OIL MARKET REPORT OCTOBER 2018

Transcription

1 16 November OIL MARKET REPORT OCTOBER EXECUTIVE SUMMARY In October crude oil market caught a bear flu after almost gripping the $90 per barrel price level (Brent). In the beginning of October the market apparently priced in quite a lot of risks regarding U.S. threats to zero Iran s oil exports. On the second week of the month these risks suddenly started easing. It seems all the September s rally was highly speculative in nature indeed. U.S. granted 8 countries 6-months waivers on November 2, including India, South Korea, Japan and China. It was surprising for the market given several months of very aggressive rhetoric. It was believed to be a political move, to put downward pressure on oil prices, taken just days before Americans headed to the polls in mid-tern elections on the 6 th of November. Interestingly the European Union, which recently announced the creation of an economic channel to continue financial dealings with Iran, was not among those receiving waivers. However, oil exports from Iran to EU had been lowered below 100 thsd bbl / d already. China and India are much more important in this matter. OPEC signaled it could cut output in 2019 due to concerns about rising oil inventories and economic uncertainty, lurching away from a pledge made just days ago to pump flat out. A committee of producers including Russia and Saudi Arabia highlighted the next day after mid-term elections the need to prepare options for how much oil they should pump next year to prevent the market slipping back into imbalance. The group, which since May has been boosting production, said the rise in oil inventories in recent weeks coupled with fears about an economic slowdown may require changing course. Global oil markets are going through a very sensitive period - global economic growth as well, IEA Executive Director Fatih Birol said in an interview in London on the day of OPEC changing its rhetoric. If the oil producers care about the health of the growth of the global economy, which I believe they do, they should take the steps to further comfort the market. The outlook for next year is very unpredictable, according to Saudi Energy Minister Al- Falih. If the supply is too long, we should be able to cut, he said in an interview with Russia s TASS news agency. If supply is short, we have to be able to respond. The U.S. Energy Information Administration (EIA) projected that U.S. crude production will average mln bbl / d in 2019, passing the 12 mln bbl / d milestone much sooner than expected, largely on the back of increased shale oil production from the Permian basin. In 2019, the EIA said it expected production to increase 1.16 mln bbl / d from the prior year, up from the previous 1.02 mln bbl / d earlier forecast. Growing U.S. oil production and eased geopolitical risks are the main drivers of oil price unstoppable falling from maximum levels. If numbers at the end of November show stable Iran s exports in spite of U.S. sanctions then the price will likely return to $60-70 per barrel trade range. 1 / 30

2 1. MARKET PERFORMANCE In October crude oil market caught a «bear flu» after almost gripping the $90 per barrel price level (Brent). In the beginning of October the market priced in apparently quite a lot of risks regarding U.S. threats to zero Iran s oil exports. On the second week of the month these risks suddenly started easing. It seems all the September s rally was highly speculative in nature indeed. Effective monthly trade range of Brent spot price skyrocketed to $12.2 per bbl (15.2% to the average price of $80.5) in October. Average price was just 2% above September level when effective trade range was just $6.6 per barrel. In the end of October the price finally broke through $80 resistance. Both crude oil futures curve for Brent and WTI are in long-term backwardation, but shortterm futures are in contango now. By the end of the month, 12-months futures to spot spread in Brent crude oil increased by $4.2 per bbl to -$0.1 per bbl. 1-month Brent futures to spot surged to $1.2 per bbl, 3-month futures to spot spread also increased by $2.4 per bbl to $1.2. WTI crack spreads deteriorated in October to $15.2 per bbl, 14.9% below end- September level. Brent crack spread surged by 105.1% to $10.9 per bbl. Tapis crack spread increased by 20.5% to $9.4 per bbl. Discount of WTI benchmark to Brent narrowed to the $8.6 per barrel level after trading close to $10 per barrel level for a while. Chart 1.1. Brent crude oil price performance over last 2 months, $ per bbl September October 2 / 30

3 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Chart 1.2. Brent crude oil price performance over last 12 months, $ per bbl Chart 1.3. Contango (+) / backwardation (-) in Brent crude oil futures, $ per bbl Brent crude oil spot price month futures 3-months futures 12-months futures Chart 1.4. Crude oil benchmarks premium (+) / discount (-) over Brent crude oil, $ per bbl Chart 1.5. Crude oil 321 crack spread, $ per bbl WTI Crack Spread Tapis Crack Spread Brent Crack Spread WTI Tapis Arab Light ESPO / 30

4 OPEC Algeria Angola Ecuador Gabon Iran Iraq Kuwait Libya Nigeria Qatar Saudi Arabia U.A.E. Venezuela 2. OPEC PRODUCTION According to Bloomberg assessments, total OPEC oil production in October increased by 430 thsd bbl / d to mln bbl / d. The largest decrease this month in OPEC oil production was made by Kuwait (-40 thsd bbl / d), while export countries with substantially increasing output were Libya (+170 thsd bbl / d) and Saudi Arabia (+150 thsd bbl / d). From a y-o-y basis in October the cartel total output marked the increase in production by 780 thsd bbl / d. Saudi Arabia demonstrated the most annual crude oil production growth (+670 thsd bbl / d or 6.7%), followed by Iraq (+340 thsd bbl / d or +7.8%) and Libya (+240 thsd bbl / d or 24.5%). The most significant annual production decrease was observed in struggling Venezuela (-590 thsd bbl / d or -31.7%). Angola (-10.5%) and Iran (-10.2%) also produced considerably less crude oil in October than a year ago. In comparison with September OPEC oil output figures by Bloomberg, EIG evaluated total OPEC production equal to mln bbl / d (17 thsd bbl / d below Bloomberg s assessment). In particular EIG printed significantly higher numbers for Iran (+272 thsd bbl / d) and Angola (+41 thsd bbl / d) relative to Bloomberg ones. Considerable downward assessments were made for Venezuela, U.A.E. and Nigeria crude oil output (-74 thsd bbl / d, -68 thsd bbl / d and -47 thsd bbl / d versus Bloomberg). Chart 2.1. OPEC crude oil output, thsd bbl / d Chart 2.2. Different assessments of OPEC crude oil output in the previous month 35,000 34,000 33,000 (Bloomberg) (EIG) The difference between Bloomberg (+) and EIG (-) estimates, thsd bbl / d 32, , , ,000, EIG, EIG In accordance with EIG figures, in September OPEC as a whole increased its share in a world crude oil output by 50 bps to 38.7%. Comparing to a year ago level it is lower by 159 bps. The lost in market share does not look dramatic given appreciation in crude oil price. OPEC has finally got some success. Brent crude oil price has been above $80 per barrel for a while now. The problem is many exporting countries could return to market share competition given this high level of prices and tensions around Iran. Pace of growth in demand is still substantially above average and stocks have already been lowered significantly. 4 / 30

5 Oct-12 Apr-13 Oct-13 Apr-14 Oct-14 Apr-15 Oct-15 Apr-16 Oct-16 Apr-17 Oct-17 Apr-18 Oct-18 Sep-13 Feb-14 Jul-14 Dec-14 May-15 Oct-15 Mar-16 Aug-16 Jan-17 Jun-17 Nov-17 Apr-18 Sep-18 Chart 2.3. OPEC crude oil production structure, by country Chart 2.4. OPEC share, as % of world crude oil production U.A.E. 9.5% Venezuela 3.9% Algeria 3.3% Ecuador Angola 1.6% Gabon 0.5% 4.7% Iran 10.4% 42.0% 41.5% 41.0% 40.5% Non-OPEC Saudi Arabia 32.5% Iraq 14.3% 40.0% 39.5% 39.0% 38.5% Qatar 1.9% Nigeria 5.5% Libya 3.7% Kuwait 8.4% 38.0% 37.5% 37.0% OPEC Source: EIG In October the Bloomberg estimated OPEC s total spare capacities at roughly mln bbl / d. Assessment of Venezuela s capacities was finally lowered by 570 thsd bbl / d in January. About 80% of OPEC s potential to ramp up crude oil production is located in just 5 states, namely Saudi Arabia (820 thsd bbl / d or 35.0% of total), Venezuela (170 thsd bbl / d or 7.0% of total), Kuwait (240 thsd bbl / d or 10.0% of total), Iran (580 thsd bbl / d or 25.0% of total) and Angola (180 or 8.0%). Chart 2.5. OPEC crude oil spare capacities structure, by country Chart 2.6. Nigeria & Libya oil production disruptions, thsd bbl / d Venezuela 7.3% U.A.E. 1.3% Saudi Arabia 35.4% Algeria 3.5% Angola 7.8% Ecuador 1.5% Kuwait 10.4% Qatar Nigeria Libya 1.3% 3.5% -0.9% Gabon 1.7% Iran 25.1% Iraq 0.4% 2,000 1,800 Nigeria spare capacities 1,600 Libya spare capacities 1,400 1,200 1, OPEC s free capacities increased in October comparing to September numbers by 560 thsd bbl / d. Nigeria lost 200 thsd bbl / d in its May s estimation of oil production capacity. Qatar s capacities fell by 140 thsd bbl / d and Venezuela s estimated capacities were lowered by other 70 thsd bbl / d in October. However, Venezuela s abilities to produce crude oil could be limited even lower in the nearest future by even 1 mln bbl / d. OPEC capacities are about to shrink not only because of Venezuela troubles, but agreed production growth. It concerns the market due to risks of potential supply outages. 5 / 30

6 Chart 2.7. Algeria crude oil output, thsd bbl / d Chart 2.8. Angola crude oil output, thsd bbl / d 1,400 1,300 2,000 1,900 1,200 1,800 1,700 1,100 1,600 1,000 1, Chart 2.9. Iran crude oil output, thsd bbl / d 4,000 3,800 3,600 3,400 3,200 3,000 2,800 2,600 2,400 Chart Kuwait crude oil output, thsd bbl / d 1,400 Chart Iraq crude oil output, thsd bbl / d 5,000 4,750 4,500 4,250 4,000 3,750 3,500 3,250 3,000 2,750 2,500 Chart Libya crude oil output, thsd bbl / d 3,200 3,100 1,600 1,400 3,000 1,200 2,900 2,800 2,700 1, , , / 30

7 Chart Nigeria crude oil output, thsd bbl / d Chart Saudi Arabia crude oil output, thsd bbl / d 2,500 2,300 11,000 10,750 10,500 2,100 10,250 1,900 10,000 9,750 1,700 9,500 1,500 9,250 9,000 1,300 8,750 Chart U.A.E. crude oil output, thsd bbl / d Chart Venezuela crude oil output, thsd bbl / d 3,200 2,400 3,100 2,200 3,000 2,900 2,800 2,700 2,600 2,000 1,800 1,600 1,400 2,500 1,200 7 / 30

8 3. NON-OPEC PRODUCTION According to the most recent EIG assessments of worldwide crude oil production, total crude oil output in non-opec states increased in September to mln bbl / d (+880 thsd bbl / d). Comparing to the reference level in October 2016 ( mln bbl / d) non- OPEC production was higher by about 2.73 mln bbl / d. The most considerable production growth in September relative to the previous month among the non-opec oil producing countries was achieved in the USA (+149 thsd bbl / d), Brazil (+96 thsd bbl / d), the U.K. (+169 thsd bbl / d) and Russia (+105 thsd bbl / d), while Canada, Mexico and India made a main cutback with oil output reduce of 4, 11 and 12 thsd bbl / d respectively. The same time from the longer-term point of view (in terms of y-o-y) non-opec crude oil output in September increased by almost mln bbl / d or 5.9% with the U.K. (+257 thsd bbl / d or +26.9% yoy), Canada (+188 thsd bbl / d or +4.9% yoy) and the USA (+1608 thsd bbl / d or +16.8% yoy) being the main drivers of this positive tendency. This output growth was partly offset by annual production decline in Brazil (-35 thsd bbl / d or -1.3%) and Egypt (-15 thsd bbl / d or -2.5%). Chart 3.1. Non-OPEC crude oil output, thsd bbl / d Chart 3.2. Non-OPEC crude oil production structure, by country 52,000 51,000 50,000 Russia. 22.0% USA. 21.7% 49,000 48,000 47,000 46,000 45,000 Others. 22.0% United Kingdom. Norway. Mexico. 2.3% 3.0% 3.5% Other Ex- USSR. 5.2% Brazil. 5.1% China. 7.3% Canada. 7.8% Source: EIG Source: EIG USA Crude oil production in the USA climbed in October (up to last date) by 25 thsd bbl / d in comparison with September data and increased by 1813 thsd bbl / d or 19.6% in comparison with October figures. According to the most recent EIG data, the USA was accounted for 13.27% of global crude oil output in September that is 107 bps higher now relative to the local maximum of 12.20% printed in February The same time natural gas liquids (NGL) production in the USA in October climbed by 85 thsd bbl / d or 2.0% on the month-to-month basis and increased by 656 thsd bbl / d or 17.5% on the yearon year basis. Crude oil net imports from the US in October decreased by 7.9% mom to a bit more than 5 bn bbl /d, while crude oil exports surging to 2.26 mln bbl / d comparing to 2.14 mln bbl / d in September. Oil products exports from the USA in October increased by 104 thsd bbl / d and the net imports of refined oil products fell by 633 thsd bbl /d. 8 / 30

9 Sep-13 Feb-14 Jul-14 Dec-14 May-15 Oct-15 Mar-16 Aug-16 Jan-17 Jun-17 Nov-17 Apr-18 Sep-18 Chart 3.3. USA crude oil production, thsd bbl / d Chart 3.4. The share of the USA in oil production, % 11,500 11,000 10,500 10, ,500 9,000 8,500 8,000 7,500 7, US crude output, as % of non- OPEC output US crude output, as % of world output (r.h.s.) Source: EIG Chart 3.5. USA crude oil net import, thsd bbl / d Chart 3.6. USA crude oil export, thsd bbl / d 9,000 8,500 3,000 2,500 8,000 2,000 7,500 7,000 1,500 6,500 1,000 6, ,500 Chart 3.7. USA NGL production, thsd bbl / day 0 Chart 3.8. USA oil processing gain, thsd bbl / day 5,000 1,250 4,500 1,200 4,000 1,150 3,500 3,000 1,100 2,500 2,000 1,050 1,000 9 / 30

10 Chart 3.9. USA oil product net import, thsd bbl / d Chart USA oil product export, thsd bbl / d ,500 6,000-1,000 5,500-1,500 5,000-2,000 4,500-2,500 4,000-3,000 3,500-3,500 3,000-4,000 2,500 Total production of shale oil in the USA marked the decline by 21 thsd bbl / d in October and on the year-on-year basis it was higher by 20.4% or 1313 thsd bbl / d, according to last data from consultant agency Rystad Energy. Only the Permian basin marked growth in October. Bakken crude oil production in October decreased on month-to-month by 1.7% and rose by +9.3% on year-on-year basis. Eagle Ford deposit in October declined by 10 thsd bbl / d and crude oil extraction in October was 5.6% higher than a year ago. Permian crude oil production in October increased by 0.4% on month-to-month basis and the growth on year-on-year basis was 35.9%. Chart USA rigs and wells spudded Chart Shale oil production, as % of total US crude oil output Rigs Wells spudded per rig (r.h.s.) Source: Rystad Energy, Bloomberg 10 / 30

11 Chart USA shale oil production by regions, thsd bbl / d 7,000 6,500 6,000 5,500 5,000 4,500 4,000 3,500 3,000 2,500 2,000 Others Marcellus Bakken Eagle Ford Permian Source: Rystad Energy, Bloomberg Chart USA crude oil output, thsd bbl / d Chart Canada crude oil output, thsd bbl / d 11,500 11,000 10,500 10,000 9,500 9,000 8,500 8,000 4,400 4,200 4,000 3,800 3,600 3,400 3,200 7,500 3,000 7,000 Source: EIG Chart Mexico crude oil output, thsd bbl / d 2,700 2,600 2,500 2,400 2,300 2,200 2,100 2,000 1,900 1,800 1,700 Source: EIG 2,800 Source: EIG Chart Brazil crude oil output, thsd bbl / d 3,100 2,900 2,700 2,500 2,300 2,100 1,900 1,700 Source: EIG 11 / 30

12 Chart Russia crude oil output, thsd bbl / d Chart China crude oil output, thsd bbl / d 11,600 11,400 11,200 11,000 10,800 10,600 10,400 Source: EIG Chart UK crude oil output, thsd bbl / d 4,500 4,400 4,300 4,200 4,100 4,000 3,900 3,800 3,700 3,600 3,500 Source: EIG Chart Norway crude oil output, thsd bbl / d 1,300 1,200 2,000 1,900 1,100 1,800 1, ,700 1,600 1,500 1, , Source: EIG 1,200 Source: EIG 12 / 30

13 Q Q Q Q Q Q Q Q1- Q2- Q3- Q4- Q1- Q2- Q3- Q4- Q Q Q Q Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 IEA FORECAST IEA FORECAST 4. DEMAND Global In September IEA presented its world oil demand estimations for the 2 nd quarter of. According to the numbers total world demand for oil in the 2 nd quarter increased by 430 thsd bbl / d or 0.4% over against the 1 st quarter of. Comparing to the 2 nd quarter of global demand for oil grew by 750 thsd bbl / d or 0.8%, partly encouraged by still strong world economic growth. The main source of global oil demand growth in the latest EIA reported quarter was non-oecd countries whose aggregate demand raised by 1.21 mln bbl / d (+2.4% qoq), while the demand from OECD states soften by 780 thsd bbl / d (- 1.6% qoq). On the year-on-year basis non-oecd countries in the 2 nd quarter of showed less pace of growth of 1.3%. As for demand from single states and regions, the most significant demand shrinkage in the 2 nd quarter was observed in Japan, where demand for oil dropped by 850 thsd bbl / d (- 19.9% qoq / -4.5% yoy). Also negative demand tendencies had a place in Korea (-80 thsd bbl / d or -3.0% qoq). The same time among the OECD states in the 2 nd quarter of demand for crude oil increased in Canada by 40 thsd bbl / d (+1.7% qoq / 0.0% yoy), in the USA by 20 thsd bbl / d (+0.1% qoq, +1.2% yoy) and in Mexico by 30 thsd bbl / d (+1.5% qoq, -0.5% yoy). In the considering period there was also quite strong demand for crude oil in China, where oil consumption grew by 300 thsd bbl / d or 2.3% qoq (+2.7% yoy). For, global demand growth forecast is lowered to 1.28 mln bbl / d in last IEA outlook. In 2019 growth accelerates slightly to 1.36 mln bbl / d, but there are risks to the forecast from escalating trade disputes. Demand growth for 2019 was revised lower by 110 thsd bbl / d and demand growth could cool down further later this year and into Chart 4.1. World oil demand yoy change, mln bbl / d 2.50 Chart 4.2. Regional oil demand yoy change, mln bbl / d Non-OECD OECD World India China Japan USA Europe World 13 / 30

14 Chart 4.3. World oil demand structure, by region Chart 4.4 World crude oil demand, mln bbl / d Non-OECD Middle East Non-OECD 8.7% - Latin America 6.5% Non-OECD - Africa 4.4% OECD - North America 25.8% Non-OECD - Asia 27.6% OECD - Europe 14.4% Non-OECD - FSU 4.7% OECD - Pacific 7.8% 90.0 Q1 Q2 Q3 Q4 Chart 4.5. OECD oil demand structure, by country Chart 4.6. Non-OECD oil demand structure, by country Korea Japan3.0% 4.0% Other Europe 16.5% GE, FR, UK, IT, SP 9.5% Other Pacific 8.9% USA 23.6% Other Americas 29.5% Canada Mexico 2.8% 2.4% Middle East 15.8% Other Latin America 11.8% Brazil 5.4% Africa 8.0% Other Asia 16.7% FSU 8.6% China 24.4% India 9.1% China Last data for China apparent demand in Bloomberg is for September. Total apparent demand for oil in China in September surged on y-o-y basis by about 987 thsd bbl / d or 8.8%. The import of crude oil to China in September decreased to mln metric tons (equals to 8.8 mln bbl / d) according to China's General Administration of Customs. The data includes imports from small independent refineries (teapots). Annually the import rose by 0.5%. China exported 4.07 mln metric tons of oil products (equals to 0.95 mln bbl / d). The annual growth was 6.5%. Net import of oil products was almost 1.15 mln metric tons in September, consequently lower by 1.5 mln metric tons. Chinese interest to SUV vehicles was encouraged by retail gasoline price fall in 2015 and still has been standing at the rather high levels. Overall in -18 SUV sales have stayed constantly above 600 thsd vehicles. The pace of growth of these gas-guzzlers in China 14 / 30

15 looks strong, comparing to prior years. In September 873 thsd SUV vehicles were sold. The same time apparent demand for oil products in September mostly increased due to rising in Diesel (7.8% m-o-m), Fuel Oil (+20.0% m-o-m) and Gasoline (+10.4% y-o-y) demand. Chart 4.7. Chinese apparent oil demand, thsd barrels per day 4,500 Apparent diesel fuel demand, kbd Apparent gasoline demand, kbd 11,900 4,000 Total apparent oil demand, kbd (r.h.s.) 11,400 3,500 10,900 3,000 10,400 2,500 9,900 2,000 9,400 Source: National Bureau of Statistics of China, Customs General Administration PRC, Bloomberg Chart 4.8. Annual changes in Chinese apparent oil demand, thsd bbl / d Chart 4.9. Chinese SUVs sales, thsd vehicles Historical range Historical average Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 0 Source: National Bureau of Statistics of China, Customs General Administration PRC, Bloomberg Source: China Passenger Car Association, Bloomberg 15 / 30

16 Chart China crude oil net imports Vs net exports of gasoline & diesel 2,500 2,000 1,500 Net exports of gasolione, '000 tons Net exports of diesel, '000 tons Net imports of crude oil, '000 tons (r.h.s.) 45,000 40,000 35,000 1,000 30, , ,000 Source: Customs General Administration PRC, Bloomberg 16 / 30

17 5. INVENTORIES Pursuant to the most recent IEA monthly report, total OECD commercial oil stocks were lower in June (the last reported month on oil stocks) by 7 mln bbl / d at 2.82 bn bbl. Crude oil inventories tumbled by 23.2 mln bbl (-2.1% mom), while total OECD products stocks rose by 17.1 mln bbl (+1.2% mom). The same time in comparison with a year ago figures total OECD commercial oil stocks in June were lower by mln bbl or 6.5% with crude oil stocks decreased by mln bbl (-9.5% yoy) and oil products stocks fell by 87.9 mln bbl (-5.9% yoy). From the standpoint of the regional structure of oil inventories the weakest situation in June was observed in Pacific region, where crude inventories declined by 0.6 mln bbl (-0.4%) mom though oil products in stocks increased by 2.5 mln bbl (+1.5%) mom. In Europe crude oil stocks tumbled m-o-m by 1.1 mln bbl or 0.3% and fell by 7.4 mln bbl or 2.0% y-o-y, while stocks of refined oil products increased by 0.7 mln bbl (+0.1%) on m-o-m and decreased by 44.6 mln bbl (-7.9%) on y-o-y basis. Stocks of crude oil in Americas region in June fell by 21.5 mln bbl (-3.6%) in m-o-m, refined oil products stocks increased by 14.0 mln bbl (+2.0%) in m-o-m. As for the by-product inventories structure, the increase in OECD inventories in June was noticed in Distillates that stocks added 2.4 mln bbl (+0.5% mom). The smallest stocks decrease took place in Gasoline that OECD inventories were lower by 4.7 mln bbl (-1.2%) on month-to-month basis. Fuel oil in OECD stocks fell by 4.7 mln bbl (-3.9%). To sum these all up we should conclude that global oil inventories in highly developed states (OECD) are still on quite elevated levels although oil stocks have finally showed significant draw downing, especially in the USA due to higher exports to Far East Asia. Chart 5.1. OECD oil stocks structure, by country Chart 5.2. OECD oil stocks structure, by product Crude oil 44.0% Europe 2.8% Americas 70.4% Gasoline 15.1% Pacific 26.8% Other refined products 15.6% Heavy fuel 4.7% Middle distillates 20.7% 17 / 30

18 Chart 5.3. OECD crude oil stocks, mln bbl Chart 5.4. OECD oil products stocks, mln bbl 1,350 1,300 1,250 1,200 1,150 1,100 1,050 1,000 1,650 1,600 1,550 1,500 1,450 1,400 1, , Chart 5.5. Americas (OECD) crude oil stocks, mln bbl 1,250 Chart 5.6. Americas (OECD) oil products stocks, mln bbl Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 600 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Chart 5.7. Europe (OECD) crude oil stocks, mln bbl Chart 5.8. Europe (OECD) oil products stocks, mln bbl Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 470 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 18 / 30

19 Chart 5.9. Pacific (OECD) crude oil stocks, mln bbl Chart Pacific (OECD) oil products stocks, mln bbl Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 150 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec USA According to DOE s weekly data total commercial crude oil stocks in the USA in October (up to date) rose by 22.0 mln bbl or 5.5% comparing to the prior month. Crude oil inventories are 53.0 mln bbl lower than 479 mln bbl printed in December Crude oil stocks in October were 28.9 mln bbl (or -6.4%) lower than they had been a year ago. As for crude oil inventories in Cushing oil storage in Oklahoma, they were 7.4 mln bbl or 30.1% higher in October than prior month and 32.0 mln bbl or 50.1% lower than a year ago. US gasoline inventories in October fell by 9.1 mln bbl or -3.8% mom and inventories of distillates decreased by 9.8 mln bbl or 7.2% mom. In comparison with the figures a year ago gasoline and distillates stocks rose by 13.3 mln bbl (+6.3%) and fell by 2.6 mln bbl (- 2.0%) respectively. Chart US commercial crude oil stocks, mln bbl Chart US commercial crude oil stocks, days of supply Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec / 30

20 Chart US gasoline stocks, mln bbl Chart US gasoline stocks, days of supply Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 25 Chart US distillate fuel stocks, mln bbl Chart US distillate fuel stocks, days of supply Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 20 Chart US kerosene stocks, days of supply Chart US propane stocks, days of supply Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 20 / 30

21 Chart Cushing Oklahoma crude oil stocks, mln bbl Floating storage According to Bloomberg Energy assessments in October total crude oil stocks stored on floating storages (including oil in transportation) was equal to mln bbl, 12.6 mln bbl less than in September (-10.4% mom) and 54.5 mln bbl less than a year ago (-33.5% yoy). The most significant drop on the month-to-month basis took place in Middle East Gulf (-13.7 mln bbl or -51.6%) and Venezuela (-5.1 mln bbl or -44.7%). From the year-on-year basis the most dramatic drop was observed in South East Asia (-17.6 mln bbl or 38.6%), while floating storages inventories in Japan + Korea and Venezuela increased on 1.4 mln bbl and 1.3 mln bbl respectively (+23.0% and +27.4% respectively). The same time total stocks of refined oil products stored on floating storages (including oil products in transportation) in September climbed to 79.8 mln bbl, 0.1 mln bbl more than in the previous month (+0.1% mom) and at the same level as a year ago. South East Asia (+1.6 mln bbl) and North West Europe (-1.4 mln bbl) were the regions where refined oil stocks grew and dropped the most relative to September figures. Chart Crude oil stocks held on floating storages structure, by country Chart Refined oil products stocks held on floating storages structure, by country Middle East Gulf 11.9% South East Asia 25.7% Mediterra nean 15.0% China North 4.7% West Europe 4.7% South East Asia 18.7% West Africa 18.9% Mediterran ean 18.6% Middle East Gulf 9.7% India 6.2% U.S. Atlantic Coast 0.7% Australia + New Zealand 2.6% Japan + Venezuela Korea 5.8% 6.9% West Africa 9.2% U.S. Gulf Coast 6.7% U.S. Atlantic Coast 0.7% Japan + Korea Venezuela 3.7% 1.8% China 3.8% North West Europe 5.1% Australia + New Zealand 8.9% India 6.0% U.S. Gulf Coast 3.9% Energy Energy 21 / 30

22 Chart Global crude oil floating storage, mln bbl Chart Global refined oil floating storage, mln bbl Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 45 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Energy Energy Chart China + Japan + Korea crude oil floating storage, mln bbl Chart China + Japan + Korea refined oil floating storage, mln bbl Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Energy Energy Chart South East Asia crude oil floating storage, mln bbl Chart South East Asia refined oil floating storage, mln bbl Energy 6 Energy 22 / 30

23 Chart Middle East crude oil floating storage, mln bbl Chart Middle East refined oil floating storage, mln bbl Energy Chart US Gulf Coast crude oil floating storage, mln bbl Energy Chart US Gulf Coast refined oil floating storage, mln bbl Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Energy Energy Chart North West Europe crude oil floating storage, mln bbl Chart North West Europe refined oil floating storage, mln bbl Energy Energy 23 / 30

24 Chart West Africa crude oil floating storage, mln bbl Chart West Africa refined oil floating storage, mln bbl Energy Energy 24 / 30

25 APPENDIX Table 1. Global oil demand, mln bbl / d (quarterly data) Q1- Q2- Q3- Q4- Q1- Q2- Q3- Q4- Q Q Q Q USA Canada Mexico North America Brazil Other LatAm ex. Mexico LatAm ex. Mexico Total Europe Japan Korea Australia, New Zealand, Israel OECD Asia Pacific China India Other non-oecd Asia Total Asia FSU Total Middle East Total Africa OECD demand Non-OECD demand World demand Δ Δ Δ 2019, Bloomberg Table 2. Global oil production, mln bbl / d (quarterly data) Q1- Q2- Q3- Q4- Q1- Q2- Q3- Q4- Q Q Q Q Δ Δ Δ 2019 OPEC Crude* OPEC NGLs OPEC production Americas Europe Pacific OECD FSU Europe China Other Asia Latin America Middle East Africa Non-OECD Non-OPEC Crude Processing Gains Global Biofuels Non-OPEC production World production * IEA Call on OPEC as OPEC Crude forecast, Bloomberg 25 / 30

26 APPENDIX Table 3. Global crude oil production, mln bbl / d (monthly data) Sep- Oct- Nov- Dec- Jan- Feb- Mar- Apr- May- Jun- Jul- Aug- Sep Algeria Angola Ecuador Gabon Indonesia Iran Iraq Kuwait Libya Nigeria Qatar Saudi Arabia U.A.E Venezuela OPEC Crude OPEC NGLs OPEC production USA Canada Mexico North America Brazil Argentina Colombia Other Latin America Non-OPEC Latin America ex. Mexico United Kingdom Norway Other Europe Europe Russia Other Ex-USSR FSU China India Malaysia Australia Other Non-OPEC Asia Pacific Non-OPEC Asia Pacific Egypt Oman Non-OPEC Africa/Mid East Non-OPEC Crude Non-OPEC NGLs Non-OPEC production World production (YTD) Δ 2016 Δ Δ (YTD) Source: IEG 26 / 30

27 APPENDIX Table 4. OECD commercial oil inventories, mln bbl (monthly data) Jun- Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- Apr- May- Jun Americas Crude Products Europe Crude Products Asia Pacific Crude Products OECD Crude Products (YTD) Δ 2016 Δ Δ (YTD) Table 5. OECD oil inventories, mln bbl (quarterly data) Q Q Q Q Q Q Q Q1- Q2- Q3- Q4- Q1- Q Canada Mexico N/A N/A -2-4 N/A USA N/A N/A N/A Americas Australia N/A N/A 0 0 N/A Japan N/A N/A N/A Korea N/A N/A 2 0 N/A New Zealand Pacific Germany N/A N/A 0-7 N/A France N/A N/A -5 4 N/A Italy N/A N/A 7 1 N/A Spain N/A N/A N/A UK Turkey N/A N/A 5 4 N/A Sweden N/A N/A -2 2 N/A Other Europe N/A N/A N/A Europe OECD (YTD) Δ 2016 Δ Δ (YTD) 27 / 30

28 APPENDIX Table 6. Global oil stocks on floating storages, mln bbl Oct- Nov- Dec- Jan- Feb- Mar- Apr- May- Jun- Jul- Aug- Sep- Oct South East Asia Crude Products Middle East Crude Products Mediterranean Crude Products North West Europe Crude Products West Africa Crude Products China + Korea + Japan Crude Products US Gulf Coast Crude Products India Crude Products World Crude Products (YTD) Δ 2016 Δ Δ (YTD) Energy 28 / 30

29 ARBAT CAPITAL EQUITY RESEARCH Sergey Fundobny Head of Research, Strategy (495) (ext ) Vitaly Gromadin, CFA Senior Analyst, Oil & Gas (495) (ext ) Mikhail Zavaraev, CFA Senior Analyst, Finance (495) (ext ) CONTACTS ARBAT INVESTMENT SERVICES LTD , Moscow Sadovaya-Kudrinskaya Str. 32 bldg.1 Tel.: (499) Fax: (499) Internet 29 / 30

30 DISCLAIMER The information and opinions contained in this publication has been prepared by Arbat Capital Group (hereinafter - Arbat Capital ) and are intended solely for the information of its customers. This information is not intended to provide advice and make decisions in specific cases. Please consult with the experts in the relevant fields, before making any decisions. This material is neither an offer to sell nor a solicitation of any offer to buy any securities, assets, investment product advisory services or any other binding offer to carry out any kind of business. No guarantees are provided, direct or indirect, including any those were imposed by law, in connection with this information. Arbat Capital does not guarantee the accuracy, adequacy, reproduction of any information by the third parties in this material and in the unconditional form disclaims liability for any errors and omissions made by the third parties that had reproduced such information. The above information does neither include a financial analysis nor investment research nor an investment recommendation nor an investment advice relating to Arbat Capital. This document contains information which has been taken from a number of sources. While the information herein is believed to be reliable, no representation is made as to the accuracy or completeness of such information. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance. This document contains forward-looking statements that depend upon or refer to future events or conditions. Thus these statements involve known and unknown risks, uncertainties and other factors that may cause the actual results and performance of Arbat Capital to be materially different from any future results or performance expressed or implied by these forward-looking statements. 30 / 30