Current Oil Market Issues. Energy Training Week Paris, April 2013

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1 Current Oil Market Issues Energy Training Week Paris, April 2013

2 Short and Medium-Term Analysis & Forecasting: Current Oil Market Issues Antoine Halff

4 Oil prices and currency effects 150 Brent in EUR vs USD $/bbl /bbl -USD appreciation offsets nominal price declines for non-usd denominated or non-usd pegged economies -In euros, 2012 record highs exceed those of 2008

5 Oil prices in perspective ($/bbl) Brent dated Source: Argus ($/bbl) Source: Argus WTI Cushing Average 2012Brent prices well above Even WTI prices remain elevated vs 2008, despite the discount provoked by LTO supply surge and transport bottlenecks

8 Gasoline crack spreads unseasonably high $/bbl Gasoline Cracks to Benchmark Crudes Copyright 2013 Argus Media Ltd -10 Feb 12 May 12 Aug 12 Nov 12 Feb 13 NWE Prem Unl Med Prem Unl USGC 93 Conv SP Prem Unl

10 Key factors at a glance Demand: Record seasonal plant maintenance Eurozone GDP down 0.3% in 2013? (vs earlier growth forecasts) China Ind. Prod. dips Jan-Feb, changing gears? China What s going on with demand? US Sequester ($85 billion spending cuts) ½ pc point off GDP growth? Fuel switching to natural gas? Supply: LTO revolution Iraq Offsets: US industrial renaissance North African security breakdown

11 East of Suez leads 820 kb/d demand growth Global Oil Demand Growth 2011/2012/2013 thousand barrels per day North America Europe FSU Middle East Asia Latin America Africa Global Demand Growth () % % % Asia leads in 2013 but growth dips from 2012 Japan growth spurt eases post-great East Japan Earthquake. Strong non-oecd gains overwhelm OECD declines. Source: IEA Oil Market Report

12 Distillates and the demand barrel (0.5) (1.0) World: Oil Demand Grow th by Product, , m b/d (1.0) Gasoline Distillates LPG & Naphtha Other Fuel Oil Total (RHS) -In reversal, gasoline led oil demand growth in 2012 (led by China, Middle East) -Distillate growth slowed in 2012 (China), but still expected to lead demand growth going forward

13 China refining capacity growth vs demand China: Apparent Oil Demand Mar 12 May 12 Jul 12 Sep 12 Nov 12 Jan 13 New Method, Adjusted for Product Stocks Old Method Chinese demand growth forecast at 3.9% Chinese Manufacturing PMI Not e: 50=cont ract ion/ expansion t hreshold. Sources: HSBC, Markit 47 Oct11 Jan12 Apr12 Jul12 Oct12 Jan13 Source: IEA Oil Market Report

14 Global supply swings to y-o-y decline after strong growth OPEC and Non-OPEC Oil Supply Year-on-Year Change Nov 11 Feb 12 May 12 Aug 12 Nov 12 Feb 13 OPEC Crude OPEC NGLs Non-OPEC Total Supply OPEC and Non-OPEC Oil Supply 50 Jan 12 Jul 12 Jan 13 Jul 13 Non-OPEC OPEC Crude - RS OPEC NGLs February production down 110 kb/d y-o-y Non-OPEC, OPEC NGLs fail to offset steep drop in OPEC crude Feb. up 90 kb/d vs Jan. on slightly higher OPEC crude OPEC rebound expected (Saudi Arabia) looking forward

15 OPEC supply down y-o-y, but so is the Call OPEC Crude Oil Production Jan Mar May Jul Sep Nov Jan Entire series based on OPEC Composition as of January 2009 onwards (including Angola & Ecuador & excluding Indonesia) Quarterly Call on OPEC Crude + Stock Change 1Q 2Q 3Q 4Q Entire series based on OPEC Composition as of January 2009 onwards (including Angola & Ecuador & excluding Indonesia) OPEC crude supply up 150 kb/d to in Feb, led by Iraq Refinery maintenance shaves demand for OPEC crude Call on OPEC cut 100 kb/d to 29.7 for both 1Q13 and FY 2013 on non-opec supplies Comfortable OPEC spare capacity

16 Iran production inches up from lows Iranian Crude Imports Feb-11 Aug-11 Feb-12 Aug-12 Feb-13 Total - RHS Unallocated OECD EUR OECD PAC China / India Other Non-OECD Iran Crude Production Jan Mar May Jul Sep Nov Jan Iran output edged up by 70 kb/d to 2.72 increments reportedly going to China and India NITC reportedly pulling tankers from the scrap yard, with shipments earmarked for China Imports of Iran crude rose in Feb to 1.28 from an upwardly revised 1.13 for January Preliminary data now being adjusted upwards by about 180 kb/d as tanker data have been under-reporting vessels

17 PdVSA All quiet on the Orinoco front? Venezuela oil industry stable but April special elections may prove contentious PDVSA, Union went out of their way to convey sense of business-as-usual Current policy unsustainable Chavez assumes power Venezuela Crude Production Takeover of oil service companies 2.0 Strike by 'Renationalisaton' of 1.6 PDVSA workers contracts force most cuts output IOCs to leave country Chavez s frayed legacy: Financially stressed PDVSA Aging oil infrastructure in dire need of fresh investment upstream & downstream Future oil production partly mortgaged to Chinese lenders Once a large product exporter, now a net gasoline importer

18 Non-OPEC supply growth Total Non-OPEC Supply, y-o-y chg Other North America Total Non-OPEC supply seen up to 54.5 in 2013 Back to growth rates seen in and Source: IEA Oil Market Report

19 Refinery ease from record highs on Spring maintenance Global Refining Crude Throughput 71 Jan Mar May Jul Sep Nov Jan Range Average est est. Crude runs down 2.5% m-o-m in Jan, to 75.6 OECD runs down by more than 3% led by the US OECD Europe runs at 11.5 lows (maintenance, prices) Asia maintenance starts in March, cuts 1Q13 crude runs to of capacity under maintenance in the next 3 mos Global Crude Throughputs Monthly Change Nov 12 Jan 13 Mar 13 May 13 Americas Europe Asia Oceania China Other Asia Middle East Latin America Other China to udle 7% capacity for maintenance; India, South Korea, Taiwan, Japan, Singapore follow suit Middle East maintenance next

20 OECD stocks below average - 1 st time since August mb OECD Total Oil Stocks 2,850 2,800 2,750 2,700 2,650 2,600 2,550 Jan Mar May Jul Sep Nov Jan Range Avg mb OECD Industry Total Oil Stocks Relative to Five-Year Average -100 Jan 11 Jul 11 Jan 12 Jul 12 Jan 13 Asia Oceania Americas Europe OECD But total product cover now 30.7 days, up 0.1 day v end-dec. Weak 22.5 mb Jan. build led by crude, NGLs/feed. and gasoline Inventories at mb Preliminary Feb. data hint at 12.9 mb draw as product decline outweighed crude build

21 Emerging shift in US crude stocks Expansion of the Seaway pipeline evacuates crude South mb Source: US Weekly Industry Crude Oil Stocks 270 Jan Apr Jul Oct Range yr Average Source: EIA Since end-2012 US crude stocks have built by 20 mb PADD 2 stocks have remained at 115 mbpadd 3 inventories have risen by 16 mb Expanded Seaway pipeline now moving 295 kb/d from PADD 2 to PADD 3 despite bottlenecking problems at Jones Creek terminal mb US Weekly PADD 2 Crude Stocks US Mid-continent Source: EIA 40 Jan Apr Jul Oct Range yr Average mb Source: US Weekly PADD 3 Crude Stocks US Gulf Coast 130 Jan Apr Jul Oct Range yr Average Source: EIA

22 Surging US product exports US Crude Production & Net Product Imports Crude production Net Product Imports US refiners benefit from new LTO feedstock

23 Indian exports hit record end-2012 Majority of exports stay East of Suez Destinations of Indian Product Exports Source: PPAC,IEA, Lloyds Marine Intelligence Apr-11 Aug-11 Dec-11 Apr-12 Aug-12 Europe OECD America OECD AO Lat Am Oth Asia Mid East Africa Unaccounted for * The 'Unaccounted for' includes vessels smaller than 60 kt, which mostly stay in the region or go to the Middle East Indian Product Exports Apr-11 Aug-11 Dec-11 Apr-12 Aug-12 MS/ Petrol Naphtha/ NGL Aviation Turbine Fuel HSD/ Diesel Fuel Oil/LSHS Others Export refiners lift Indian throughputs to record Fuel subsidies discourages supplying the domestic market OECD ramp-up Indian imports at end-2012

24 FSU fuel oil exports remain high 2.0 FSU Refined Product Exports source: Argus Media Ltd 2.0 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Other Prods Fuel Oil Gasoil Total Prods (RHS) Despite Russian excise tax changes aimed at stimulating refinery upgrades

25 Learning to read the new oil map In Amenas & N. African supply: no major disruption yet, but concerns are mounting Arab Spring transition ongoing the toughest may lie ahead Economic forecasts keep getting revised down 2012 year of disruptions S/D logistical challenge Changing supply chain: new refining hubs OPEC spare capacity: steepest in 10+ years, but

Market Report Series: Oil 2018 Analysis & Forecasts to Energy Community 10 th Oil Forum, Belgrade, 25 September 2018

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