Oil price - Norges Bank

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Oil price - Norges Bank
Oil and Natural Gas Analysis at Norges Bank
Pål Winje ( International Department), workshop on modeling and
forecasting oil prices, 22 March 2012
The Norwegian Petroleum Sector as a
Share of Macroeconomic Variables
Percent, 2010
60
60
47
50
50
40
40
30
26
26
30
21
20
20
10
10
0
0
GDP
Exports
Goverment
Revenue
Investment
Sources: Ministry of Petroleum and Energy, Norwegian Petroleum Directorate
2
Three topics for my talk
 Oil price forecasts in the Monetary Policy Report
 The structural story of oil prices
 What about natural gas prices?
3
Oil prices in the Monetary Policy Report
4
Four options for forecasting oil prices
 Spot price
 Futures prices
 Judgement based
 Model based
5
Why futures prices?
 Consistent with the approach for other exogenous
variables
 Cautious – a technical assumtion in line with the
market
 Close to the alternatives
 Common among other central banks
 Context – allow for discussion
6
Oil price (Brent Blend)
USD per barrel. Daily figures. January 2000 – December 2015
160
160
Oil price
140
140
Futures MPR 1/12
120
120
Futures MPR 3/11
100
100
80
80
60
60
40
40
20
20
0
2000
0
2002
2004
2006
2008
2010
2012
2014
Source: Thomson Reuters
International Department
7
Source: IEA
International Department
8
Annual figures. 1970 – 2011.
Spare production capacity
for crude oil in OPEC
12
12
10
10
8
8
Million barrels per day. Three month moving
average. March 1994 – February 2012.
6
6
4
4
2
2
7
0
1970
1980
1990
7
2000
6
6
5
5
4
4
3
3
2
2
1
1
0
1994
0
1997
2000
2003
2006
0
2010
2009
Source: EIA
International Department
9
Structural story
10
Oil price and Chinese imports of crude oil
3 month moving average. January 1994 – March 2012.
Oil price: USD per barrel. Imports: Million metric ton per month
25
140
Chinese oil imports (LHS)
20
120
Oil price (RHS)
100
15
80
10
60
40
5
20
0
1994
0
1997
2000
2003
2006
2009
2012
Source: Thomson Reuters
International Department
11
Change in global oil consumption and
production 2005 – 2011
Million barrels per day
10
10
8
8
6
6
4
4
2
2
0
0
-2
OECD
Non-OECD
Production
-2
-4
-4
-6
-6
Sources: Energy Information Administration and Norges Bank
Norges Bank Monetary Policy
12
Long term marginal costs
 World Energy Outlook 2011
 oil prices in the range from 70 to 90 US dollars
per barrel are needed to cover private companies’
long-term all-in costs for new oil outside OPEC.
 This composite measure is probably a form of
average, so long-term marginal costs are
arguably higher.
International Department
13
Supply challenges ahead
 IEA’s chief economist Dr Fatih Birol
 Due to high decline rates in current oil fields,
fresh sources of oil equivalent to the output of
four Saudi Arabias will have to be found simply to
maintain present levels of supply by 2030
 i.e. even without any growth in global oil demand
over that period
International Department
14
Target price from OPEC
 Saudi Arabia, as the key OPEC swing producer,
has recently stated that it aims at an oil price
around 100 dollars per barrel.
International Department
15
Natural gas prices
16
Oil and gas production on the Norwegian
continental shelf
Millions of Sm3 oil equivalents. 1990-2015¹⁾
200
200
Oil
Gas
160
160
120
120
80
80
40
40
0
0
1990
1995
¹⁾ Figures for 2011 - 2015 are projections from The shelf 2010
2000
2005
2010
2015
Source: Norwegian Petroleum Directorate
Export price of Norwegian gas and oil
Oil: NOK/barrel. Gas: NOK/Sm3
700
600
500
3
Oil price, lagged two
quarters (LHS)
2.5
Gas price (RHS)
2
400
1.5
300
200
100
1
0.5
0
0
1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011
Source: Statistics Norway and Norges Bank
18
Crash course in international gas pricing
 Much of the traded gas across borders in Europe
and OECD Asia is sold under long-term contracts,
with linkages to the price of oil or refined products.
 In a growing number of markets1), gas prices are set
freely in the market, an approach known as gas-togas competition.
1)
North-America, United Kingdom, Australia and increasingly
in continental Europe
19
The relationship between prices for oil and
natural gas
 Substitution effects both on the demand and
supply side
 Common factors
 Arbitrage activity
20
Oil and gas prices
Monthly figures. USD/MMBtu. January 1997 – March 2012.
25
25
Oil, Brent
20
Gas UK, National Balancing Point
20
Gas US, Henry Hub
15
Norwegian export price for gas (excluding LNG)
15
10
10
5
5
0
1997
0
1999
2001
2003
2005
2007
2009
2011
Sources: Thomson Reuters, Statistics Norway and Norges Bank
Reduced demand and increased supply in
2009
Sources: Statoil
22
Decoupled?
 Certainly for US natural gas prices
 Not for market based prices in UK
 And not for oil-indexed Norwegian prices,
although renegotiations are reportedly
intensifying
 See Economic Commentaries 4/11: ”Increased
gas exports, but what about prices?”
23
Gas prices
Monthly figures. USD/MMBtu. January 2000 - March 20121)
20
20
Gas UK, National Balancing Point
Gas US, Henry Hub
15
10
15
Russian gas, At German border
Norwegian export price for gas
(excluding LNG)
Gas Japan, LNG imports
10
5
5
0
2000
0
2001
2002
1) For March 2012 calculated as daily average
2004
2005
2007
2008
2009
2011
Sources: Thomson Reuters, IMF and Statistics Norway
24
Oil and gas prices
Monthly figures. USD/MMBtu. January 1997 - March 2012.
Broken lines indicate futures prices April 2012 – January 2015¹⁾
25
25
Oil, Brent
Gas UK, National Balancing Point
20
20
Gas US, Henry Hub
Norwegian export price for gas (excluding LNG)
15
15
10
10
5
5
0
1997
0
1)Futures
1999
2001
prices as at 19 March 2012
2003
2005
2007
2009
2011
2013
Sources: Thomson Reuters, Statistics Norway and Norges Bank
To summarize:
 We use futures prices for forecasting oil prices,
but maybe some new insights today or
tomorrow?
 We believe oil prices are high for fundamental
reasons, but may come down somewhat in the
time ahead.
 Natural gas prices deserve attention.
26

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