Transcript Oil Price 2017

USAEE CONFERENCE
TULSA – OCTOBER 24, 2016
What Price for Oil in 2017
Jean-Pierre Favennec
[email protected]
1
Crude oil price (Brent 2000-2016)
140
120
USD per barrel
100
80
60
40
20
0
Crude Oil (petroleum), Dated Brent, light blend 38 API, fob U.K., US$ per barrel
2014-2015 oil price drop
Brent crude oil price (spot)
Recent Evolution
Oil price 2014+
120.00
•
•
Monthly Averaged Crude Price $/bbl
100.00
•
80.00
60.00
40.00
•
•
•
20.00
0.00
11 June 2014
165th OPEC meeting
Market adequately
supplied.
OPEC supply
unchanged(30mbd).
Steps to ensure market
balance(around
$100/bbl).
28th September 2016
170th OPEC Meeting
• Production limited at
32,5– 33 Mbd
27 Nov 2014
166th OPEC Meeting
Discussed COP21 & CMP10
Stable price : Decent income for
producer.
OPEC Supply at 30 Mbd.
05th Dec 2015
168th OPEC Meeting
• OPEC Supply at
30mbd
•
•
•
05th June 2015
167th Meeting
Concern over market
volatility.
Market oversupplied.
OPEC Supply at 30mbd.
•
02nd June 2016
169th OPEC Meeting
Called Non-OPEC countries
for balancing market
Factors
a) Potential Oversupply + Geo political Factors:-
•
•
•
•
•
•
•
Arab Spring: Syria, Libya, Yemen, Egypt, Kuwait, Iraq, Saudi Arabia (2011).
Strikes by oil workers in Libya : oil production reduced by 88% (2013).
Violence in Libya blocked oil exports(2014).
Iraq & ISIS: fears of supply outages(2014).
Nigeria’s political instability: on going theft of up to 350,000 bd.
Climate change: Limiting carbon emission from fossil.
Iranian Sanction lifted: more 0.5 mbd into already glutted market (2016).
Factors
b) Demand of Oil:

2016 saw slower increase in oil demand because of slower growth of GDP

Japan & Europe’s Oil demand also decreased

A stable US oil demand.
c) Climate Change & other factors:

Paris Agreement(COP-21) showcased a strong and growing civil society, including clear
demands to stop funding Fossils and keep Fossil Fuels in the Ground.

The age of stone did not finish because of the lack of stones, the age of oil will not finish
because of the lack of oil (Sheikh Zaki Yamani – Oil Minister in Saudi Arabia in 1986).

Advances in technology are beginning to offer a way for economies to diversify their
supplies of energy and reduce their demand for petroleum, thus loosening the grip of oil
and the countries that produce.

Oil which is not produced today will, perhaps, not be produced in the future.
The Doha & Algiers Agreements.

- A summit in Doha among the world's largest oil producing countries ended without an
agreement on 17th April 2016: leaders failed to strike a deal to freeze output.

- OPEC on Sept. 28, in Algiers, agreed to reduce output to a range of 32.50 million barrels
per day from 33.0 million bpd: its first output cut since 2008.

- Further OPEC & Non-OPEC producers plan an informal meeting to discuss the Algiers
agreement.
The Fiscal Deficit

With income falling, the 13/15 members of OPEC posted a combined current account
deficit of $99.60 billion in 2015, compared with a surplus of $238.10 billion in 2014.

Venezuela : suffering from scarcity of food and medicine and has logged a budget deficit of
around 20% of GDP.

Kuwait: recorded a budget shortfall of $15.3 billion in the fiscal year which ended on
March 31.

The IMF expects Iraq’s budget deficit will grow to 17.4 per cent this year, up from 5 per
cent in 2014.

Saudi Arabia: expected deficit for 2016 $87 billion.
Need for an increased price
Country
Oil revenues (in % of GDP)
Kuwait
53

- High inflation rates.
Congo Republic, Africa
45.2

- Struggling economies like Venezuela &
Iraq
41.4

Nigeria.
Saudi Arabia
38.7
Libya
33.3

- Important Development projects are on halt.
Oman
28

- CAPEX is also reduced..
Azerbaijan
27.2

- Deficits are widening.
Venezuela
23.8
Iran
23.6
UAE
19
How to allocate the global quota
between the different countries?
Potential Non-OPEC Production


1. Kashagan Field:
- An offshore oil filed in Kazakhstan’s zone of Caspian Sea.

- Recoverable reserves= 13 billion bbl.

- Commercial production could begin in 2017 and expected to last till 2040.
2. Brazil Fields:
13 billion bbl of proved
reserves.
- Rancador Field
- Lula(Tupi) Oil Field

7,500
Mbbl
recoverable oil.

100,000 bbl/day.
- Badejo Field
- Franco Oil Field

Production peak not yet
reached!
Potential Non-OPEC Production


4. US Gulf of Mexico Field:
- Accounts to 17% of total US Oil
Production.

Fields: Louisiana, Texas, Alabama, Florida
3. Mexican Field:
- 10.3 billion bbl proved reserves as of
2013

- From 1979 to 2007, Mexico produced
most of its oil from the
supergiant Cantarell Field, which used to
be the second-biggest oil field in the
world by production.

- Oil production peaked in 2004.

- Other field- Chicontepec Field.
Potential OPEC Production


1. Iraq

Iraq has 5 super giant fields.

143.1 billion bbl of proved reserves.

Oil production of 2015 nearly around
4.1mbd.
2. Iran

157.8 billion barrel of proved reserves.

Total production peaked at 6.6mbd in
1976.

2015 oil production= 3.92 mbd
Investment

International oil companies (IOCs) have been forced to scale back investments as weak prices
squeeze profit margins=> Decrease in standard production by IOC.

More than $300 billion upstream investments slashed in 2015/16.

NOCs have raised their share of upstream investments to a 40-year high of 44 percent.

With NOCs gaining a larger share of investments in the sector, the oil market could enter a new
dynamic in which production decisions are less driven by market fundamentals.
Future Supply Demand Balance
- The balancing will depend on the
clearance of the stock at sea and also on
the way OPEC adjusts its production in
the short term. Focus will also be on the
participation of non OPEC producers
with OPEC.
All data before of Algeria Agreement
THANK YOU