Market Report Series: Oil 218 Analysis & Forecasts to 223 Energy Community 1 th Oil Forum, Belgrade, 25 September 218
Short term update: crude prices (excl. WTI) up strongly Aug/Sep $/bbl 8 Benchmark Crude Prices 78 76 74 72 7 68 66 64 62 6 Jun 18 Jul 18 Aug 18 Sep 18 Copyright 218 Argus Media -25 WTI Cushing N. Sea Dated Dubai $/bbl 5-5 -1-15 -2 WTI Midland diffs Copyright 218 Argus Media Ltd Jan 18 Mar 18 May 18 Jul 18 Sep 18 WTI Midland vs WTI Cushing WTI Midland vs WTI Houston Brent crude tests $8/bbl. US and Canadian differentials fall due to infrastructure constraints.
Short term update: demand growth slows 2Q18; rebounds 2H18 2.5 Global Oil Demand Growth, y-o-y 2. 1.5 1..5. -.5 1Q217 3Q217 1Q218 3Q218 1Q219 3Q219 Europe China India US Total Demand growth 1.4 in 218 and 1.47 in 219, but trade wars, GDP, growth outlook, currency devaluations, are risks.
Short term update: global oil supply reaches 1 in August 3. OPEC and Non-OPEC Oil Supply Year-on-Year Change 2. 1.. -1. -2. Jan 16 Jul 16 Jan 17 Jul 17 Jan 18 Jul 18 OPEC Crude Non-OPEC OPEC NGLs Total Supply Higher OPEC output offsets seasonal non-opec decline. Non-OPEC output up 2.6 on a year ago, OPEC down 27 kb/d due to declines from Venezuela, Iran and Angola.
Short term update: Iranian exports tumble 28 kb/d to 1.9 Iran Crude Oil Loadings 2.5 Source: Kpler 2. 1.5 1..5. Jan-17 May-17 Sep-17 Jan-18 May-18 India China Europe Korea Japan Other Top customers India and China make sharp cuts in August, Europe already at lower levels.
Short term update: Oil market set to tighten late in 218 1 3. 98 2. 96 1. 94. 92-1. 9 2Q15 2Q16 2Q17 2Q18-2. Total Stock Ch. & Misc Demand Supply* *Note: For scenario purposes, OPEC/non-OPEC cuts remain constant. Stocks will draw 4Q18 by more than shown unless Iran/Venezuela shortfalls compensated by more output from other producers.
Back to the medium term: robust demand growth of 1.2 growth by product & fuel oil breakdown y-o-y changes 2.5 2. 1.5 1..5. -.5-1. 217 218 219 22 221 222 223 LPG & ethane Naphtha Motor gasoline Jet fuel & kerosene Gasoil/diesel Residual fuel oil Other products Total products 3. 2.5 2. 1.5 1..5. -.5-1. -1.5-2. LPG & ethane + naphtha + gasoline 217 218 219 22 221 222 223 Jet fuel & kerosene + other products Gasoil/diesel Inland FO New bunker ULSFO Bunker HSFO Total products Very large shift in demand in 22 and following adjustments reflect IMO induced switch
Petrochemicals drive oil demand growth to 223 Feedstock requirements for new steam crackers 7 kb/d 6 5 4 3 2 Naphtha Ethane 1 US China Russia Others Petrochemical feedstocks (ethane and naphtha) responsible for 25% of global oil demand growth
IMO 22 marine fuel specification changes 3 5 3 2 5 2 1 5 1 5 kb/d Marine bunker in OECD and major non-oecd fuel switch Volumes (kb/d) and Shares (%) 215 216 217 218 219 22 221 222 223 9% 8% 7% 6% 5% 4% 3% 2% 1% % 215 216 217 218 219 22 221 222 223 Bunker HS FO Marine gasoil Marine FO.5% % High Sulfur fuel oil replaced by a new.5% fuel and gasoil. Gasoil availability is the main constraint.
Sign of the future? China uses alternative fuels in transport Thousand 7 LNG trucks and electric buses fleet 6 5 4 Thousand cars 6, Natural gas car fleet 25% Electric car fleet Thousand cars 1 6 3 2 5, 4, 3, 2, 1, 1996 24 212 217 China NGVs % World 2% 15% 1% 5% % 1 4 1 2 1 8 6 4 2 213 214 215 216 217 PHEV BEV 1 212 213 214 215 216 217 LNG trucks Electric Buses Likely to replace 2 kb/d of gasoline and 8 kb/d of diesel per year over the forecast
Supply concerns: limited increase in 218 upstream spending Global oil and gas upstream capital spending 211-218 9 8 7 6 5 4 3 2 1 USD billion (real) -25% -25% +1% +4%* 212 213 214 215 216 217 218 *Preliminary based on selection of investment updates Most companies maintain spending, increases focused on US.
Supply concerns: global oil discoveries fall to 7-year low 8 7 6 5 4 3 2 1 Resources Million Barrels Global oil discoveries 2 21 22 23 24 25 26 27 28 29 21 211 212 213 214 215 216 217 Crude Oil Condensate NGL Less than 4 billion barrels of crude, condensate and NGLs confirmed.
Supply concerns: industry needs to find a North Sea each year. Output loss from post-peak conventional crude oil fields -1. OPEC -2. -3. Non-OPEC -4. -5. 21 211 212 213 214 215 216 217 Ageing oil fields lose more than 3 per year despite slowing decline rates.
Supply concerns: Venezuela, Libya, Iran risk factors for OPEC Changes in OPEC crude supply capacity 217-223.8.6.4.2. -.2 Algeria Eq. Gui Gabon Qatar Ecuador Nigeria Saudi Kuwait Libya Iran UAE Iraq -.4 -.6 -.8 Angola Venezuela OPEC crude oil capacity rises by a mere.75 (13 kb/d annual). Iran sanctions make picture very uncertain as does possible collapse of Venezuela.
Strong growth in US, Brazil, Canada drives non-opec output Annual non-opec supply change 3. 2.5 2. 1.5 1..5. -.5-1. -1.5 212 213 214 215 216 217 218 219 22 221 222 223 US Brazil Canada Other Top three expand by combined 5.5 by 223, total non-opec rises 5.2.
US oil supply hits 16.9 by 223, up 3.7 on 217 US total oil supply Annual change in US oil supply 18 16 14 12 1 8 6 4 2 2 1-1 21 213 216 219 222 kb/d 211 214 217 22 223 LTO Gulf of Mexico Alaska Other Crude NGLs Other Liquids Growth stalls by early 22s in the absence of higher prices or further technological advances.
Most incremental crude exports come from non-opec Africa Angola Algeria Nigeria Egypt Libya Middle East Kuwait Oman Saudi UAE Iraq Latin America Venezuela Colombia Brazil FSU/Norway Kazakh Russia Norway North America Mexico Canada US -1.5-1. -.5..5 1. 1.5 2. 2.5 3. US refining capacity has absorbed most of the first wave of the Shale. Second wave goes to exports.
US oil finds new markets Low-sulphur and petchem feedstocks US LTO first wave Low-sulphur, low residue feedstocks US LTO second wave Refiners in Asia and Europe look for suitable crude oil to produce petrochemical feedstocks and low-sulphur fuels
China net crude oil imports double the US in 223 Net crude oil imports 1 8 6 4 US China India 2 23 25 27 29 211 213 215 217 219 221 223 Indian imports, too, surpass the US in 223 as shale growth reduces US import dependence.
Tightening oil market balance 4. Global Oil Market Balance 36. 32. 28. 24. 2. 27 28 29 21 211 212 213 214 215 216 217 218 219 22 221 222 223 OPEC Crude Capacity Call on OPEC Crude + Stock Ch. Solid demand growth alongside major uncertainties around OPEC capacity & investment elsewhere could lead to shrinking of spare production capacity cushion by 223. Security of supply risk.
Conclusions: medium term outlook to 223 Robust world oil demand growth to 223 petrochemicals key driver. IMO disruption? More upstream investment needed today to meet future demand and offset 3 of declines from mature oil fields each year. Venezuela, Libya & Iran are major OPEC supply risks In non-opec, US, Brazil, Canada, Norway dominate output growth. US crude finds new markets as refiners seek light, low-sulphur crude to meet petrochemical demand and IMO specifications. China & India overtake US as net importers. As spare capacity cushion shrinks, supply security concerns remain critical.