1. Falling Oil and its Impact
Money.Net
Falling Oil and its Impact
Presented by:
Morgan Downey
CEO,
Author, Oil 101
February 4, 2015

2. Global Oil Market Fundamentals
Peter Went, Money.Net

3. Oil Prices Fall by More than Half in Just Four Months

4. It’s all about three things: Global oil demand slows.
The Simple Answer
It’s all about three things:
Global oil demand slows.
US oil supply grows.
3. Libyan oil supply recovers.

5. Global Growth Expectations Slowed
Oil demand forecasts for 2015 began to be cut.

6. US Fracking has Taken Large Oil Market Share Since 2009
2. US oil supply increases and pushes OPEC oil off the market.

7. US Fracking has Taken Large Oil Market Share Since 2009
3. Libyan oil supply recovers.
Libyan supply disruption shrinks.

8. The Net Result
The Net Result is:
Someone (OPEC or Non-OPEC) needs to cut supply by 1 to 1.5 million barrels per day to balance the global market and stop oil simply filling storage tanks.

9. Someone Needs to Cut Supply by 1million barrels per day
OPEC needed to cut supply to prevent this unneeded oil inventory hitting the market in 2015.
They decided not to cut which is why prices collapsed.

10. Since 1973 OPEC have managed prices by withholding supply

11. Why did OPEC not Cut supply like they usually do?
The New Oil Price War: OPEC vs US Frackers
Usually there is some talk of supply cuts any time prices sell off.
When prices began to fall in Aug-2014 OPEC stayed relatively silent.
OPEC Say Nothing
(very unusual)
Rosneft CEO (large Russian oil company) appears at OPEC meeting in November and refuses to support an OPEC-Russia combined supply cut.
Last Minute Deal with Russia Fails
Saudis have low debt and large cash reserves
US oil frackers have high debt and low cash reserves
Saudis feel they can bankrupt US frackers easily with sub-$75 oil which would result in much high oil prices over the long term.
Saudis do not want to lose any more

12. Global Oil Demand
Peter Went, Money.Net

13. Demand is still growing, just not as fast as needed to soak up new supply

14. Asia and Developing Economies are the source of growth

15. Global Oil Supply
Peter Went, Money.Net

16. The US Oil Frackers are almost all supply growth

17. Even with Lower Prices, US Oil Supply is expected to grow in 2015

18. Although lower oil prices have slowed drilling

19. Texas and North Dakota Benefitted the Most from Fracking

20. What Happens Next?
Peter Went, Money.Net

21. A Range Bound 2015

22. Global Oil inventories will hit highs

23. US Crude and Gasoline Inventories to hit new Highs, Diesel Lows
The US government ban on US crude oil exports has resulted in the US oil industry exporting diesel as a proxy instead.
This means diesel prices at the pump in the US have not fallen

24. US is importing less, but exporting a lot more refined products

25. 2015 will be a record year for US Gasoline Consumption
So much for those calling for a “Peak Demand” for US oil consumers a few years ago.

26. The Known Unknowns
Peter Went, Money.Net

27. Unexpected Events that Could cause much higher prices in 2015
Terrorism event affecting production infrastructure in large oil producing nation.
US frackers cut production much more than anticipated.
Russia approaches OPEC to cut supply in cooperation.

28. Oil Supply Cuts due to Unplanned Events: Non-OPEC
Dec 2014

29. More on Commodities and Oil at www.Money.Net
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