


16

0 5 10 15 20

Other OECD

Non-OECD Europe and Eurasia

Other non-OECD

OECD Americas

Middle East

Non-OECD Asia

China Other

Other

Other

Other

Iran Saudi Arabia

United States

Russia

select global natural gas and crude oil prices with average monthly LNG prices in Japan

U.S. dollars per million British thermal unit

North American natural gas prices are low compared to prices in the

rest of the world, although spreads have narrowed recently

Source: U.S. Energy Information Administration, Bloomberg L.P.


U.S. Energy Outlook


Key updates in AEO2016

• Incorporation of the U.S. Environmental Protection Agency’s final rules for the Clean

Power Plan

• Updated renewable capital costs

• Latest California zero-emission vehicle sales mandates, which have been adopted by a

number of other states

• Extension of the production tax credit for wind and 30% investment tax credit for solar

• Lower near-term crude oil prices


U.S. primary energy consumption

quadrillion Btu


Reductions in energy intensity largely offset impact of gross domestic

product (GDP) growth, leading to slow projected growth in energy use

Source: EIA, Annual Energy Outlook 2016

20

0

20

40

60

80

100

120

1980 1990 2000 2010 2020 2030 2040 2020 2030 2040

29%

9%

16%

36%

8%

Coal

ProjectionsHistory 2015

1%Liquid biofuels

32% of

U.S. total

8%

14%

33%

12%

1%

Projections2015

AEO2016 Reference No CPP

Natural gas

Renewables

Nuclear

Petroleum and other liquids

33%

8%

10%

34%

14%

1%

(excluding biofuels)

-10

0

10

20

30

1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040



U.S. net energy imports continue to decline (except for liquids in the near term)

reflecting increased oil and natural gas production coupled with slowly growing or

falling demand

21


Coal

Natural gas

AEO2016 Reference

No CPPLiquids

U.S. net imports

quadrillion Btu


CO2 emissions are lower in AEO2016 Reference case than AEO2015

Reference Case, even without the Clean Power Plan (CPP)

22

4,000

4,500

5,000

5,500

6,000

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040

No CPP

AEO2015 Reference

AEO2016 Reference


energy-related carbon dioxide emissions

million metric tons


U.S. Electricity


0

1

2

3

4

5

6

1990 2000 2010 2020 2030 2040 2020 2030 2040

1

3

%

electricity net generation

trillion kilowatthours


Clean Power Plan accelerates shift to lower-carbon options for generation, led

by growth in renewables and gas-fired generation; results are likely sensitive

to CPP implementation approach


24

2015History

1993 2040


2015

1%

2040

33%

33%

13%

Nuclear

Natural gas

Coal

Renewables

15%

23%

26%

34%

1%

11%

13%

19%

53%

4% 16%

27%

18%

38%

20%1%

Petroleum and other liquids


Natural gas generation falls through 2021; both gas and renewable

generation surpass coal by 2030 in the Reference case, but only natural

gas does so in the No CPP case

25

0

500

1,000

1,500

2,000

2,500

1990 2000 2010 2020 2030 2040 2020 2030 2040


2015History 2015

Nuclear

Petroleum

Natural gas

Coal

Renewables

net electricity generation

billion kilowatthours



Lower costs and extension of renewable tax credits boost projected

additions of wind and solar capacity prior to the 2022 effective date of

the Clean Power Plan (CPP)

26

0

10

20

30

40

50

60

1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040

Coal Other Nuclear Natural Gas / Oil Wind Solar

History Projections

0

102030

4050

60

2020 2025 2030 2035 2040

No CPP

AEO2016 Reference

annual capacity additions, gigawatts


0

200

400

600

800

1,000

1,200

1,400

1990 2000 2010 2020 2030 2040 2020 2030 2040

total electric generating capacity

gigawatts


Reference case projects slightly higher levels of total capacity because

of higher levels of renewable capacity

Notes: prior to 2000 wind and solar data is not broken out, and is reflected in ‘Other Renewable’; Hydro includes pumped storage


27

Nuclear

Natural gas/oil

Coal

Wind

2015History AEO2016 Reference No CPP2015

Other renewables

284

100

477

102 SolarHydro

215

99

570

103

128

203

176

99

576

103

149

246

0

200

400

600

800

1,000

1,200

1,400

2000 2005 2010 2015 2020 2025 2030 2035 2040 2015 2020 2025 2030 2035 2040

renewable electricity generation by fuel type

billion kilowatthours


Changing tax and cost assumptions contribute to stronger solar growth,

with the Clean Power Plan providing a boost to renewables


28

SolarGeothermal

Biomass

Municipal waste/

landfill gas

Wind

2015History

Conventional

hydroelectric power

AEO2016 Reference No CPP2015

U.S. Natural Gas


Shale resources remain the dominant source of U.S. natural gas

production growth

30

0

20

40

60

80

100

120

0

5

10

15

20

25

30

35

40

45

1990 2000 2010 2020 2030 2040

U.S. dry natural gas production

trillion cubic feet



Tight gas

Coalbed methane

Other lower 48

onshore

Shale gas and

tight oil plays

AlaskaLower 48 offshore

History 2015Projections

AEO2016 Reference

Natural gas consumption growth is led by electricity generation and

industrial uses; natural gas use rises in all sectors except residential

31

0

10

20

30

40

50

60

70

80

90

100

0

5

10

15

20

25

30

35

40

2005 2015 Reference No CPP Reference No CPP Reference No CPP

U.S. dry gas consumption

trillion cubic feet billion cubic feet per day



ProjectionsHistory

Electric powerIndustrial*Residential Transportation**

12.6

4.6

1.7

11.2

3.7

9.1

4.6

0.9

9.6

3.2

*Includes combined heat-and-power and lease, plant, and export liquefaction fuel

Commercial

12.5

4.6

1.7

12.0

3.7

20402020 2030

**Includes pipeline fuel

For more informationU.S. Energy Information Administration home page | www.eia.gov

Annual Energy Outlook | www.eia.gov/forecasts/aeo

Short-Term Energy Outlook | www.eia.gov/forecasts/steo

International Energy Outlook | www.eia.gov/forecasts/ieo

Today In Energy | www.eia.gov/todayinenergy

Monthly Energy Review | www.eia.gov/totalenergy/data/monthly

State Energy Portal | www.eia.gov/state


http://www.eia.gov/

http://www.eia.gov/forecasts/aeo

http://www.eia.gov/forecasts/steo

http://www.eia.gov/forecasts/ieo

http://www.eia.gov/todayinenergy

http://www.eia.gov/totalenergy/data/monthly

http://www.eia.gov/state

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