Oil Markets and the Global Economy

Transcription

1 Oil Markets and the Global Economy Christof Rühl, Global Head of Research Abu Dhabi February

2 Outline The economy: an age of stagnation and low returns? Oil price recap Why are lower oil prices not boosting economic growth? Where next for oil markets? 2

3 Secular Stagnation? Source: The Economist 3

4 Real interest rates and total factor productivity (TFP) Yield 9% Real return on 10-year Government bonds US Germany Japan TFP in Advanced Economies Average annual growth 3% % 2% 3% 2% 1% 0% 1% -3% 1983 '87 '91 '95 '99 '03 '07 ' Source: Haver 0% Source: OECD US Germany Japan 4

5 Where is US dollars per barrel Oil price decline July 2014 Dated Brent 20 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Source: Bloomberg 5

6 Where is the shot in the arm? Oil price decline Revisions to GDP growth projections 2015 US dollars per barrel 120 July Dated Brent GDP growth 6% Jul-14 Jan-15 Jul-15 Oct-15 5% 4% 3% 2% 1% 20 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Source: Bloomberg Source: IMF 6 0% World US Advanced economies Emerging economies

7 Long term growth projections in emerging markets Share of global oil demand Revisions to 5-year GDP growth forecast Percent China Emerging excl. China Percent pp Apr-13 Oct pp pp China Emerging World Source: BP Statistical Review Source: IMF WEO 7

8 Outline The economy: an age of stagnation and low returns? Oil price recap Why are lower oil prices not boosting economic growth? Where next for oil markets? 8

9 Oil price vs. other commodities Daily oil price Oil and industrial metals prices US dollars per barrel US Dollars per barrel Index 120 Dated Brent High price band of period Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Source: Bloomberg Low price band post Dated Brent (lhs) Industrial metals (rhs) 0 Jan-00 Jan-03 Jan-06 Jan-09 Jan-12 Jan-15 Source: Bloomberg

10 Oil supply disruptions and US production growth Cumulative change since 4Q10, Mb/d 5 4 Libya Iran Other US Net Q11 3Q11 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 1Q15 3Q15 Source: Includes data from BP Statistical Review of World Energy and BP Energy Outlook 10

11 Oil supply disruptions and US production growth Cumulative change since 4Q10, Mb/d 5 4 Libya Iran Other US Net Q11 3Q11 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 1Q15 3Q15 Source: Includes data from BP Statistical Review of World Energy and BP Energy Outlook 11

12 Oil supply disruptions and US production growth Cumulative change since 4Q10, Mb/d 5 4 Libya Iran Other US Net Q11 3Q11 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 1Q15 3Q15 Source: Includes data from BP Statistical Review of World Energy and BP Energy Outlook 12

13 OPEC s dilemma TO CUT PRODUCTION? YES NO OIL PRICE HIGHER OIL PRICE LOWER U.S. SHALE PRODUCTION HIGHER U.S. SHALE PRODUCTION LOWER OPEC LOSES MARKET SHARE OPEC GAINS MARKET SHARE OPEC REVENUES DECLINE OPEC REVENUES DECLINE 13

14 Outline The economy: an age of stagnation and low returns? Oil price recap Why are lower oil prices not boosting economic growth? Where next for oil markets? 14

15 (1) US Dollar is appreciating Real trade weighted US Dollar index Index, Jan 1990 = rises for good reasons 19% real appreciation since July 2014 (26% since July 2011): Relatively strong US growth and productivity gains The end of QE in the US Jan-90 Jan-95 Jan-00 Jan-05 Jan-10 Jan-15 Source: Bloomberg 15

16 (2) Households are deleveraging... Household debt as a share of GDP US Euro area 1Q 2008 = 97.9% Change in household debt since peak: percentage points 70 4Q 2009 = 64.6% 60-4 percentage points Q 99 1Q 01 1Q 03 1Q 05 1Q 07 1Q 09 1Q 11 1Q 13 1Q 15 16

17 while government debt hampers demand management % of GDP Government debt in Advanced Economies % of GDP Investment in Advanced Economies Source: Haver Source: Haver 17

18 (3) Major importers are becoming producers Share of local consumption produced at home 90% US Brazil 80% 70% Decline in imports since 1994: Kb/d 60% - 1,940 Kb/d 50% 40% 30% Source: BP Statistical Review of World Energy 18

19 (4) Oil intensity is in long-term decline Barrels of oil per $1,000 of GDP OECD Decline since 1979: - 47% - 49% - 57% 0.2 Non-OECD World Source: BP Statistical Review of World Energy 19

20 Outline The economy: an age of stagnation and low returns? Oil market recap Why are lower oil prices not boosting economic growth? Where next for oil markets? 20

21 Crude prices and term structure Weekly oil price Daily oil price and term structure $/bbl $/bbl $/bbl 140 Dated Brent M Dated Brent (rhs) Dated Brent Contango Jan-00 Jan-03 Jan-06 Jan-09 Jan-12 Jan-15 Source: Bloomberg Backwardation 20 Jan-14 Jun-14 Nov-14 Apr-15 Sep Source: Bloomberg

22 (1) OECD inventories are at historic highs Million barrels of crude oil and oil products 3, Inventory range ,000 2,900 2,800 2,700 2,600 2,500 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: EIA 22

23 and so is the US strategic petroleum reserve Forward imports cover in days Million barrels of oil per day Strategic reserve Net imports of crude and products (rhs) 0 Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12 Jan

24 (2) US shale oil production finally declining YoY growth 30% US on-shore oil production (excl. Alaska) 25% 20% 15% 10% 5% 22% was the average US onshore production growth in the 2012 to end-2014 period US on-shore production declined by more than 0.6 Mb/d since peaking at 7.7 Mb/d in March % -5% Jan-11 Sep-11 May-12 Jan-13 Sep-13 May-14 Jan-15 Sep-15 24

25 driving overall production lower Million barrels per day (Mb/d) Total US crude production 6.4 Lower-48 production 6.0 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Source: EIA 25

26 (3) Above-average demand growth driven by the OECD European and US demand growth OECD and Non-OECD demand growth Million barrels per day (Mb/d) 0.4 Europe US Million barrels per day (Mb/d) 2.0 OECD Non-OECD World Mb/d 1.27 Mb/d Average Average Source: EIA Source: EIA 26

27 Demand slows in the non-oecd but Significant slowdown outside Asia Million barrels per day (Mb/d) 0.3 Middle East Brazil Russia 0.2 Asian demand remains robust Million barrels per day (Mb/d) 0.5 China Asia excl. China Mb/d lower growth in 2015, compared to the average Average Average Source: EIA Source: EIA 27

28 China worries overblown YoY growth 40% Gasoline Diesel % 20% 10% 0% -10% -20% -30% Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Source: JODI 28

29 (4) Saudi Arabia: FOREX reserves and forward rate Saudi Arabian FOREX reserves Saudi Riyal 12-month forward premium Million US dollars 750 Basis points (above spot rate) 1, $129bn decline since August , Jan-12 Dec-12 Nov-13 Oct-14 Sep-15 Source: Bloomberg 0 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Source: Bloomberg 29

30 Selected oil market shares OPEC market share Country market shares Market share Market share 36% OPEC meeting 12% OPEC meeting 35% 11% 34% 10% 33% 9% 32% 8% 31% OPEC 30% Jan-12 Oct-12 Jul-13 Apr-14 Jan-15 Oct-15 Source: EIA 7% Russia Saudi Arabia 6% US crude oil Jan-12 Oct-12 Jul-13 Apr-14 Jan-15 Oct-15 Source: EIA 30

31 US and Saudi Arabia: oil market shares Market share 12% 11% 10% 9% 8% Saudi Arabia market share (crude only) US market share increased from 6.1% to 10.2% at the peak US market share (crude only) Saudi Arabian share essentially flat 7% 6% Jan-11 Aug-11 Mar-12 Oct-12 May-13 Dec-13 Jul-14 Feb-15 Sep-15 Source: EIA 31

32 Oil market shares of key OPEC producers Iran & Iraq Saudi Arabia Market share Market share 4.8% Iran Iraq 11.5% Saudi Arabia 4.4% 11.1% 4.0% 10.7% 3.6% 10.3% 3.2% 9.9% 2.8% Jan-11 Dec-11 Nov-12 Oct-13 Sep-14 Aug-15 Source: EIA 9.5% Jan-11 Dec-11 Nov-12 Oct-13 Sep-14 Aug-15 Source: EIA 32

33 Conclusion The economy: Multiple and volatile adjustments, but still locally driven Relationship between oil and global growth has weakened Oil markets are searching for a new equilibrium, accommodating OPEC as well as unconventional growth Expect volatility with an upward drift in prices for