oil market update...3 market summary • at the time of writing, brent is currently trading around...

Oil Market Update

May 2020

2

This presentation has been provided to you for informational purposes only. This presentation is not advice on ora recommendation of any of the matters it describes. This presentation is not an offer or solicitation by or onbehalf of BP p.l.c. or any of its subsidiaries (collectively "BP") to enter into any contractual arrangement. BP makesno representations or warranties, express or implied, regarding the accuracy, adequacy, reasonableness orcompleteness of the information, assumptions or analysis contained in this presentation or in any supplementalmaterials. BP accepts no liability in connection with any of such information. BP deals and trades in energy relatedproducts and may have positions consistent with or different from those discussed herein.

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Disclaimer

3

Market Summary

• At the time of writing, Brent is currently trading around $25/bbl, falling following

the unfortunate outbreak and global spread of the COVID-19 pandemic.

• Crude oil inventories have been building as supply has exceeded very low demand. On 20th

April, the WTI May-20 futures contract hit historic lows at -$37/bbl the day before expiry due

to concerns around storage capacity in Cushing, Oklahoma.

• Initially, in an effort to balance the oil market amidst COVID-19 demand weakness, the

Vienna Alliance of OPEC and non-OPEC producers met on the 6th March to discuss further

production cuts. However, they were unable to reach an agreement and Saudi Arabia

subsequently announced substantial discounts on its Official Selling Prices (OSPs) for April

and stated that it would increase production to record highs of 12.3mbd. Brent and WTI

prices subsequently fell almost 25% on 9th March.

• OPEC and non-OPEC producers met for an emergency meeting on 9th April as prices

continued to fall as a result of the COVID-19 crisis. Unprecedented production cuts were

agreed of 9.7mbd for May-Jun 2020, 7.7mbd for Jul-Dec 2020, and 5.8mbd for the 16 months

thereafter, ending April 2022.

• Despite OPEC+ intervention, prices subsequently fell as the extent of the demand

destruction from COVID-19 countermeasures became apparent. OECD transport fuel

demand has rapidly decreased, with Mar-20 jet/kero demand down 20% YoY.

Source: BP Internal, S&P Global Platts ®, ICE, IEA

4

Crude prices fall as COVID-19 spreads

Source: NYMEX, ICE

Global Crude Weekly Prices

Futures as of 27/04/2020

• Brent has fallen by approximately 65% since highs of $71/bbl recorded on 6th Jan-20.• Crude prices fell to record lows in Apr-20 due to unprecedented demand weakness as travel restrictions have

been introduced globally to control the spread of COVID-19.• On 20th April, WTI traded at a negative price for the first time in history at -$37/bbl. • On 27th April, the Jun-20 Brent and WTI futures contracts traded at $20/bbl and $13/bbl respectively.

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2015 2016 2017 2018 2019 2020 2021

$/bbl

WTI Brent WTI Futures Brent Futures Dubai

5

WTI traded at -$37/bbl on 20th April 2020

Source: NYMEX, ICE, S&P Global Platts ®

• On 20th April, WTI traded at a negative price for the first time in history; the May-20 futures contract, expiring the next day, fell to a low of -$37/bbl.

• Prices fell sharply due to concerns around Cushing storage capacity in May-20, when the crude was due for delivery from the expiring contract.

• The May-20 WTI contract ended trading at $0.65/bbl.• The Jun-20 contract fell to $11/bbl and, on 27th April, is trading at $13/bbl. The Dec-20 contract is trading at $27/bbl.

-40

-30

-20

-10

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10

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30

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01-Apr 08-Apr 15-Apr 22-Apr

$/bbl

May-20 Jun-20 Dec-20

WTI Futures contracts

6

Net speculative length falls with crude price

Net Speculative Length (2012-2020)

Source: ICE

Net Speculative Length (2020)

• NSL fell rapidly during 1Q20, reaching lows of 55k contracts, the lowest level since 2014.• NSL recovered slightly by mid-April, at 100k contracts. However, contracts are still 300k lower than since the

start of the year.

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140

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2012 2013 2014 2015 2016 2017 2018 2019 2020

$/bbl

Thousands of contracts

Brent Net Spec Length (LHS) Brent Price (RHS)

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Jan 20 Feb 20 Mar 20 Apr 20

Thousands of contracts

$/bbl

Brent Net Spec Length (LHS) Brent Price (RHS)

7

OPEC+ agree 9.7mbd of cuts on 9th April 2020

Source: IEA, S&P Global Platts ®

Russia Crude SupplySaudi Crude SupplyOPEC Crude Supply

NB: assumes 100% of production cut applied to crude oil

• Brent and WTI prices fell almost 25% on 9th March after OPEC and non-OPEC producers were unable to reach an agreement on further production cuts on 6th March. Saudi Arabia announced substantial discounts to its official selling prices for crudes in April, and made commitments to increase production to record highs of 12.3mbd (having produced 9.7mbd of crude oil in Feb-20).

• Following continued low oil prices, OPEC and non-OPEC producers met on the 9/10th April and agreed an unprecedented 9.7mbd total production cut for May-Jun 2020, 7.7mbd for Jul-Dec 2020, and 5.8mbd for the 16 months after, ending Apr-22.

• If cuts are fully complied with, 2H20 production from current OPEC members to be approximately 25% less than 2H19.

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7.5

8.5

9.5

10.5

11.5

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mbd

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8.7

9

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9.6

9.9

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'09-'15 Range 2016 2017 2018 2019 2020 Announced OPEC+ cut

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1.5

2.0

2.5

3.0

3.5

4.0

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'09-'15 range 2016 2017 2018 2019 2020

0.5

1.0

1.5

2.0

2.5

3.0

3.5

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mbd

Iranian, Libyan and Venezuelan output remains low

Source: IEA

• Iranian crude supply remained low at 2mbd in Mar-20, as US sanctions suppressed the country’s oil exports.• Libyan crude supply has declined 700kbd since Jan-20 to 80kbd in Mar-20 as production disruptions continue.• Venezuelan output decreased slightly to 670kbd in Mar-20, due to ongoing operational difficulties and the

pressure of international sanctions.

Venezuela Crude SupplyLibya Crude SupplyIran Crude Supply

0.0

0.5

1.0

1.5

2.0

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mbd

9

US crude production fell in Q1 2020

Source: IEA, EIA

US Crude Supply

• US crude supply fell slightly in 1Q20, from 12.8mbd in Dec-19 to 12.6mbd in Mar-20. The latest weekly DOE statistics (week ending 17th April) report US crude supply at 12.2mbd.

• US drilling companies have cut budgets and drilling plans as a response to low prices. • The EIA recorded the rig count at 702 in Mar-20, however, further declines have materialised in Apr-20. Baker

Hughes reported a rig count of 465 for 24th April, down 64 week on week and a 34% decrease from Mar-20.

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

mbd

'09-'15 range 2016 2017 2018 2019 2020

Rig count vs. crude production

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2008 2010 2012 2014 2016 2018 2020

No. of rigsmbd

Anadarko Region Appalachia RegionBakken Region Eagle Ford RegionHaynesville Region Niobrara RegionPermian Region Total US productionTotal Rig Count

10

US refinery runs drop sharply as product cracks fall

US crude runs

Source: EIA, IEA

OECD crude runs

• US crude runs have decreased sharply in Apr-20, with current average throughput data from the EIA at 13.6mbd for Apr-20, 2.4mbd lower than Mar-20.

• OECD crude runs were in line with averages at 37mbd in Jan-20, the last data point available.

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mbd

Th

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'09-'15 range 2016 2017 2018 2019 2020

34

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mbd

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Global oil demand fell by a record 7.4mbd in 1Q20

Global QoQ oil products demand growth QoQ OECD oil products demand growth

Source: IEA

• Oil demand has fallen significantly as global travel restrictions have been introduced to control the COVID-19 pandemic.

• 1Q20 oil product demand was 93.3mbd, a 5.6mbd reduction since 1Q19 and 7.4mbd reduction quarter on quarter.

• The IEA forecasts the largest demand destruction in Apr-20 (29mbd lower YoY). Demand in Apr-20 is forecast to be similar to 1995 demand levels.

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1

Jan-Apr 2019 Jan-Apr 2020

mbd

LPG and Ethane Naphtha Motor Gasoline

Jet and Kerosene Diesel Gasoil

Residual Fuel Other Products Total Products

Note: April 2020 demand numbers are IEA forecasts

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1Q19 2Q19 3Q19 4Q19 1Q20

mbd

OECD Non-OECD Total

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OECD Product Demand

Source: IEA

Ethane and LPG Naphtha

Gasoline Jet/Kerosene

Diesel/Gasoil Residuals

OECD product demand was exceptionally weak in March• Fuels used predominantly in transport, such as gasoline and jet, saw dramatic demand declines in Mar-20 as

governments introduced travel restrictions and flight cancellations increased.

• Jet demand dropped 20% in Mar-20 YoY, and the IEA forecasts jet demand in Apr-20 to drop by more than 50% YoY as flight cancellations reach record highs.

4.2

4.8

5.4

6.0

6.6


mbd

2.9

3.2

3.5

3.8


mbd

12.0

12.8

13.6

14.4

15.2


mbd

3.4

3.8

4.2

4.6

5.0


mbd

11.8

12.6

13.4

14.2


mbd

1.6

2.0

2.4

2.8


mbd

'09-'15 range 2016 2017 2018 2019 2020

13

Gasoline demand collapses as travel restrictions take effect

US Gasoline demand Germany Gasoline demand

• COVID-19 containment methods has significantly impacted gasoline demand as it is almost exclusively used in transportation

• To date, the current crisis has impacted gasoline demand more than other oil products (on an absolute basis).

• Gasoline demand dropped 13% or 2mbd in Mar-20 YoY, and the IEA forecasts gasoline demand in Apr-20 to fall 11.2mbd. The forecast Apr-20 demand decrease would be the largest monthly decline ever recorded.

Source: IEA

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Spain Gasoline demand

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'09-'15 range 2016 2017 2018 2019 2020

14

Jet demand falls globally as flight cancelations surge

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'09-'15 range 2016 2017 2018 2019 2020

OECD Europe Jet/keroDemand

US Jet/kero Demand OECD Asia and Oceania Jet/kero Demand

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• As the COVID-19 crisis has developed, travel restrictions have been introduced across the globe to contain the pandemic.

• In Mar-20, OECD Europe and the US saw a month on month fall in jet/kero demand of 14% and 8% respectively.

• Global jet demand fell 20% in Mar-20 YoY, and the IEA forecasts jet demand in Apr-20 to drop by more than 50% YoY.

Source: IEA

15

February 2020 OECD crude stocks were lower than 2015-2019 levels

Total OECD Crude Stocks

Source: IEA

• Before the full impact of the global COVID-19 pandemic materialised, OECD crude stock levels were below 2015-2019 levels in Feb-20, while product stocks were slightly above 2019 levels.

• OECD crude stocks built by 22mb from Dec-19 to Feb-20, but remained below the 5 year average in Feb-20.• OECD product stocks fell by 50mb between Jan-20 and Feb-20, trending in line with seasonal norms.

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mb

'09-'15 range 2016 2017 2018 2019 2020

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'09-'15 range 2016 2017 2018 2019 2020

Total OECD Product Stocks

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mb

A dramatic increase in US crude stocks was recorded in April 2020• US crude oil stocks built rapidly during Mar-20 and Apr-20 as the dramatic reduction in demand outstripped falls

in crude supply• The latest EIA Apr-20 data shows a build of 75mb since the beginning of Mar-20.

US Crude inventories Cushing inventories

Source: EIA

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mb

'09 - '14 2015 2016 2017 2018 2019 2020

17

• Jet fell to +$2/bbl from a 4Q19 average of +$17/bbl, as commercial flight cancellations reached record highs.• The jet-diesel price differential is currently much wider than historical norms at ~$9/bbl (diesel is currently trading

at +$11/bbl). Diesel/gasoil has a wide range of applications, such as passenger and commercial transport, heating, industry and agriculture, and market fundamentals have been somewhat stronger than gasoline or jet.

• Gasoline is currently trading at +$3/bbl, similar to the exceptionally weak levels observed in 1Q19.• HSFO cracks have risen to trade around Brent parity. Global refinery run cuts and falling HSFO supply from Russia

have supported values despite the COVID-19 pandemic and the implementation of the IMO-2020 sulphur regulations.

European products markets were volatile in March/April 2020 as the global crisis unfolded

Product Cracks (NWE FOB)

Source: S&P Global Platts ®Note: Prices and cracks as of 27th April 2020

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Jan 19 Apr 19 Jul 19 Oct 19 Jan 20 Apr 20

$/bbl

Naphtha Gasoline Jet Diesel HSFO VLSFO

18

Refinery margins reached a low of $1.4/bbl on 13th April 2020• Global Refinery Marker Margins (RMM) fell in Mar-20 as demand for oil products deteriorated rapidly.• 1Q20 average RMM was $8.75/bbl, the lowest quarterly average for over a decade (4Q09). Mar-20 averaged

$7/bbl.• RMM spiked on 20th April as a result of WTI trading at negative pricing, temporarily lifting US diesel and gasoline

cracks to around +$50/bbl.

BP Global Refining Marker Margin (RMM)

Source: BP Analysis

The BP Global Refining Marker Margin (RMM) is a simplified indicator that reflects the margins achieved on gasoline and diesel only. The RMM may not be representative of the margin achieved by BP in any period because of BP’s particular refinery configurations and crude and product slates.

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$/bbl

Quarterly Average

19

Upcoming events

• OPEC+ are due to meet on 10th June 2020 via webinar

o The meeting will provide an opportunity to assess the extent to which their

production cut has succeeded in rebalancing the market and to discuss production

plans.

• United States presidential election is scheduled for November 2020.

oil market update...3 market summary • at the time of writing, brent is currently trading around...

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