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4 Growth is picking up Percent 6 Advanced economies Emerging and developing economies E 2018F 2019F 2020F Source: World Bank, Global Economic Prospects Notes: E denotes estimate and F denotes forecast as of January 2018.

5 Most commodity prices are recovering, albeit very slowly Index, nominal terms, 2010 = Post-recession peak 2011:Q1 Post-recession trough 2016:Q1 150 Energy Agriculture Metals Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Source: World Bank Note: Last observation is April 2018.

6 Prices are much higher than the average Index, constant US$ (2010 = 100) Agriculture Changes (%) in real prices to 2017 from: Agriculture: Energy: Metals: Metals 40 Energy Source: World Bank.

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8 The equilibrium of the oil price changed after 2004 US$/bbl January August 2014 Average price: $104/bbl Volatility: 2.95 December 2014 March 2018 Average price: $50.24/bbl Volatility: Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Source: World Bank. Note: Weekly data. Volatility is defined as standard deviation of logarithmic changes times 100. Last observation is March 16, 2018.

9 Oil prices are just above their long-term average US$/bbl, deflated by U.S. CPI (Jan 2017 terms) Two price cycles after WWII 1972 to 1986: Supply driven-cycle associated with oil supply disruption and major downturn in the global economy. High prices induced production from unconventional sources, including Alaska, Gulf of Mexico, and North Sea to 2014: Demand-driven cycle with no disruption in the global economy (during the spike) or boost to the global economy (during the collapse). High prices induced production from unconventional sources, including US shale, Canadian oil sands, and biofuels average: $56/bbl Source: World Bank. Note: World Bank average. Last observation is March 2018.

10 The costs of shale oil have gone down US$/bbl Range across regions Average Q1 2013Q3 2014Q1 2014Q3 2015Q1 2015Q3 2016Q1 2016Q3 2017Q1 Source: Rystad Energy NASWellCube Premium. Note: Does not include test activity, where well was shut-down after completion. Last observation is 2017Q2.

11 U.S. shale well productivity has increased b/d per well 1,800 1,500 1,200 Range across regions Median Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Source: U.S. Energy Information Agency. Notes: Range and median are based on five regions (Bakken, Eagle Ford, Niobrara, and Permian). Last observation is March 2018.

12 Cumulative change in oil production since September 2016 mb/d 5 Agreement countries Non-Agreement countries Net change Agreed cuts Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 Jan-18 Source: International Energy Agency Note: Bars denote change in oil production relative to September 2016, when the OPEC/non-OPEC cuts were first discussed. The cuts of 1.8 mb/d became effective in January Last observation is February 2018.

13 Energy prices are closer together US$/mmbtu Crude oil (World Bank average) Natural gas (U.S.) 0 Jan-00 Jul-01 Jan-03 Jul-04 Jan-06 Jul-07 Jan-09 Jul-10 Jan-12 Jul-13 Jan-15 Jul-16 Jan-18 Source: World Bank. Note: Last observation is March Coal (Australia)

14 Natural gas prices are closer US$/mmbtu 20 Japan (LNG) 15 Europe 10 5 U.S. 0 Jan-00 Jul-01 Jan-03 Jul-04 Jan-06 Jul-07 Jan-09 Jul-10 Jan-12 Jul-13 Jan-15 Jul-16 Jan-18 Source: World Bank. Note: Last observation is March 2018.

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16 Some metals prices are picking up $/mt 10,000 $/mt $/mt 200 2,800 $/mt 30,000 Copper [left] Iron ore [right] Aluminum [LHS] 25,000 8, ,400 20,000 6, ,000 15,000 4, ,600 10,000 2,000 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan ,200 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 5,000 Source: World Bank Note: Last observation is March 2018.

17 China dominates metal consumption Million metric tons 6 5 Rest of the world China 1 0 Jan-95 Jan-97 Jan-99 Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13 Jan-15 Jan-17 Source: World Bank and World Bureau of Metal Statistics Notes: Last observation is December 2017.

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19 Agricultural prices have been stable for more than 3 years Index, nominal terms, 2010 = Food Remarkably stable agricultural commodity prices 100 Raw materials 80 Beverages 60 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Source: World Bank. Note: Last observation is March 2018.

20 Stock-to-use ratios of key grains have recovered Ratio 0.40 Maize Rice Wheat Source: U.S. Department of Agriculture. Notes: Update based on the U.S. Department of Agriculture March 8, 2018 data release.

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22 Where are commodity prices heading? Index, real (2010 = 100) Agriculture Forecasts as of April Metals 40 Energy Source: World Bank. Note: The period refers to forecasts, as of April 2018.

23 History of oil consumption and prospects as envisaged in 2005 mb/d OECD, actual Non-OECD, actual OECD, projected in 2005 Non-OECD, projected in Source: International Energy Agency and World Bank. Note: The projection was taken from the 2005 IEA World Energy Outlook.

24 China has reversed the global metals intensity Index, 1995= World World excl. China Source: World Bureau of Metal Statistics.

25 Oil and energy intensity of GDP have been declining Oil Energy Barrels of oil per $10,000 of GDP Barrels of oil equivalent per $10,000 of GDP 12 World OECD Non-OECD 30 World OECD Non-OECD Source: BP Statistical Review and World Bank

26 Consumption against income in per capita terms Oil Natural gas tons of oil per capita tons of oil equivalent per capita EM7 ex China China 0.5 EM7 ex China China 0 G7 South Korea 0 10,000 20,000 30,000 40,000 50, G7 South Korea 0 10,000 20,000 30,000 40,000 50,000 GDP per capita GDP per capita Source: BP Statistical Review and World Bank. Note: Consumption per capita vs. GDP per capita ( ).

27 Consumption against income in per capita terms Coal Aluminum ton of oil equivalent per capita kg per capita EM7 ex China China 10 EM7 ex China China 0.0 G7 South Korea 0 10,000 20,000 30,000 40,000 50, G7 South Korea 0 10,000 20,000 30,000 40,000 50,000 GDP per capita GDP per capita Source: BP Statistical Review and World Bank. Note: Consumption per capita vs. GDP per capita ( ).

28 Consumption against income in per capita terms Copper Zinc kg per capita kg per capita 25 EM7 ex China China 14 EM7 ex China China 20 G7 South Korea G7 South Korea ,000 20,000 30,000 40,000 50, ,000 20,000 30,000 40,000 50,000 GDP per capita GDP per capita Source: BP Statistical Review and World Bank. Note: Consumption per capita vs. GDP per capita ( ).

29 mb/d 7 Iran s oil production Consumption Net Exports Source: BP Statistical Review, International Energy Agency. Note: Production includes crude oil and liquids.

30 mb/d 4 Venezuela s oil production Consumption Net Exports Source: BP Statistical Review. Note: Production includes crude oil and liquids.

31 Conflict-driven oil supply reductions in historical context -0.9 Nov 2011 Oct 2012 Sanctions on Iran -1.5 Feb Oct 2011 Libyan civil war -2.3 Mar Dec 2003 Iraq war -4.3 Aug 1990 Jan 1991 Kuwait invasion -4.1 Oct 1980 Jan 1981 Iran-Iraq war -5.6 Nov 1978 Apr 1979 Iranian revolution -4.3 Oct 1973 Mar 1974 Arab oil embargo mb/d Source: International Energy Agency and World Bank

32 US oil production exceeded its 1970 record of 10 mb/d Mb/d 11.0 U.S. shale boom Jan-70 Jan-73 Jan-76 Jan-79 Jan-82 Jan-85 Jan-88 Jan-91 Jan-94 Jan-97 Jan-00 Jan-03 Jan-06 Jan-09 Jan-12 Jan-15 Jan-18 Source: U.S. Energy Information Administration

33 OPEC s role in the global oil market Shares of global oil production 70% 60% 50% 40% 30% 20% 49% Non-OPEC oil producers that agreed to cuts OPEC oil producers Source: BP Statistical Review and International Energy Agency Notes: Columns denote 5-year averages, except the last which refers to OPEC today POWER: It It is is less less powerful compared to to the the 1970s. It It asked for for assistance from key key non-opec producers to to make the the cuts effective. COHERENCE: It It appears to to be be less less coherent compared to to the the past because of: of: (i) (i) political fractions within and (ii) (ii) some members cannot afford supply cuts. COMPETITION: Commodity agreements have a a poor record. They are are successful initially, but but non-members gain market share and eventually become efficient suppliers. A A case in in point is is the the U.S. shale oil oil industry, now acting as as a a counterweight to to OPEC. A A historical example is is the the International Coffee Agreement. SUBSTITUTION: Agreement-induced supply cuts make substitute (natural or or synthetic) products more competitive. A A historical example is is the the International Tin Tin Agreement whose supply cuts made aluminum competitive.

34 Signs of slowdown in China s metal consumption mmt, year-on-year change OECD China ROW Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 Source: World Metal Statistics Notes: Last observation is December 2017

35 Agricultural prices show little correlation with weather cycles Index, deflated by U.S. CPI, January 2010 = Agriculture price index ENSO Index peaks The strongest El Niño on record, 1997/ % -19.6% % -2.9% -0.9% -2.2% -6.5% -7.3% Source: World Bank and National Oceanic Atmospheric Administration. Note: The numbers denote percent changes of the six-month average leading to the ENSO peak compared to the previous six-month period (bold) and the corresponding six-month period of the previous year (italic). The last observation is February % 9.8% 3.8% -3.5% -7.1% -14.8%

36 Could India become the next China? China India Crude oil Crude oil Coal Coal Iron ore Iron ore Base metals Base metals Grains Grains Edible oils Edible oils Population GDP Population GDP Share of world total (percent) Share of world total (percent) Source: World Bank, BP Statistical Review of World Energy, World Bureau of Metals Statistics, U.S. Department of Agriculture

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