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Copyright 2020 Trend Macrolytics LLC. All rights reserved. This document is not to be forwarded to individuals or organizations not
authorized by Trend Macrolytics LLC to receive it. For information purposes only; not to be deemed to be recommendations for buying
or selling specific securities or to constitute personalized investment advice. Derived from sources deemed to be reliable, but no
warranty is made as to accuracy.
Trend Macrolytics, LLC
Donald Luskin, Chief Investment Officer
Thomas Demas, Managing Director
Michael Warren, Energy Strategist
Data Insights: Oil Tuesday, February 18 2020
The light tight oil revolution -- the rollover and the recovery Production in major US shale plays, millions of barrels/day
Bakken
Eagle Ford
Niobrara
Permian
Other
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Source:DOE EIA Drilling Productivity Report, TrendMacro calculations
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2
Inside the revolution: depleting legacy, diminishing new production Aggregate production in major US shale plays, millions of barrels/day
Total lower 48 light tight oil production
0
1
2
3
4
5
6
7
8
9
10
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Month's new production
0+.05+.10+.15+.20+.25+.30+.35+.40+.45+.50+.55+.60+.65+.70+.75+.80
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Month's loss of legacy production
-.60
-.50
-.40
-.30
-.20
-.10
0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Source: DOE EIA Drilling Productivity Report, TrendMacro calculations
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3
Low fracking fruit: the inventory of drilled but uncompleted wells (DUC)
Wells: — Drilled — Completed — Drilled but uncompleted
Total oil regions Total gas regions
Permian Anadarko
Eagle Ford Appalachia
Bakken Haynesville
Niobrara
0
2000
4000
6000
8000
2014 2015 2016 2017 2018 2019 2020
0
500
1000
1500
2000
2500
2014 2015 2016 2017 2018 2019 2020
0
1000
2000
3000
4000
2014 2015 2016 2017 2018 2019 2020
0
500
1000
1500
2000
2014 2015 2016 2017 2018 2019 2020
0
200
400
600
800
1000
2014 2015 2016 2017 2018 2019 2020
0
200
400
600
800
1000
2014 2015 2016 2017 2018 2019 2020
0
200
400
600
800
1000
1200
2014 2015 2016 2017 2018 2019
0
500
1000
1500
2014 2015 2016 2017 2018 2019
0
50
100
150
200
250
300
2014 2015 2016 2017 2018 2019 2020
Source: DOE EIA Drilling Productivity Report, TrendMacro calculations
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4
Doing a lot more… New-well oil production per rig, major US shale plays, barrels/day
BakkenEagle Ford
Niobrara
Permian
0
200
400
600
800
1000
1200
1400
1600
1800
2000
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Source: DOE EIA Drilling Productivity Report, TrendMacro calculations
…with a lot less Rig count, total oil and major US shale plays
Bakken
Eagle Ford
Niobrara
Permian
Total
Other
0
200
400
600
800
1000
1200
1400
1600
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Source: DOE EIA Drilling Productivity Report, Baker Hughes, TrendMacro calculations
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5
Flooding the productivity zone
2007
20082009 2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
1
2
3
4
5
6
7
8
9
10
100 300 500 700 900 1100 1300 1500 1700
Pro
du
cti
on
in
US
sh
ale
re
gio
ns
, m
illi
on
s b
arr
els
/da
y
Rig count
Most productive quadrant
Least productive quadrant
Source: DOE EIA Drilling Productivity Report, TrendMacro calculations
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6
US crude oil production -- deep history, and the modern transformation of sources Millions of barrels/day ◼ Recession
Alaska Gulf of Mexico
Lower 48 conventional
Separate light tight data available Jan 2007
Lower 48 light tight
0
2
4
6
8
10
12
14
1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019
Alaska
Gulf of Mexico Lower 48 conventional
Lower 48 light tight
Total
0
2
4
6
8
10
12
14
2013 2014 2015 2016 2017 2018 2019 2020
Differentiated source data available Jan 1981
Total US production
0
2
4
6
8
10
12
14
19
20
19
24
19
28
19
32
19
36
19
40
19
44
19
48
19
52
19
56
19
60
19
64
19
68
19
72
19
76
19
80
19
84
19
88
19
92
19
96
20
00
20
04
20
08
20
12
20
16
20
20
Source: DOE EIA Short Term Energy Outlook, Drilling Productivity Report, TrendMacro calculations
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7
The evolution of expectations: booms and busts in US production outlooks
Millions of barrels/day — Actual − − − Forecast
Data published May 2015
Data published April 2016 Data published
January 2017
Data published December 2017
Data published December 2018
Data published December 2019
Data published January 2020
Data published February 2020
7.5
8.5
9.5
10.5
11.5
12.5
13.5
14.5Ja
n 1
5
Ap
r 15
Jul 1
5
Oct
15
Jan
16
Ap
r 16
Jul 1
6
Oct
16
Jan
17
Ap
r 17
Jul 1
7
Oct
17
Jan
18
Ap
r 18
Jul 1
8
Oct
18
Jan
19
Ap
r 19
Jul 1
9
Oct
19
Jan
20
Ap
r 20
Jul 2
0
Oct
20
Jan
21
Ap
r 21
Jul 2
1
Oct
21
Source: DOE EIA Short Term Energy Outlook, TrendMacro calculations
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8
OPEC: what it's producing, what's left to produce Millions of barrels/day
Official
spare capacity
Production 10
15
20
25
30
351
96
2
19
65
19
68
19
71
19
74
19
77
19
80
19
83
19
86
19
89
19
92
19
95
19
98
20
01
20
04
20
07
20
10
20
13
20
16
20
19
0.0
7
0.1
3
0.0
2
0.0
0
1.8
4
0.2
2 0.4
1
0.5
1
0.1
7
0.0
0
1.8
0
0.3
9
0.0
6
Source: Bloomberg News, TrendMacro calculations
OPEC's battle for market share Millions of barrels/day
OPEC production
2224262830323436 OPEC market
share in world
35%
37%
39%
41%
43%
45%
Saudi production
7
8
9
10
11 Saudi market share within OPEC
27%
29%
31%
33%
35%
Iran production
1.5
2
2.5
3
3.5
4
4.5
Iraq production
0
1
2
3
4
5
2001 2003 2005 2007 2009 2011 2013 2015 2017 2019
Iran market share within OPEC
6%
11%
Iraq market share within
OPEC
0%
3%
6%
9%
12%
15%
18%
2001 2003 2005 2007 2009 2011 2013 2015 2017 2019
Source: Bloomberg News, TrendMacro calculations
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9
US petroleum imports and exports Millions of barrels/day
Total imports
Total exports
0
2
4
6
8
10
12
14
16
1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
Crude exports
Crude imports
0
2
4
6
8
10
12
1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
Refined exports
Refined imports
0
1
2
3
4
5
6
7
1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
Source: DOE Weekly Petroleum Status Report, TrendMacro calculations
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10
The world of oil consumption Millions of barrels/day ◼ Recession
US
China
Japan
Europe
Canada
Other Non-OECD
0
5
10
15
20
25
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
World
75
80
85
90
95
100
105
Source: DOE EIA Short Term Energy Outlook, TrendMacro calculations
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11
US gasoline: paying a lot, using a lot
w
Nominal price/gallon
Real gasoline price/gallon, all grades
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015 2018
US gasoline consumption, thousands barrels/day
12-month moving average
5500
6000
6500
7000
7500
8000
8500
9000
9500
10000
1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015 2018
Source: DOE EIA Weekly Petroleum Status Report, Weekly Retail Gasoline Survey, TrendMacro calculations
The rubber meets the road: US gasoline spending as share of GDP ◼ Recession
Total
Dec 2008, 1.8%
1.5%
Imported
Dec 2008, 1.2%
0.5%
0%
1%
2%
3%
4%
5%
73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17 19
Source: BEA, DOE EIA, TrendMacro calculations
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12
The mirror of apparent demand: long-term storage dynamics Millions barrels
US commercial crude ending stocks
As of Feb 7
OECD petroleum ending stocks vs OPEC target
As of Dec 2019
OECD ex-US, 9.325015667 121.74534
US, 89.81131667
106.218
OPEC target
OPEC target
1500
1600
1700
1800
1900
2000
2100
2200
2300
2400
2500
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Actual
Based on average 1981-2013
Actual adjusted for SPR
355
375
395
415
435
455
475
495
515
535
2017 2018 2019 2020
Source: DOE EIA Weekly Petroleum Status Report, JODI, TrendMacro calculations
