USOI - EIA Short-Term Energy Outlook Tight Oil Report And IEA Oil Market Outlook May 2023
2023-05-27 01:50:00 ET
Summary
- The EIA’s Short-Term Energy Outlook (STEO) was published in early May.
- The report that follows compares World Petroleum Liquids output from the STEO with estimates from OPEC’s Monthly Oil Market Report (MOMR) from May and the IEA’s Oil Market Report (OMR) from February 2023.
- For the Permian basin, the annual rate of increase was 535 kb/d per year from April 2021 to March 2023.
A guest post by D Coyne
The EIA’s Short-Term Energy Outlook (STEO) was published in early May. The report that follows compares World Petroleum Liquids output from the STEO with estimates from OPEC’s Monthly Oil Market Report (MOMR) from May and the IEA’s Oil Market Report (OMR) from February 2023 with an update on World liquids output based on the summary of the May report with my estimate on quarterly output in 2023 based on the annual estimate for 2023 published in May 2023 and the quarterly numbers published in February 2023.
Figure 1
In the chart above, I modified the EIA Liquids estimate from 2023Q2 to 2023Q4 by assuming that the OPEC crude output matches the call on OPEC for those months. This assumption reduces the 2024 annual output for World C+C to about 82.74 Mb/d from the STEO estimate of 82.94 Mb/d.
Figure 2
The chart above shows the increase in the gap between World liquids and World C+C from 2022 to 2024, which I call non-crude liquids (mostly NGL, but also biofuels such as ethanol and biodiesel, and refinery gains).
The rate of increase based on OLS on the data in the chart is 391 kb/d per year. Much of this increase is probably from the US, which has increasing Natural Gas and NGL output.
Figure 3
The chart above confirms that about 68% of the increase in World non-crude liquids comes from the US based on the EIA estimates in the STEO.
Figure 4
Figure 4 above shows the balance of supply and demand for World Liquids through 2023Q1. Beyond this, I have assumed OPEC acts as a swing producer and tries to balance supply and demand on World markets.
Thus, there is no surplus or shortage on the World market after 2023Q1, if OPEC chooses the EIA Non-OPEC supply and World demand estimates as the basis for its output.
Figure 5
The chart above considers the World Liquids supply and demand balance based on OPEC’s estimates for World supply and demand. As before, we assume OPEC chooses to meet the call on OPEC so that after 2023Q1, there is no surplus or shortage.
I do not show a similar chart for the IEA OMR because the data is 3 months old. I cannot construct this type of chart for May because I cannot access the full May Oil Market Report from the IEA.
Figure 6
The chart above takes the average of the EIA STEO, OPEC MOMR, and my estimate for the IEA OMR for May for World liquids. It uses a similar methodology as was used for the STEO to construct an estimate of World C+C based on the EIA’s International Energy data for World C+C and the ratio of World minus US C+C to liquids ratio for 2022.
When comparing with figure 1 note that the horizontal scales are different and that the 82.59 Mb/d for 2024Q4 in figure 6 should be compared with the 81.97 Mb/d estimate for the same quarter in Figure 1.
In short, the EIA estimate is the most conservative of the three agencies for their 2023 estimate for World C+C (for 2023 annual output EIA is 81.67 Mb/d vs 81.81 for the 3 agency average).
Figure 7
The chart above uses Paul Pukite’s Oil Shock Model to estimate future output with the assumption that a transition to electric transport reduces oil demand to less than supply by 2035 (+/- 2 years).
The data above the line is EIA data up to 2022 and 2023 and 2024 are the STEO estimates, the data below the line is the model output. The 2018 peak is exceeded in 2025 for my best guess model (100% probability this will be wrong) and the peak is in 2028 at 84.2 Mb/d.
Figure 8
The chart above shows the amount of difference tight oil has made to the World Oil Market, World C+C less tight oil peaked in 2016. A new peak is only reached in 2028 due to increased tight oil output from 2018 to 2028. This is the reason I focus on tight oil.
Figure 9
The chart in figure 9 shows the tight oil model used in my Oil Shock Model in figure 7. Output peaks in 2029 and is roughly on plateau from 2027 to 2032. The data shown on the chart is average annual output in millions of barrels per day. Note that at the peak in 2018, tight oil output was only 6.6 Mb/d. I will cover future tight oil output in greater detail below.
Figure 10
Figure 10 gives an overview of US tight oil output based on EIA Official estimates . The peak was November 2019 at 8396 kb/d. In March 2023, output had reached 8327 kb/d some 69 kb/d below the peak.
In April 2021, output was 7283 kb/d so the simple straight line increase over two years was 1044 kb/d or 522 kb/d per year. Note the difference in the slope of the line from Jan 2018 to Dec 2019 vs. April 2021 to March 2023, roughly a 2.5 times steeper slope in the earlier 2018-2019 period.
Figure 11
The actual annual rate of increase is better measured using an OLS trend and in figure 11 we see that this is about 491 kb/d per year over the April 2021 to March 2023 period for US tight oil.
Figure 12
For the Permian basin, the annual rate of increase was 535 kb/d per year from April 2021 to March 2023.
Figure 13
For US tight oil minus Permian tight oil, the rate of decrease in annual output was 45 kb/d per year.
Figure 14
For the North Dakota Bakken I use NDIC (North Dakota Industrial Commission) data in figure 14. Average annual output decreased by 20 kb/d per year over the past 2 years.
Figure 14
The chart above looks like there may be a problem with the most recent 6 months of data, there have been a number of revisions lately to EIA data and this looks suspicious to me. In any case, the trend is a decrease of 47 kb/d per year over the past 2 years.
Figure 15
The data for the most recent 5 months for the Niobrara also looks anomalous, but the trend is an increase of 18 kb/d over the past 24 months.
Figure 16
The chart above shows projected output for a scenario where the completion rate for US tight oil wells remains constant at the March 2023 level until December 2024. US tight oil increases at an annual rate of 312 kb/d from April 2023 to December 2024 and Permian output increases at an annual rate of 317 kb/d over the same period.
Figure 17
The chart above shows the decrease in non-Permian US tight oil output for my best guess models. My expectation is that the recent 3 months of data will be revised higher in the future, potentially the model is about 50 kb/d too high. Annual output decreases at about 6 kb/d per year over the April 2023 to Dec 2024 period.
Figure 18
Note that the scenarios above assume no increase in the completion rate after March 2023; it remains constant from April 2023 to December 2029. The Permian model and data should be read on the right-hand vertical axis; all other plays are read from the left hand vertical axis. Permian scenario URR is 51.7 Gb, Bakken URR is 9.2 Gb, Eagle Ford URR is 8.5 Gb, Niobrara URR is 3.5 Gb, and Other tight oil URR is 7.6 Gb.
Figure 19
The chart above simply is the sum of the scenarios presented in Figure 18. I extend the chart out to 2039 just to show that I do expect output to decline fairly quickly falling by half in 5.33 years from 9000 kb/d in Jan 2034 to 4500 kb/d in April 2039.
The URR of the tight oil scenario is about 81 Gb. The average annual rate of increase from March 2023 to July 2028 is about 2.4% per year for this scenario.
Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.
For further details see:
EIA Short-Term Energy Outlook, Tight Oil Report, And IEA Oil Market Outlook, May 2023