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Predicting Oil Prices
Thina Margrethe Saltvedt, Senior Analyst Macro/Oil
November 2012 @ThinaSaltvedt
1 December, 2012
2
Oil price
drivers
Financial markets
Commercial/Non-commercials
USD
Asset prices
Liquidity injections
Risk Appetite
Short/Medium term
Inventory levels
OPEC goals and disipline
Weather
Refinery capacity
Income development
Long-term Supply/Demand
OPEC target price and spare capacity
Non-OPEC peak production
Emerging Markets’ demand growth
Renewable energy and regulatory
changes
Oil intensity
Technological changes
Source: PIRA, Nordea Markets
Geopolitical
risk
Nordea: Brent oil price forecast in USD per barrel
3 •
04/09/2012 Q1 Q2 Q3 Q4 Year
2011 106 115 112 110 111
2012E 118 109 112 109 112
2013E 108 110 112 114 111
2014E 114 114 116 116 115
Forward curve: Large fluctuations
in short term contracts
4 •
«Speculators» have cut their
long oil bets to a two year’s
low
Late June
Nov 2011
Now
March
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
0
20
40
60
80
100
120
140
160
20Nov07 20Nov09 20Nov11U
SD
/bb
l
Managed Money net positions vs. WTI price
WTI Net positions, rhs
Sources: Bloomberg, Ecowin Reuters, CFTC
High oil prices and a
weaker EUR vs USD
5 •
05 06 07 08 09 10 11 12
1.1500
1.2000
1.2500
1.3000
1.3500
1.4000
1.4500
1.5000
1.5500
1.6000
1.6500
1.7000
1.7500
30
40
50
60
70
80
90
100
110
120
130
140
150
Source: Ecowin/Reuters
Crude Oil Brent, blue
EUR/USD
EUR/USD, dark blue
USD/barrel EUR/USD
Inflation worries
Risk appetite on/off
Poltical risk and Euro crisis
Liquidity injections can
influence oil prices through
higher expected growth or
inflation
109
112109
20
40
60
80
100
120
140
0
1
2
3
4
5
6
4Q2002 2Q2004 4Q2005 2Q2007 4Q2008 2Q2010 4Q2011
US
D/
bb
l
mb
/d
Implied OPEC effective spare capacity and Brent price
forecast
Effective spare Effective spare (f'cast) Brent 1.pos, rhs Brent (f'cast), rhs
Oil market searches for price
required for next trillion barrels
6 •
World runs out
of spare
capacity
Source: PIRA, IEA, Nordea Markets
0
20
40
60
80
100
120
1402007 2009 2011 2012USD/barrel
Oil exporters’ budget breakeven
oil prices to increasingly affect
oil price formation
7 •
0 2 4 6 8 10
Saudi ArabiaRussia
Iran
UAEKuwait
NigeriaIraq
AngolaNorway
VenezuelaAlgeria
QatarCanada
Kazakhstan
Azerbaijan
Million barrels per day
-1200
-800
-400
0
400
800
1200
1600
Tho
usa
nd
bar
rels
pe
r d
ay
15 largest oil exporters
in the world - only 2
politically stable
10 largest oil
exporter in the
world today may
have a net export
deficit in 2017 –
who will cover the
gap?
Changes in export volumes in 2017 from 2011
Source: IEA, EIA and Nordea Markets
Worldwide upstream oil and gas investment and upstream
investment cost index
8 •
Source: IEA
Do we see
a supply
response
after all?
Shale oil revolution counterbalance supply
disturbances outside OPEC
10 •
Source: Reuters EcoWin
90 92 94 96 98 00 02 04 06 08 10 120
25
50
75
100
125
150
0.0
2.5
5.0
7.5
10.0
12.5
15.0
17.5 USD per mmBtu
Natural Gas Henry Hub, lhs
WTI light sweet crude, rhs
USD per barrel
Source: PIRA and Reuters Ecowin
Natural gas
Oil
Global unconventional oil: average production cost curve
More expensive oils replace natural decline of conventional oils
11 • Source: IEA
World oil supply – still fields yet-to-be found to cover expected
future oil demand growth
12 •
Source: IEA
World offshore crude oil production
Deepwater production moving up on the agenda
– Gulf of Mexico, Brazil and West Africa
13 • Source: IEA, Subsea7
Gulf oil exploration seeing steady recovery.
Before: 30% of US oil production. Now: 20%, next ten years rise to 28%
From 4.8m b/d in 2011 to
8.7m b/d in 2035
World oil demand by sector : Transportation sector accounts
for 52% of total oi demand – expected to rise to 60% by 2035
14 •
Source: IEA
Contact details:
Thina Margrethe Saltvedt
Senior Macro/Oil Analyst
Commodities Research
Nordea Markets
Phone: +47 22 48 79 93
Mobile: +47 90 63 40 75
@ThinaSaltvedt
15 •
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