global oil overview and outlook...1. global oil overview & outlook –sophie udubasceanu 2....

Global oil overview and outlook

1. Global oil overview & outlook – Sophie Udubasceanu

2. North Sea developments – Richard Price

3. Insight into the US oil market – Ignacio Sotolongo

4. Oil products outlook – Michael Connolly

5. Focus on the US naphtha market – Michael Sims

6. Q&A

Agenda

30/09/2020 2Global oil overview and outlook

World Crude Report

330/09/2020 Global Oil Overview and outlook

• Round the clock coverage

• 3 daily updates

• Physical and futures market pricing

• Assessments at 5 daily timestamps

• Market 7-day outlook and editorial features

• Regional physical sections:

• Asia Pacific, Arab Gulf, North Sea, West Africa, Mediterranean, CIS and Americas

Crude oil overview & outlook

4

Sophie Udubasceanu

- 30 m bbl/day of demand

5

A three-pronged attack from Coronavirus

6

Fall in oil and energy

demand

Travel: Lockdown leads to reduced flights, car usage. Started off with China and spread swiftly across the world01

Industry: Many factories, heavy industry and construction, including a reduced refining activity02

Economy: World could enter recession; China’s GDP growth rate for 2020 revised down while other countries also followed suit. Most governments rolled out economic relief packages

03

“No prospect of demand returning to the historical average during the remainder of 2020”

IEA

Demand threat

30/09/2020 7

OPEC production

8

More than 24m bbl/day

-7.7m bbl/day

The OPEC+ agreement cameinto force on 1 May

30/09/2020 Global oil overview and outlook

0

5

10

15

20

25

30

35

Sep-2019 Oct-2019 Nov-2019 Dec-2019 Jan-2020 Feb-2020 Mar-2020 Apr-2020 May-2020 Jun-2020 Jul-2020 Aug-2020

in m

illio

n b

arre

ls p

er d

ay

OPEC Production

Algeria Angola Ecuador Equatorial Guinea Gabon

Iran Iraq Kuwait Libya Nigeria

Qatar Saudi Arabia United Arab Emirates Venezuela

US oil rig count weakening

9

179US oil rig count down from 562 in April

10.7m bbl/dayUS Oil production

5 m

6 m

7 m

8 m

9 m

10 m

11 m

12 m

13 m

14 m

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

Jun

-14

Au

g-1

4

Oct

-14

Dec

-14

Feb

-15

Ap

r-1

5

Jun

-15

Au

g-1

5

Oct

-15

Dec

-15

Feb

-16

Ap

r-1

6

Jun

-16

Au

g-1

6

Oct

-16

Dec

-16

Feb

-17

Ap

r-1

7

Jun

-17

Au

g-1

7

Oct

-17

Dec

-17

Feb

-18

Ap

r-1

8

Jun

-18

Au

g-1

8

Oct

-18

Dec

-18

Feb

-19

Ap

r-1

9

Jun

-19

Au

g-1

9

Oct

-19

Dec

-19

Feb

-20

Ap

r-2

0

Jun

-20

Au

g-2

0

In b

bl/

day

US Rig count (Baker Hughes) US Oil production (EIA)

The sustainability transformation

1030/09/2020 Global Oil Overview and Outlook

Bio-diesel Bio-gasoline Bio-Jet

Sustainable oil products

Traditional refinery

Oil Supply Outlook

11May 2020

Global oil overview and outlook

Source: OPEC+, EIA

The US supply forecast decrease is vs the January 2020 oil production figure

Source: CDI, part of ICIS

Revised forecast: world oil use to rise to

96.7 MMB/D next quarter before decreasing

seasonally to 95.6 MMB/D during the first

quarter of next year.

12

2nd

WaveWill the impact be localised?

• Concerns over a recession

• Will global economies recover over the the next few months?

• Extent of a second Covid-19 wave in October

• How will this impact oil demand?

• Double dip in Chinese demand

• Difficult in restarting when other countries continue to have

restrictions

• Demand improvement

• Jet fuel demand, Long term consequences

Market outlook

13

Electrification

Key factors to watch

30/09/2020 Global oil overview and outlook

EconomyThe threat of a global recession

The sustainability movement

• How the dispute will progress?

• Reaction to theUS presidentialelections

• Is the deal enough?

• Improvement in demand could ease the oversupply

Demand OPEC+

US-ChinaUS

election

North sea developments

14

Richard Price

North Sea CIF cargoes

15Date Presentation title

North Sea CIF cargoes

16Date Presentation title

Insight into the US oil market

17

Ignacio Sotolongo

Top five oil producing countries (2019)

1830/09/2020 Global crude oil overview and outlook

The ChallengeA Perfect Storm

US Crude Oil Production

US Crude Oil -Import/Export

US/China Trade Agreement

Trade Agreement – Phase 1

US PRESIDENTIAL ELECTIONS

The Candidates

Key challenges in Q4 2020

19Global crude oil overview and outlook

The US shale oil industry

20Date Presentation title

Top 10 importing countries in 2020

21Date Presentation title

Top 10 importing countries in 2020

2230/09/2020 Global crude oil overview and outlook

Crude imports in k bbl/day

Overview of the US pipeline sector

23

Typical products from a 42-gallon Barrel of Crude Oil

2430/09/2020 Global crude oil overview and outlook

25Date Presentation title

Top 10 importing countries in 2020

26Date Presentation title

TrumpRepublican candidate

BidenDemocrat candidate

27Date Presentation title

vs

US crude stocks continue to swell

28

494m bblHurricane Laura impacted oil injections

10.7m bbl/dayUS Oil production

0

2000

4000

6000

8000

10000

12000

14000

0

100

200

300

400

500

600

Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20

in t

ho

usa

nd

bb

l/d

ay

in m

illio

n b

bl

US Crude stocks US Crude production

TrumpRepublican candidate

BidenDemocrat candidate

29Date Presentation title

vs

Top 10 importing countries in 2020

30Date Presentation title

Oil products outlook

31

Michael Connolly

The impact of COVID-19 will continue through 2021 as cities, regions and entire countries have further waves, resulting in lockdowns

Reduction in Gasoline / Jet / Diesel demand on average from 2019 in first 7 months of 2020

RecoveryIn 2021 broadly expected gas/diesel to be relatively flat or declining compared to “recent month” levels. Jet will continue to recovery at a slow pace

9 Mbbl/dKey Product Demand 2020 vs. 5 yr. Average

Source: ICIS Analytics, local Gov’t data;

Based on sample of countries totalling c.70% of total demand in each product

Product YTD Recent MonthEstimated

Mbbl/d reduction

Gasoline 87% 93% -3.3

Jet 64% 53% -2.8

Diesel 91% 95% -2.5

Focus on the US naphtha market

33

Michael Sims

Naphtha’s place in the value chain

RefineryCrude Oil

Heavy Naphtha

Light Naphtha

Gasoline

Petrochemicals

Supply outpaces demand before and after coronavirus

-Coronavirus demand

shock and crude oil crash

temporarily increase

attractiveness of naphtha

as cracking feedstock

-Exports soar on low US

prices

-Recovering crude buoys

prices, subdues exports

Contracts at 18-year low

US Stream Cracking Margins

Source: ICIS Margin Analytics

-After brief uptick in Q2/Q3,

Naphtha’s share of US

steam cracking feedslate

falls to record low (between

2 and 3 percent)

US Exports to Asia Soar in H1 2020

Source: ICIS Supply and Demand

-A wide arbitrage window

and surging demand in Asia

resulted in record export

volumes in H1.

Main drivers

385 October 2020 La Volatilidad del petróleo

Outlook - Global Oil Markets

Demand

OPEC+

LockdownEconomy

US

Thanks for listening. Questions?

For further questions, please send market enquiries to:

Sophie Udubasceanu

Global Oil Editor

T: +44 (0) 20 7911 1889

E: Sophie.udubasceanu@icis.com

Richard Price

Deputy Global Oil Editor

T: +44 (0) 20 7911 3118

E: Richard.price@icis.com

Ignacio Sotolongo

Senior Oil Editor

T: +1 832 404 3710

E: Ignacio.sotolongo@icis.com

Michael Connolly

Senior Consultant

T: +44(0)7816 547234

E: Michael.connolly@icis.com

Michael Sims

Markets reporter

Feedstocks & Olefins

T: +1 713 569 8659

E: Michael.sims@icis.com