Brent spot. Brent 20-day rolling average. WTI - Brent Arb. USD per barrel. USD per barrel

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1 USD per barrel USD per barrel Oil benchmark prices are looking bullish again as Saudi Arabia and Russia announced that they will be extending production cuts until March The extension would reinforce the efforts made already to reduce oil stocks and raise the price per barrel. Speaking last week, Saudi energy minister Khalid Falih steadied the falling oil price by announcing his intention to extend the production cut agreement, and one week later his comments were supported by his Russian counterpart Alexander Novak. Novak assured that Russia are willing to support the agreement to attempt to rebalance the gluttonous market. March 2018 shows even greater intent to curb supplies and restore prices. However, with inventory levels still high having resisted over four months of cuts, it may be that a further nine months, at least, will be needed to drag them down to target levels. The potential success of the extension shall be largely dependent on Opec members such as Iraq and Iran agreeing to cut production - both have increased their output recently. Nigeria and Libya are again unlikely to sign the agreement this time around, with both nations working to bring various assets back online and raise output Brent spot Brent 20-day rolling average Russian cooperation will be vital to the success of an Opec-led cut extension since increased shale and crude production from outside of Opec has countered all efforts to reduce supply, and has dragged prices down at every sign of recovery. With Nigeria and Libya exempt from the Opec-led agreement and both successfully increasing their output, Saudi Arabia, who are leading efforts to cut supply, are reliant upon other large producing nations like Russia backing their corner. Russian president Vladimir Putin who was received in Beijing for the One Belt, One Road trade initiative, gave his full support to the proposal, and oil prices reacted positively. The Brent crude price currently sits around USD 52 per bbl, up 6.7% in the last week. Opec next meet on 25 th May, where it was previously expected that the agreement would be extended until the end of the year, however the decision to extend until With the US claiming that shale oil production growth will continue, any additional cooperation from outside of Opec will be a bonus for Saudi Arabia. In South America, Brazil and Venezuela are both looking to increase, rather than decrease their production, leaving limited potential takers with real market influence. However, with Russia on board it is believed that even without further countries joining, a nine month extension would see re-balance the market, bringing stocks down to below the target five-year average close to levels before the 2014 crash WTI - Brent Arb

2 Mn bpd Nigeria s Forcados terminal is set to load up to four Suezmax vessels this month, each approximately 950,000 bbls. The facility has been undergoing major repairs for several months following multiple militant attacks last year in February, July, October and November. Nigeria is the subject of our country profile this week, and contains further information on the status of the Nigerian oil industry. Libyan daily crude oil production has reached over 814,000 bpd following operations resuming at the Sharara and El Feel fields. The production has increased by more than 100,000 bpd since the end of April and shows a marked improvement in the country s attempt to reach a target of 1.32 Mn bpd by the end of the year. For the first time in four years, the Chinese state-run oil giants have been raising combined spending. However, this is not expected to stop the decline of the country s crude output, as most companies now focus on producing more natural gas, according to the International Energy Agency. China s production fell during the first quarter of 2017, down by 6.8 per cent year-on-year. The record pace of declines suffered last year seems to be here to stay OPEC (Source: IEA, Affinity Estimate) Russia (Source: IEA, Affinity Estimate) US (Source: EIA, IEA) Rest of the World (Source: Affinity Estimate) Russian ESPO crude oil exports are expected to fall 17% next month as oilfields commence maintenance periods. Reduced output will see an increase in ESPO blend premiums. US crude production increased yet again, now 12 consecutive weekly increases. The rig count was also up, now 17 straight weeks, with a further 9 rigs in operation since last week a total of 712 are now operational. US shale production is expected to increase a further 122,000 bpd next month. Opec will meet in Vienna to discuss further production cuts in order to throttle world oil supply. With Russia backing the Saudi Arabia s proposed nine month extension, it looks set to go ahead on 25 th May. K bpd Production Rig Count

3 Mn bpd Mn Barrels/Day Mn bpd The EIA downgraded global oil demand growth for the year, reducing estimates to 1.3 Mn bpd, following weaker than expected demand in the first quarter from India, Russia, the US, Korea and the Middle East. Indian demand returned to growth in April, following three months of declines resulting from governmental demonetisation-schemes to tackle corruption. Fuel consumption is increasing, up 3.3 per cent last month. Demand growth is expected to be between 7 and 8 per cent this year to over 4.1 Mn bpd. Chinese demand has been the main driver for global oil demand for 2017 to date, and latest figures have shown imports beginning to slow down as refinery maintenance periods begin to get underway With Saudi Arabia and Russia indicating that the Opec production cut will be extended until March 2018, the market is expected to be rebalanced, with reduced inventories at the target five-year average, within the next nine months (0.50) (0.19) (0.32) (0.08) Global Oil Demand Global Oil Supply (1.00) (1.50) (1.09) (1.14) 90 Change

4 The Nigerian economy relies on oil exports for over two-thirds of its income. Such heavy reliance is not ideal, especially in the volatile and uncertain times of the modern market. Known for it s low-sulphur Bonny Light oil, produced in the Niger Delta basin, recent times have been tough for the most populous African nation. Collapsing prices and falling production has resulted in depressed revenues since the 2014 oil crash. Following militant attacks on oil infrastructure in the Niger Delta region, Nigeria has lost production capacity and is second to Angola, which is now the largest African oil producing nation. However, plans are afoot to ramp up production in the coming months and to reclaim lost market share. The Forcados pipeline was one of the targets hit by militants in early 2016, and is currently undergoing tests to come back online, which would add 200, ,000 bpd export capacity. Forcados terminal is reportedly set to load between two and four cargoes of 950,000 bbls this month, the first to load at the main terminal since last November. According to Opec s latest monthly report, Nigerian production rose 274,000 bpd between April and March, with a daily output of 1.48 Mn bpd. This direct opposition to the Opec efforts to reduce oil market supply threatens to offset any progress made, predominantly by Saudi Arabia slashing its output. Nigeria, in addition to Libya, is exempt from the Opec cuts and can freely increase its output as infrastructure comes back online. Should Nigeria and Libya receive no major setbacks to production recovery schedules, their combined increase could amount to a further 800,000 bpd by the end of the year. That would more than offset Saudi Arabia s cuts under the Opec deal and would, in fact, account for almost two-thirds of the group s entire reductions. The export capacity of Nigeria has averaged greater than 1.6 Mn bpd so far in In November of 2015 exports reached 2.43 Mn bpd, and it is estimated these levels could be reached again in 2019 if the schedule can be maintained. Nigeria has had a consistent customer base for its crude, being well positioned geographically for exports in all directions. India is the primary destination for crude leaving Nigeria, with 294 Mn bbls being shipped in the last 12 months. The other top buyers are the US, Spain, Netherlands and South Africa. West African shipping rates have been depressed since the beginning of the year, with oversupplied V and Suezmax markets. Owners will be watching closely the impacts of Nigeria bringing its oil assets back online and releasing more cargoes tomarket.

5 Million Barrels USD per barrel 13 The US crack spread has risen over the last week, with refinery margins at their highest since the beginning of April. Up 15% on this time last week, the growth has been strong and the spread now sits at USD11.88 per bbl. The trend is now sitting USD1.28 per bbl above the 20-day rolling average, following the poor end to the month of April for the US refineries Crack Spread Crack Spread 20-day rolling average US crude stocks continued to fall, recording a one per cent decrease on last weeks figures. This is the fifth consecutive decrease, now down over 13 Mn bbls since stocks began to decline last month. US product stocks were again slightly up by 1.68 Mn bbls, rising for a second consecutive week US Crude Stocks EU Crude Stocks US Product Stocks EU Product Stocks Mn bbl Change Change % US Crude (Weekly) % US Products (Weekly) % EU Crude (Monthly) % EU Products (Monthly) %

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