[PPT] - May 2018 Short-Term Energy Outlook for Williston Basin Petroleum PowerPoint Presentation

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www.eia.gov

U.S. Energy Information Administration

Independent Statistics & Analysis

May 2018 Short-Term Energy Outlook

for Williston Basin Petroleum Conference May 24, 2018 | Bismarck, N.D. by

Dr. Linda Capuano

Administrator

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Crude oil spot price dollars per barrel

Short-Term Energy Outlook May 24, 2018

Brent crude oil prices are forecast to average about $71/b in 2018 and $66/b in 2019, with WTI prices $5/b lower in both years

Source: EIA Short-Term Energy Outlook, May 2018, EIA Annual Energy Outlook 2018, and Thomson Reuters. 2

2025

Annual Energy Outlook ($100/b)

20

20 40 60 80 100 120 2014 2015 2016 2017 2018 2019 Brent crude oil WTI crude oil price difference forecast

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Various events could lead to physical changes to global supply or demand that could push future crude oil prices higher or lower than in the current STEO forecast

3

Increase Prices Decrease Prices

Potential Events Reduction in Iranian oil production because of renewed sanctions Venezuela’s oil production declines faster than expected U.S. crude oil production rises more slowly than expected Major geopolitical or weather related unanticipated supply disruption U.S. crude oil production continues to increase faster than expected Weaker than expected economic and oil demand growth OPEC increases production in 2019 following expiration of the supply reduction agreement Removal of price subsidies creates greater price sensitivity, reducing demand

Short-Term Energy Outlook May 24, 2018

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EIA has four main reports estimating domestic crude oil production

Petroleum Supply Monthly Survey Data (PSM)
Weekly Petroleum Status Report (WPSR)
Short-Term Energy Outlook (STEO)
Drilling Productivity Report (DPR)

Short-Term Energy Outlook May 24, 2018 4

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Main sources of monthly oil and natural gas data are the EIA-914 survey and state administrative data

EIA-914 survey requires roughly 375 operators, representing a minimum of 85% of production, to report state-level oil and natural gas production

Data is report individually for 15 states (AR, CA, CO, KS, LA, MT, NM, ND, OH, OK,

PA, TX, UT, WV, WY), the Federal GOM, and an other states group excluding AK

Responses due 40 days after the close of the production month. Published monthly

60 days after the close of the production month.

EIA forecasts are benchmarked to this data

State agencies also collect and release state-level data, plus well or lease level production data

Available 45 days to 2 years (or more) after close of the production month
EIA uses this data for analysis of decline rates and sub-state production rates (e.g.,

how Eagle Ford differs from Permian within Texas)

Short-Term Energy Outlook May 24, 2018 5

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6%
4%
2%

0% 2% 4% % difference between PSM with first EIA-914 data and most recent data in the PSM

Short-Term Energy Outlook May 24, 2018

Forecasts improved with expanded EIA-914 survey in 2015 because revisions to historical data dropped to generally less than half a percent

Source: U.S. Energy Information Administration Petroleum Supply Monthly (PSM). EIA-914 FAQs 6

Expanded EIA-914 survey began January 2015 Expanded data became available August 2015

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100 200 300 400 500 600 Jan-15 Jan-16 Jan-17 Jan-18 U.S. Weekly Reported Fracs 5wk Average U.S. reported completions and recompletions filings Percent change month over month

Short-Term Energy Outlook May 24, 2018

Monthly average FracFocus well completion filings have substantially greater variation than production data

Source: FracFocus weekly reported completion and recompletion filings 7

40%
20%

0% 20% 40% 60% 80% 100% Jan-15 Jan-16 Jan-17 Jan-18 m/m change

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Sample timeline of PSM and STEO oil and natural gas production data reporting and releases

Short-Term Energy Outlook May 24, 2018 8

January February March April

January 1-31 Oil and natural gas is produced March 12 Operator reports are due for January production EIA-914 survey

40 days after the last day of the

production month

March 30 EIA releases January production in the Petroleum Supply Monthly (PSM)

Last day of the month

April 11 EIA monthly forecast with January data is released in the Short-Term Energy Outlook (STEO)

First Tuesday after the first

Thursday of the month

March PSM (data through Jan)
February and March estimates

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Global liquid fuels market balance million barrels per day

Short-Term Energy Outlook May 24, 2018

Global oil markets are expected to be relatively balanced in 2018, with some inventory growth expected in 2019, putting modest downward pressure on oil prices

Source: EIA Short-Term Energy Outlook, May 2018. 9

88 90 92 94 96 98 100 102 104 106 2013-Q1 2014-Q1 2015-Q1 2016-Q1 2017-Q1 2018-Q1 2019-Q1 world production world consumption

2
1

1 2

implied stock build implied stock draw

forecast

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Annual change in total liquid fuels production million barrels per day

Short-Term Energy Outlook May 24, 2018

Global oil supply growth is forecast to increase in 2018-19 compared with 2016-17, the United States and Canada are key drivers of the increase

Source: EIA Short-Term Energy Outlook, May 2018. 10

1.0
0.5

0.0 0.5 1.0 1.5 2.0 2.5 3.0 2016 2017 2018 2019 OPEC Countries North America Eurasia Latin America Other Non-OPEC World

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U.S. total liquid fuels production million barrels per day Components of annual change million barrels per day

Short-Term Energy Outlook May 24, 2018

Crude oil and hydrocarbon gas liquids (HGL) production growth—particularly of ethane and propane—support total U.S. liquids production growth in 2018-19

Source: EIA Short-Term Energy Outlook, May 2018. 11

5 10 15 20 2016 2017 2018 2019 total production

0.3

0.8 2.0 1.6

1.0
0.5

0.0 0.5 1.0 1.5 2.0 2.5 2016 2017 2018 2019

fuel ethanol & biodiesel HGL (ethane, propane, butane, pentanes) crude oil (net change)

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U.S. total liquid fuels consumption million barrels per day Components of annual change million barrels per day

Short-Term Energy Outlook May 24, 2018

Strong HGL consumption growth contributes to an expected increase in U.S. liquid fuels consumption growth in 2018

Source: EIA Short-Term Energy Outlook, May 2018. 12

16 17 18 19 20 21 22 2016 2017 2018 2019 total consumption

0.154 0.190 0.499 0.268

0.2
0.1

0.0 0.1 0.2 0.3 0.4 0.5 0.6 2016 2017 2018 2019

distillate fuel HGL (ethane, propane, butane, pentanes) gasoline

ther

(net change)

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U.S. total crude oil and petroleum product trade million barrels per day

Short-Term Energy Outlook May 24, 2018

With strong expected growth in crude oil production and high levels of refinery runs, EIA forecasts that net imports of petroleum will continue to decline

Source: EIA Short-Term Energy Outlook, May 2018 and EIA Petroleum Supply Monthly. 13

10
8
6
4
2

2 4 6 8 10 12 14 16 Jan-05 Jun-05 Nov-05 Apr-06 Sep-06 Feb-07 Jul-07 Dec-07 May-08 Oct-08 Mar-09 Aug-09 Jan-10 Jun-10 Nov-10 Apr-11 Sep-11 Feb-12 Jul-12 Dec-12 May-13 Oct-13 Mar-14 Aug-14 Jan-15 Jun-15 Nov-15 Apr-16 Sep-16 Feb-17 Jul-17 Dec-17 May-18 Oct-18 Mar-19 Aug-19 gross imports gross exports net imports forecast

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Henry Hub natural gas price dollars per million British thermal units

Short-Term Energy Outlook May 24, 2018

Henry Hub prices are forecast to average $3.01/MMBtu in 2018 and $3.11/MMBtu in 2019

Source: EIA Short-Term Energy Outlook, May 2018, and Thomson Reuters. 14

0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50 5.00 5.50 6.00 6.50 2013 2014 2015 2016 2017 2018 2019 historical Henry Hub spot price STEO forecast

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U.S. marketed natural gas production billion cubic feet per day Components of annual change billion cubic feet per day

Short-Term Energy Outlook May 24, 2018

EIA forecasts marketed natural gas production to grow by a record 7.4 Bcf/d on average in 2018

Source: EIA Short-Term Energy Outlook, May 2018. 15

10 20 30 40 50 60 70 80 90 100 2016 2017 2018 2019 total production

1.0

1.1 7.4 3.3

5
4
3
2
1

1 2 3 4 5 6 7 8 9 2016 2017 2018 2019

Haynesville Permian Appalachia

ther

(net change)

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Regular-grade gasoline retail price dollars per gallon

Short-Term Energy Outlook May 24, 2018

The regular-grade gasoline retail price forecast averages $2.90 per gallon in summer 2018 compared with $2.41 per gallon last summer

Source: Short-Term Energy Outlook, May 2018. 16

0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Brent crude oil price (summer avg) Wholesale gasoline - crude oil price difference (summer avg) Retail - wholesale gasoline price difference (summer avg) Monthly retail price 2015

Avg. $2.63

2016

Avg. $2.23

2017

Avg. $2.41

2018 Forecast

Avg. $2.90

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Average annual household expenditures on gasoline and motor oil dollars

Short-Term Energy Outlook May 24, 2018

Household transportation expenditures in 2018 are projected to be higher than last year but similar to the average expenditures over the past decade

Source: U.S. Bureau of Labor Statistics, Consumer Expenditure Survey; EIA Short-Term Energy Outlook, May 2018. 17

$0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 All consumer units forecast

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For more information

Petroleum Supply Monthly | www.eia.gov/petroleum/supply/monthly EIA-914 survey expansion | https://www.eia.gov/todayinenergy/detail.php?id=22732 and https://www.eia.gov/petroleum/production/faqs.php Weekly Petroleum Status Report | www.eia.gov/petroleum/supply/weekly Short-Term Energy Outlook | www.eia.gov/steo Drilling Productivity Report | www.eia.gov/petroleum/drilling/ Webinar STEO 11/16/2017 | www.eia.gov/petroleum/workshop/crude_production Webinar WPSR 1/29/2018 | www.eia.gov/pressroom/events or www.eia.gov/pressroom/events/pdf/Est_Domestic_Crude_Oil_Production_WPSR_01292018.pdf

Short-Term Energy Outlook May 24, 2018 18