Latest Update OMR 14 Nov 2013
Prices
$/bbl 120 115 110 105 100 95 90 85 Oil Prices Hit Four Month Lows WTI Downturn Far Outpaced Brent Losses Crude Futures Front Month Close 80 Oct 12 Jan 13 Apr 13 Jul 13 Oct 13 NYMEX WTI ICE Brent $/bbl 112 110 108 106 104 102 Source: ICE, NYMEX 100 Source: ICE ICE Brent Forward Price Curve M1 2 3 4 5 6 7 8 9 10 11 12 09 Nov 12 11 Sep 13 09 Oct 13 11 Nov 13 Futures prices trended lower in October and early November, with benchmark crudes hovering near four-month lows Markets appeared well supplied in October, with refinery runs at seasonal lows amid extensive plant maintenance WTI down over $15/bbl in Oct and early Nov, due in part to high stocks Brent off $3/bbl, supported by loss of Libya barrels in Europe Winter heating season in Northern Hemisphere & turmoil in Libya and Iraq may support prices in the near term Source: IEA Oil Market Report
Diverging Market Dynamics On Either Side of the Atlantic Basin $/bbl 120 115 110 105 100 95 90 85 Benchmark Crude Prices Copyright 2013 Argus Media 80 Oct 12 Jan 13 Apr 13 Jul 13 Oct 13 WTI Cushing N. Sea Dated $/bbl 10 0-10 -20-30 -40 WTI differentials to West Canadian Select and Bakken Copyright 2013 Argus Media Ltd -50 Oct 12 Jan 13 Apr 13 WCS Jul 13 Oct 13 Bakken WTI prices under pressure from rising stocks, rising LTO supplies -- knock-on effect on all US & Canadian crudes Differentials to benchmark WTI especially hard hit, especially inland crudes and imports from Canadian Western Canada Select (WCS) discount to WTI deepened by around $7.80/bbl to a near $40/bbl in early November compared with $32/bbl in October and around $29/bbl in September Source: IEA Oil Market Report
Demand
Modest Acceleration in Global Oil Demand Growth Forecast for 2014 Global Oil Demand (2012-2014) (million barrels per day) 1Q12 2Q12 3Q12 4Q12 2012 1Q13 2Q13 3Q13 4Q13 2013 1Q14 2Q14 3Q14 4Q14 2014 Africa 3.6 3.6 3.7 3.7 3.7 3.8 3.8 3.8 3.8 3.8 3.9 4.0 4.0 4.1 4.0 Americas 29.5 30.0 30.3 30.3 30.0 30.1 30.3 30.6 30.3 30.3 30.1 30.5 30.7 30.5 30.5 Asia/Pacific 29.9 29.1 29.2 30.6 29.7 30.6 29.6 29.5 30.8 30.1 31.0 30.1 30.2 31.4 30.7 Europe 14.3 14.5 14.5 14.4 14.4 13.8 14.5 14.7 14.3 14.3 13.9 14.2 14.5 14.3 14.2 FSU 4.3 4.4 4.6 4.6 4.5 4.3 4.5 4.8 4.7 4.6 4.4 4.6 4.9 4.9 4.7 Middle East 7.3 7.8 8.2 7.5 7.7 7.5 7.9 8.4 7.8 7.9 7.7 8.1 8.6 8.0 8.1 World 89.0 89.4 90.4 91.1 90.0 90.1 90.6 91.8 91.7 91.0 91.0 91.5 92.8 93.1 92.1 Annual Chg (%) 0.7 1.8 0.6 1.5 1.2 1.2 1.3 1.5 0.6 1.2 1.1 1.0 1.1 1.6 1.2 Annual Chg () 0.6 1.6 0.6 1.3 1.0 1.0 1.2 1.4 0.6 1.0 0.9 0.9 1.0 1.5 1.1 Changes from last OMR () -0.01 0.00 0.00 0.01 0.00 0.06 0.04 0.13-0.04 0.05-0.06 0.06 0.02 0.04 0.02 Global oil demand growth is forecast to accelerate modestly in 2014, to 1.1, after rising by around 1.0 in 2013 Supported by widely anticipated macroeconomic strengthening, although less so than forecast last month as IMF curbs GDP numbers Base data raised on higher August/September numbers 3Q13 demand estimate raised by 135 kb/d, to 91.8 Stronger European demand, up 1.4% y-o-y, its highest growth rate since the previous post-recessionary bounce of 2010 Which raised the total 2013 estimate 45 kb/d, to 91.0 Lower IMF GDP projections although still showing a global acceleration in 2014 curbed the demand growth forecasts for 4Q13 and 2014 Source: IEA Oil Market Report 6
Europe Bounce Supports Short-Term Demand 52 Eurozone Manufacturing PMI 15.5 OECD Europe: Oil Product Demand 50 Note: 50=contraction/expansion threshold. S ource: M arkit 14.5 48 13.5 46 44 Oct11 May12 Dec12 Jul13 12.5 Jan Apr Jul Oct Jan 2011 2012 2013 2014 The pace of the European demand decline has eased in recent months, from string of steep drops in recent years +1.4% y-o-y 3Q13, +0.1% 2Q13-2.4% 5-year average, 2008-2012 Economic outlook has improved European demand still seen in structural decline -- postrecessionary bounce likely brief -0.7% 2014, after -0.8% in 2013 (-3.8% 2012) Source: IEA Oil Market Report 7
IMF GDP Downgrades Trim The Strength of 2014 Growth Forecast % change Oct-13 Jul-13 WORLD 3.6 3.8 US 2.6 2.7 Germany 1.4 1.3 France 1.0 0.8 Italy 0.7 0.7 Spain 0.2 - UK 1.9 1.5 Canada 2.2 2.2 Japan 1.2 1.2 China 7.3 7.7 India 5.1 6.3 Brazil 2.5 3.2 Russia 3.0 3.3 Source: IMF Economic Outlook, 2014 IMF projections kb/d 95,000 90,000 85,000 80,000 75,000 70,000 Global Oil Product Demand 2002 2006 2010 2014 IMF revisions to 2013-2014 forecast outweighs stronger-thanexpected 3Q13 Y- o- Y Chg 2,600 1,800 1,000 200-600 -1,400 October s World Economic Outlook trims 2013 global GDP outlook to 2.9%, from 3.2% (July) Global economic growth forecast to accelerate in 2014, to 3.6%, vs 3.8% in previous forecast North America, non-oecd Asia, Latin America & FSU take brunt of the downgrade Lower global GDP numbers trimmed the potential upside in the 2014 demand forecast Source: IEA Oil Market Report 8
Supply
OPEC Output Lower in October Saudi Output Cut Leads Downturn OPEC Crude Oil Production 32 31 30 29 28 Jan Mar May Jul Sep Nov Jan 2010 2011 2012 2013 32 31 30 29 28 27 26 Quarterly Call on OPEC Crude + Stock Change 1Q 2Q 3Q 4Q 2012 2013 2014 OPEC crude oil supply down for 3 rd month running in October, by 105 kb/d to 29.89 driven by Saudi cutback l OPEC output below 30 ceiling for the 2 nd consecutive month Saudi production down 370 kb/d to 9.75 OPEC ministers meet 4 December in Vienna to discuss the market outlook non-opec growth widely seen to constrain demand for OPEC crude Call on OPEC crude and stock change was unchanged for 4Q13 and full-year 2013, at 29.6 and 30, respectively
Iraq & Libya Recover but Problems Remain 3.4 3.2 3.0 2.8 2.6 2.4 2.2 Civil Unrest and Security Issues Worsen Iraq Crude Production Jan Mar May Jul Sep Nov Jan 2010 2011 2012 2013 Libya Crude Production 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 Jan-11 Oct-11 Jul-12 Apr-13 Iraqi crude oil output partially recovered in October from exceptionally low levels in September, up 150 kb/d to 2.97 l Worsening security problem in main Basrah producing region and export bottlenecks at the southern terminals may cut Nov production l The BP-operated Rumaila field completely shut-down for several days due to export bottlenecks l Attacks on foreign workers in early November forced oil service firms Schlumberger and Baker Hughes to suspend operations, with the latter declaring force majeure Libyan oil production up 150 kb/d m-o-m to 450 kb/d in Oct, but down again to 250 kb/d early Nov amid worsening political turmoil and labour disputes
Iran Discounts Oil Sales Amid Bid for Sanctions Relief Iran Crude Production 3.9 3.7 3.5 3.3 3.1 2.9 2.7 2.5 Jan Mar May Jul Sep Nov Jan 2010 2011 2012 2013 Iranian Crude Imports 1.2 1.0 0.8 0.6 0.4 0.2 0.0 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Total - RHS OECD EUR OECD PAC China / India Other Non-OECD 3.0 2.5 2.0 1.5 1.0 0.5 0.0 First steps toward interim agreement to freeze Iran s nuclear programme stumbled in Geneva on 9 November Status of talks fluid and unpredictable Iran s crude supply up 100 kb/d to 2.68 in October but signs emerging that National Iranian Oil Company (NIOC) is having an increasingly hard time placing barrels against the backdrop of sanctions Preliminary data show total crude imports from Iran declined by a steep 45% in October, falling to the lowest level since January 2012, when the stricter sanctions regime was first implemented
Non-OPEC Supply Jumps 740 kb/d in October, 3Q13 Non-OPEC Supply Up 1.97 y-o-y 4Q13 expected to be up 675 kb/d q-o-q Total Non-OPEC Supply, y-o-y chg 2.0 1.5 1.0 0.5 0.0-0.5-1.0 1Q10 4Q10 3Q11 2Q12 1Q13 4Q13 3Q14 Other North America Total Non-OPEC supply ex-n. America seen flat in 4Q13, then up steeply y-o-y in 1Q14 Forecast for 2014 up to 1.8 as further US, Russian growth offsets slight downward revisions elsewhere
Russia Is a Mainstay of Non-OPEC Growth Although Increases Small in Percentage Terms Y-o-y production growth 80 kb/d in 2013; 40 kb/d in 2014 Most large Russian companies continue to make sufficient investment to slow natural declines at mature fields in West Siberia and bring on greenfield production, particularly in East Siberia 11.09 Russia - Total Supply 10.89 10.69 10.49 Jan Mar May Jul Sep Nov Jan 2011 2012 2013 2014 forecast 2013 forecast
OECD stocks
OECD Stock Deficit vs 5-yr Average Narrowed in September 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 2008-2012 Avg 2008-2012 2012 2013 mb 100 50 0-50 -100 OECD Industry Total Oil Stocks Relative to Five-Year Average -150 Sep 11 Mar 12 Sep 12 Mar 13 Sep 13 Asia Oceania Americas Europe OECD OECD commercial oil stocks built counter-seasonally by 8.6 mb to 2 676 mb at end-sep l Stock deficit to 5-year average narrowed to 42.9 mb, from 67 mb at end- August. l Inventories remain 53 mb below a year ago Crude oil surged counter-seasonally by 18.2 mb as refining throughputs plunged on seasonal maintenance and poor margins Refined products cover 30.8 days of forward demand 3Q13 inventories buit by 12.5 mb or 140 kb/d
OECD Lag to 5-Yr Average Concentrated in Refined Products mb OECD Crude Oil Stocks Relative to Five-Year Average 80 60 40 20 0-20 -40-60 Sep 11 Mar 12 Sep 12 Mar 13 Sep 13 Asia Oceania Europe Americas OECD mb 40 20 0-20 -40-60 OECD Industry Total Product Stocks Relative to Five-Year Average -80 Sep 11 Mar 12 Sep 12 Mar 13 Sep 13 Asia Oceania Americas Europe OECD Products at 40.9 mb deficit to 5-yr average, led by Europe l OECD Europe 51 mb in deficit Crude oil at 11 mb surplus, led by Americas l OECD Americas 35 mb in surplus as domestic crude production soars NGLs and refinery feedstocks 13 mb in deficit
Unusually Weak October Draw Based on Preliminary Data mb 2,850 2,800 2,750 2,700 2,650 2,600 OECD Total Oil Stocks 2,550 Jan Mar May Jul Sep Nov Jan Range 2008-2012 Avg 2008-2012 2012 2013 October OECD inventories slipped by 7.6 mb l weaker than the 16.0 mb seasonal draw Crude stocks soared by a further 25.6 mb on weak OECD refining activity Refined products drew by steep 35.8 mb Deficit to 5-yr average narrowed further to 34.5 mb
Refining
Global Refinery Runs Plummet in October Throughputs down 3.6 since July peak 79 78 77 76 75 74 73 72 71 Global Refining Crude Throughput Jan Mar May Range 08-12 Jul Sep Nov Jan Average 08-12 2012 2013 est. 2013 2014 4.0 3.0 2.0 1.0 0.0-1.0-2.0-3.0 Global Crude Throughputs Monthly Change Jun 13 Aug 13 Oct 13 Dec 13 Americas Europe Asia Oceania China Other Asia Middle East Latin America Other Global refinery crude throughputs plunge by 1.4 in September and 1.5 and October Year-on-year gains, of an average 1.6 seen in June-August period, eroded by October Collapse in refinery margins amplify seasonal maintenance curbs 4Q13 global crude runs revised down by 550 kb/d since last month s Report, to 76.7, falling from 77.2 in 3Q13. Annual growth slows from 1.2 in 3Q13 to 0.4 in 4Q13
OECD Refiners Drive Runs Lower European Crude Intake Plunge to Lowest in 22 Years 40 39 38 37 36 OECD Total Crude Throughput 35 Jan Mar May Jul Sep Nov Jan Range 08-12 Average 08-12 2012 2013 est. 2013 2014 est. 0.6 0.4 0.2 0.0-0.2-0.4-0.6-0.8-1.0-1.2 OECD Crude Throughputs Annual Change 1Q11 3Q11 1Q12 3Q12 1Q13 3Q13 Americas Europe Asia Oceania OECD OECD crude runs plunged 2.6 over September and October, steeper than the normal seasonal downturn All OECD regions were lower, on heavy maintenance and as margins plunged Total OECD runs below year-earlier levels, despite robust US throughputs European refiners continue to struggle
European Fall Steeper than Offline Capacity Weak margins exacerbate drop 14.0 13.5 13.0 12.5 12.0 11.5 11.0 10.5 10.0 OECD Europe Crude Throughput Jan Mar May Jul Sep Nov Jan Range 08-12 Average 08-12 2012 2013 est. 2013 2014 est. 2.0 1.5 1.0 0.5 OECD Europe Refinery Shutdowns 0.0 Jan Mar May Jul Sep Nov Jan Range 08-12 Average 08-12 2012 2013 Reported Rates lowest since 1991 in September and 1989 in October? Drop in runs exceed planned and unplanned refinery outages Surplus capacity exist despite significant refinery closures to date
Surplus Capacity Exist Despite Closures MOL s Mantova Refinery in Italy, 17 th to shut 1.3 of capacity already shed, 500 kb/d in 2011 and 500 kb/d in 2012 350 kb/d shut this year, for a total of 1.7 In addition, lot of ownership changes, with Russian, Chinese, Indian players entering the market, as well as trading companies (Vitol, Gunvor)
Dismal Refining Margins Lead to Cuts But improve in October as lower runs bite $/bbl Northwest Europe Refining Margins 15.0 12.5 10.0 7.5 5.0 2.5 0.0-2.5-5.0-7.5 Jan 12 Jul 12 Jan 13 Jul 13 Brent Cracking Urals Cracking Brent HS Urals HS $/bbl Singapore Refining Margins 10.0 7.5 5.0 2.5 0.0-2.5-5.0-7.5 Data Source: IEA/KBC -10.0 Jan 12 Jul 12 Jan 13 Jul 13 Dubai Cracking Tapis Cracking Dubai HS Tapis HS Surplus refining capacity causes margins to fall even in the peak maintenance season As refiners cut runs, and crude prices come off summer peaks, margins improve Simple margins remain negative and complex margins low September European margins $9.95/bbl than year earlier on average. October $5.85/bbl lower than same month in 2012 Singapore margins no better, with simple margins firmly negative
Non-OECD Continues to Drive Growth 2.5 2.0 1.5 1.0 0.5 0.0-0.5-1.0-1.5 Global Crude Throughputs Annual Change 1Q12 3Q12 1Q13 3Q13 Americas Europe Asia Oceania China Other Asia Middle East Latin America Other OECD vs. Non-OECD Crude Runs 42.0 40.0 38.0 36.0 34.0 32.0 30.0 28.0 1Q2004 1Q2006 1Q2008 1Q2010 1Q2012 OECD Non-OECD Non-OECD refinery runs up 1.6 y-o-y in 3Q13, and 1.0 in 4Q13 Non-OECD Asia is largest contributor to growth, led by China Russia, Brazil also at record levels through summer Middle East sees the start-up of 400 kb/d Jubail refinery in Saudi Arabia in September China, India to add new capacity by year-end