Short and Medium-Term Oil Market Outlook 13 th Shanghai Derivatives Market Forum - 25 May 2016
Oil world changed on Nov. 27 th 2014 $/bbl 120 Brent crude oil 100 80 60 40 Copyright 2016 Argus Media 20 May 14 Sep 14 Jan 15 May 15 Sep 15 Jan 16 May 16 OPEC doesn t cut production to support prices. The market will find the price. Brent falls from $80/bbl to $70/bbl. At Dec. 4th 2015 meeting OPEC removes production quotas & price falls from $43/bbl to $27/bbl.
Where are we now? Demand growth is solid China s growth rate slows India s growth rate picks up Global supply growth falling away OPEC & non-opec growth down Non-OPEC falls sharply led by US Iran is stand-out country Market getting close to balance Prices reach 4-month high Looking further ahead
Demand growth revised upwards in 1Q16 kb/d 2500 Global Oil Demand Growth, y-o-y 2000 1500 1000 500 0-500 1Q2014 4Q2014 3Q2015 Japan China India US Total
Indian demand races ahead kb/d Indian Demand Growth, y-o-y 400 300 200 100 0 1Q2015 3Q2015 1Q2016 LPG/naphtha FO/other Gasoil/Jet/Kerosene Gasoline Total
India takes the lead in oil demand growth
China slowing growth but still strong 12 mb/d Chinese Oil Demand 9% 8 6% 4 3% 0 1Q2014 3Q2014 1Q2015 3Q2015 1Q2016 0% LPG/naphtha Gasoil Growth (RHS) % Gasoline Others
OECD momentum evaporates kb/d OECD Oil Demand Growth, y-o-y 1000 500 0-500 Jan-15 May-15 Sep-15 Jan-16 OECD Americas OECD Asia Oceania OECD Europe total
Outages & low prices take toll on supply mb/d 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0-0.5-1.0-1.5 OPEC and Non-OPEC Oil Supply Year-on-Year Change Jan 14 Jun 14 Nov 14 Apr 15 Sep 15 Feb 16 OPEC Crude OPEC NGLs Non-OPEC Total Supply
Non-OPEC supply falling fast Total Non-OPEC Supply, y-o-y Change mb/d 3.0 2.5 2.0 1.5 1.0 0.5 0.0-0.5-1.0-1.5 1Q12 1Q13 1Q14 1Q15 1Q16 Other North America Total
US supply growth vanishes mb/d 2.0 US Crude Supply - Yearly Change 1.5 1.0 0.5 0.0-0.5-1.0 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16
OPEC pumps at robust rate mb/d OPEC Growth y-o-y 2.0 1.5 1.0 0.5 0.0-0.5-1.0-1.5 Jan 14 Jul 14 Jan 15 Jul 15 Jan 16 Other OPEC Iraq Saudi Arabia Iran OPEC
Iran only major growth in OPEC mb/d 4.25 4.00 3.75 3.50 3.25 3.00 2.75 2.50 Iran Crude Supply
OECD stocks draw in February mb 3,100 OECD Total Oil Stocks 3,000 2,900 2,800 2,700 2,600 2,500 Jan Mar May Jul Sep Nov Jan Range 2011-2015 Avg 2011-2015 2015 2016
Market heading towards balance mb/d Demand/Supply Balance until 4Q16* mb/d 98 96 94 92 90 88 86 *OPEC crude production assumed to ramp up to average 33.0 mb/d in 2Q16, 33.2 mb/d in 3Q16 and 33.1 mb/d in 4Q16 84 1Q09 3Q10 1Q12 3Q13 1Q15 3Q16 Impl. stock ch.&misc (RHS) Demand Supply* 3.5 2.5 1.5 0.5-0.5-1.5-2.5
Oil rallies to 4-month high near $45/bbl $/bbl 120 Benchmark Crude Prices 100 80 60 40 Copyright 2016 Argus Media 20 May 14 Sep 14 Jan 15 May 15 Sep 15 Jan 16 May 16 WTI Cushing N. Sea Dated Dubai
Looking ahead to 2021 Demand growth solid at 1.2 mb/d through 2021 Production growth slashed as investment cuts bite Crude trade shifts more and more eastwards Huge uncertainties OPEC production policy Non-OPEC World economy Efficiency gains
World oil demand growth slows 2009-15 2015-21 Europe FSU Americas -179-76 Middle East 138 52 Asia/Pacific 969 826 283 27 164 215 Africa 104 155 (kb/d) OECD/IEA, 2016 Cools from 1.7%/yr in 2009-15 to 1.2%/yr in 2016-2021
mb/d mb/d Non-OECD drives global demand 60 50 40 30 20 10 0 OECD vs NonOECD Total products 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 OECD OECD vs NonOECD Motor Gasoline 16 14 12 10 8 6 4 2 0 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 NonOECD Despite concerns about slowing Chinese demand, overall non-oecd momentum remains strong
mb/d Chinese demand growth slips a gear 14 20% 12 18% 16% 10 14% 8 12% 10% 6 8% 4 6% 2 4% 2% 0 0% 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 LPG Naphtha Motor Gasoline Jet & Kerosene Gasoil/Diesel Residual Fuel Other Products y-o-y Growth (RHS) Economy slows and shifts from industry to services
kb/d Indian oil use races ahead 6.0 5.0 4.0 3.0 2.0 1.0 LPG Naphtha Motor Gasoline Jet & Kerosene Gasoil/Diesel Other Products 0.0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Motorists take to the roads
mb/d OECD wanes, after rare growth in 2015 16 14 12 10 8 6 4 2 0-2 -4-6 Cumulative Demand Growth 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 OECD NonOECD (excl BRICS) BRICS Falling OECD demand trend returns post-2016
mb/d Rampant US gains ease then reverse 25 4% LPG 20 2% Naphtha 15 0% Motor Gasoline Jet & Kerosene 10-2% Gasoil/Diesel 5-4% 0-6% 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 Residual Fuel Other Products y-o-y Growth (RHS) 0.3 mb/d gain of 2015, more than halves in 2016
USD billion USD billion Upstream oil capex cut for 2nd year 600 600500 500400 400300 300200 200100 100 0 2002 2004 2006 2008 2010 2012 2014 2016 0 America 2002 N 2004 2006 America 2008 S 2010 Europe 2012 2014 Australia 2016 Middle East Russia Asia Africa Drop of 17% in 2016 follows 24% reduction in 2015
mb/d World supply growth plunges 3.0 2.5 2.0 1.5 1.0 0.5 0.0-0.5-1.0 2014 2015 2016 2017 2018 2019 2020 2021 OPEC OPEC Non-OPEC Non-OPEC World *2014-15 shows actual output growth. 2016 assumes Iran ramp-up. OPEC capacity increases thereafter. 2015-21 growth slows to 4.1 mb/d vs 11 mb/d in 2009-15
kb/d Non-OPEC supply growth collapses 2500 2000 1500 1000 500 0-500 -1000-1500 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Other non-opec China Latin America FSU Other Asia Europe OECD Americas Total
mb/d US LTO takes biggest hit for now 6.0 5.0 4.0 3.0 2.0 1.0 0.0 2010 2012 2014 2016 2018 2020 Bakken Eagle Ford W. Texas Niobrara Other LTO Output to drop by 800 kb/d over 2016-17
US still the world s growth engine Selected sources of non-opec supply change 2015-21 1 400 1 200 1 000 800 kb/d 600 400 200 0-200 - 400 Gains in Brazil, Canada; drops in Russia, China
mb/d Post-sanctions Iran leads OPEC gains 4.1 3.9 3.7 3.5 3.3 3.1 2.9 2.7 2.5 2010 2012 2014 2016 2018 2020 Actual production 2010-15, capacity thereafter Output to rise 1 mb/d to 3.9 mb/d by 2021
mb/d Middle East dominates OPEC growth 0.25 0.20 0.15 0.10 0.05 0.00-0.05-0.10 2016 2017 2018 2019 2020 2021 Iran Iraq UAE Other Total OPEC
Surplus erodes in 2017 Global balance mb/d 102 100 98 96 94 92 90 88 86 84 82 2004 2006 2008 2010 2012 2014 2016 2018 2020 mb/d 2.5 2.0 1.5 1.0 0.5 0.0-0.5-1.0-1.5-2.0-2.5 Implied Stock Change World Demand World Supply Tightening market drives price recovery - $80/bbl in 2020?
Conclusions Global oil supply growth is plunging, as low prices take their toll Iran leads OPEC gains over the forecast period Despite a near-term dip, U.S. production rises to an alltime high While global oil demand growth is slowing, oil use crosses the symbolic 100 mb/d mark towards the end of the decade The availability of resources that can be easily and quickly tapped set to limit the scope of price rallies at least in the near-term The historic investment cuts now being seen raise the odds of oil-security surprises in the not-too-distant-future
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