OILX - EIA Short-Term Energy Outlook And Annual Energy Outlook 2023
2023-03-28 02:35:00 ET
Summary
- The EIA updated the Short-Term Energy Outlook (STEO) in March and also released the 2023 version of the Annual Energy Outlook in March.
- The quarterly peak in World C+C output was 84.36 Mb/d in 2018Q4, which was 1.2 Mb/d higher than the next highest quarter over the 2015 to 2019 period one quarter earlier.
- The rate of increase in World C+C output dropped to 478 kb/d over the 2015 to 2019 period, less than half of the preceding 4 years.
A guest post by D Coyne
The EIA updated the Short-Term Energy Outlook (STEO) in March and also released the 2023 version of the Annual Energy Outlook in March. This post will take a brief look at both of these reports with a focus on Crude plus Condensate (C+C) Output for the World, OPEC and Non-OPEC in the case of the STEO through the fourth quarter of 2024 and US C+C output for three oil price cases from 2022 to 2050, reference (medium oil price), high and low oil price cases.
Figure 1
Figure 1 above shows World C+C output from 2015Q1 to 2024Q4. The red line shows quarterly output using International data from the EIA. The yellow line is the Ordinary Least Squares (OLS) trend before the pandemic from 2015Q1 to 2019Q4, the annual rate of increase was about 478 kb/d over that period.
The blue line is a projection based on the OPEC, non-OPEC liquids projection in the STEO and US C+C projection in the STEO from 2022Q4 to 2024Q4. The OLS trend for this EIA projection is an annual rate of increase of 970 kb/d.
The quarterly peak in World C+C output was 84.36 Mb/d in 2018Q4, which was 1.2 Mb/d higher than the next highest quarter over the 2015 to 2019 period one quarter earlier, the highest 4 quarter average was 83 Mb/d from 1870 to 2023. The EIA projection has World C+C output rising from 81.53 Mb/d in 2022Q4 to 83.13 Mb/d for 2024Q4.
Figure 2
Figure 2 shows World, OPEC and Non-OPEC output from 2005 to 2024 with STEO projections shown for 2022Q4 to 2024Q4. Output was relatively flat from 2005 to 2009, with a noticeable rise in output from 2009 to 2018, followed by OPEC cuts, pandemic and then recovery. Of the 10 Mb/d increase in World output from 2010Q1 to 2018Q4, about 70% of the increase was from Non-OPEC nations.
Figure 3
Figure 3 above considers the centered 3-year average annual Real Brent Oil Price in 2022 US$/b. The centered 3-year average real Brent oil price remained above $90/b in 2022$ for the period from 2006 to 2014, and was above $100/b from 2007 to 2014.
World output increased very rapidly from 2002 to 2005 in a response to a doubling of the real price of oil (from $40 to $80/b over 3 years for centered 3-year average real oil price), the annual rate of increase in World C+C output was 2625 kb/d over the 2002 to 2005 period (OLS trend on quarterly output).
There was then a pause in World C+C output increases from 2005 to 2009, the World may have reached capacity limits and it took some time for capacity to be added, in addition the high oil price environment from 2006 to 2009 allowed the development of tight oil in the US to take off.
Figure 4
For the period covered in figure 4 above (2011-2014), for 3 years (2011-2013) the centered 3-year average real Brent price was over $130/bo in 2022$, World output increased at an average rate of 1083 kb/d with much of this increase coming from US tight oil.
Figure 5
The rate of increase in World C+C output dropped to 478 kb/d over the 2015 to 2019 period, less than half of the preceding 4 years. Centered 3-year average real oil prices had dropped to under $80/b over this later period which may have reduced the rate of oil field investment in resource development and thus reduced the rate of increase in output.
Figure 6
Figure 6 shows the 2023 Annual Energy Outlook scenarios for 3 cases of many (15 total cases) different scenarios, many of the other cases are not that different from the reference case, the only exception is the high and low oil and gas supply cases and I chose the high and low oil price cases to keep the analysis simple.
Figure 7
Basically I chose the high and low oil price cases because the range from high and low US output for those cases was larger than the High and Low Oil and Gas Supply cases.
If we consider US C+C output minus tight oil output for the three cases from figure 6, we find that the difference beween the high and low oil price cases is much smaller than for US C+C output in figure 6. See figure 8 below.
Figure 8
In 2030 the difference between the high an low oil price cases for conventional oil is only about 1.2 Mb/d vs. roughly 11 Mb/d for total US C+C output.
Figure 9
We can see clearly in figure 9 that there is a 10 Mb/d difference between the high and low oil price cases in 2030 for tight oil and about a 7 Mb/d difference between the high oil price case and the reference case (16 Mb/d vs 9 Mb/d in 2030.)
Note that if we assume tight oil output falls linearly to zero by 2055 in all three cases in figure 9, then the URR is 90 Gb, 127 Gb, and 173 Gb for each of the three cases in figure 9.
Figure 10
I doubt the low oil price scenario will be correct from 2022 to 2040, but potentially oil prices might fall between 2035 and 2040 as the transition to electric land transport occurs and oil demand may fall below oil supply at the World level.
My expectation is that between 2024 and 2035 real oil prices (in 2022$) will be in the $100 to $120/bo range at the wellhead in the US L48. For my tight oil scenario I use a more conservative oil price scenario with maximum L48 average real wellhead oil prices of $90/bo in 2022$ (see figure 11 below.)
Figure 11
The AEO 2023 scenarios for US C+C output are highly unrealistic in my opinion, particularly the tight oil output scenarios. The low oil price tight oil scenario is most realistic in terms of URR at 90 Gb (though at the assumed real oil prices output would be half that level at most).
My best guess US tight oil scenario with the oil prices shown as the DC model in figure 11, has a URR of about 70 Gb. My scenario is compared with the AEO scenarios in the chart below.
Figure 12
Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.
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EIA Short-Term Energy Outlook And Annual Energy Outlook 2023