HOUSE_OVERSIGHT_016147.jpg
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People
8
Organizations
12
Locations
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Events
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Relationships
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Quotes
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Financial research report / congressional oversight document
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1.85 MB
Summary
This document is page 37 of a Merrill Lynch 'GEMs Paper #26' dated June 30, 2016. It contains a financial analysis of global oil markets, specifically Brent crude prices, non-OPEC production reduction, shale output forecasts, and OPEC supply requirements through 2020. While the content is strictly macroeconomic analysis, the 'HOUSE_OVERSIGHT_016147' stamp indicates this document was part of a subpoenaed production to the House Oversight Committee, likely related to investigations into financial institutions (such as Merrill Lynch/Bank of America) and their records, potentially connected to the broader Epstein financial inquiry.
Organizations (8)
| Name | Type | Context |
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| Merrill Lynch |
Logo in footer and cited as source for charts
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| BofA Merrill Lynch Commodities Research |
Source cited for charts
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| OPEC |
Subject of supply/demand analysis
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| House Oversight Committee |
Implied by the footer stamp 'HOUSE_OVERSIGHT_016147'
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| BP |
Cited source for Chart 34
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| Bloomberg |
Cited source for Chart 34
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| IEA |
Cited source for Chart 35 and 36
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| EIA |
Cited source for Chart 37
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Locations (12)
| Location | Context |
|---|---|
Key Quotes (3)
"Non-OPEC producers have massively reduced capex spending, down US$290bn or 42% from 2014 to 2016"Source
HOUSE_OVERSIGHT_016147.jpg
Quote #1
"4.1mn bpd needs to be added by OPEC by 2020, namely Saudi, Iran and Iraq"Source
HOUSE_OVERSIGHT_016147.jpg
Quote #2
"We see global light sweet crude oil averaging US$55 to US$75/bbl over the 2016-2020 period"Source
HOUSE_OVERSIGHT_016147.jpg
Quote #3
Full Extracted Text
Complete text extracted from the document (3,243 characters)
Chart 34: Real Brent prices are at one of the lowest levels in decades, and will likely encourage very strong demand growth ahead
Real and nominal yearly average Brent crude oil prices US$/bbl
140
120
100
80
60
40
20
0
70 73 76 79 82 85 88 91 94 97 00 03 06 09 12 15
2016YTD
nominal oil price
real oil price, rebased to 2016YTD price level
Source: BP, Bloomberg, BofA Merrill Lynch Commodities Research
Real and nominal yearly average Brent crude oil prices US$/bbl
140
120
100
80
60
40
20
0
70 73 76 79 82 85 88 91 94 97 00 03 06 09 12 15
2016YTD
nominal oil price
real oil price, rebased to 2016YTD price level
Source: BP, Bloomberg, BofA Merrill Lynch Commodities Research
Chart 35: We see global light sweet crude oil averaging US$55 to US$75/bbl over the 2016-2020 period
Medium term oil supply & demand (2016-2020)
110
100
90
80
70
60
50
40
avg oil price (US$/bbl)
mn bpd growth, 2016-20
2 3 4 5 6 7 8 9 10
supply (OPEC 2.9): low
supply (OPEC 4.2): base*
supply (OPEC 5.5): high
demand
Source: IEA, BofA Merrill Lynch Commodities Research
*4.2 mn b/d OPEC supply: Saudi: 1.3 mn b/d; Iraq: 0.8 mn b/d; other OPEC crude: 1.7 mn b/d; 0.4 mn b/d OPEC NGLs.
Medium term oil supply & demand (2016-2020)
110
100
90
80
70
60
50
40
avg oil price (US$/bbl)
mn bpd growth, 2016-20
2 3 4 5 6 7 8 9 10
supply (OPEC 2.9): low
supply (OPEC 4.2): base*
supply (OPEC 5.5): high
demand
Source: IEA, BofA Merrill Lynch Commodities Research
*4.2 mn b/d OPEC supply: Saudi: 1.3 mn b/d; Iraq: 0.8 mn b/d; other OPEC crude: 1.7 mn b/d; 0.4 mn b/d OPEC NGLs.
Non-OPEC production will not reach 2015 levels before 2020 at the earliest...
Non-OPEC producers have massively reduced capex spending, down US$290bn or 42% from 2014 to 2016, in response to the low price environment. Should capex start to increase again in 2017, the effect on non-OPEC non-shale production is unlikely to be felt before 2020 at the earliest. Most of the decline in the short term comes from non-conventional output in the US, as shale is very price sensitive within a 12-month horizon. With Brent prices set to increase from US$46/bbl this year to US$80/bbl in 2020 in our base case, we believe US shale production will grow again, albeit at a slower rate than in the past four years. Total non-OPEC supply is set to drop to 56.4mn bpd in 2017 before rebounding to 57.5 mn bpd in 2020, a similar level as in 2015.
Non-OPEC producers have massively reduced capex spending, down US$290bn or 42% from 2014 to 2016, in response to the low price environment. Should capex start to increase again in 2017, the effect on non-OPEC non-shale production is unlikely to be felt before 2020 at the earliest. Most of the decline in the short term comes from non-conventional output in the US, as shale is very price sensitive within a 12-month horizon. With Brent prices set to increase from US$46/bbl this year to US$80/bbl in 2020 in our base case, we believe US shale production will grow again, albeit at a slower rate than in the past four years. Total non-OPEC supply is set to drop to 56.4mn bpd in 2017 before rebounding to 57.5 mn bpd in 2020, a similar level as in 2015.
Chart 36: With Brent prices set to increase to US$80/bbl in 2020, we believe US shale output will grow again, albeit at a slower rate
Non-OPEC oil supply growth by major country
mn b/d, YoY
3.0
2.5
2.0
1.5
1.0
0.5
0.0
-0.5
-1.0
BofAML f'cast
2010 2012 2014 2016F 2018F 2020F
US
North Sea
Asia
other
Canada
Russia
Brazil
total non-OPEC
Mexico
Kazakhstan
Sudan/So. Sudan
Source: IEA, BofA Merrill Lynch Commodities Research
Non-OPEC oil supply growth by major country
mn b/d, YoY
3.0
2.5
2.0
1.5
1.0
0.5
0.0
-0.5
-1.0
BofAML f'cast
2010 2012 2014 2016F 2018F 2020F
US
North Sea
Asia
other
Canada
Russia
Brazil
total non-OPEC
Mexico
Kazakhstan
Sudan/So. Sudan
Source: IEA, BofA Merrill Lynch Commodities Research
Chart 37: Linking this with our 5-year price deck suggests marginal US shale output grows in 2017 and acceleration thereafter
Shale production forecasts aligned with BofAML WTI price assumptions
mn b/d
8
6
4
2
0
2013 2014 2015 2016 2017 2018 2019 2020
base
2016@$45/bbl
2017@$59/bbl
2018@$67/bbl
2019+@$75/bbl
Source: EIA, BofA Merrill Lynch Commodities Research
Shale production forecasts aligned with BofAML WTI price assumptions
mn b/d
8
6
4
2
0
2013 2014 2015 2016 2017 2018 2019 2020
base
2016@$45/bbl
2017@$59/bbl
2018@$67/bbl
2019+@$75/bbl
Source: EIA, BofA Merrill Lynch Commodities Research
4.1mn bpd needs to be added by OPEC by 2020, namely Saudi, Iran and Iraq
The US is the only country able to ramp up production among non-cartelized players by 2020, so OPEC has to come to the rescue to provide the required incremental supplies. We estimated that demand will grow by 5.9mn bpd in 2015-20. With the market oversupply of 1.8mn bpd in 2015, OPEC needs to increase production by 4.1mn bpd in the next five years to "balance the market". Saudi Arabia could make up for half of this given its c2mn bpd of spare capacity, and we believe it intends to at least increase its market share. We would expect other OPEC countries to expand their capacity in the
The US is the only country able to ramp up production among non-cartelized players by 2020, so OPEC has to come to the rescue to provide the required incremental supplies. We estimated that demand will grow by 5.9mn bpd in 2015-20. With the market oversupply of 1.8mn bpd in 2015, OPEC needs to increase production by 4.1mn bpd in the next five years to "balance the market". Saudi Arabia could make up for half of this given its c2mn bpd of spare capacity, and we believe it intends to at least increase its market share. We would expect other OPEC countries to expand their capacity in the
Merrill Lynch
GEMs Paper #26 | 30 June 2016 37
HOUSE_OVERSIGHT_016147
GEMs Paper #26 | 30 June 2016 37
HOUSE_OVERSIGHT_016147
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