A self-defeating rally

Transcription

1 The New Oil Order A self-defeating rally Commodities Research Market rebalancing derailed by price rally The oil market rebalancing has started: weak prices in 1Q15 pushed producers to cut capex while supporting demand. This led to a recovery in prices further fueled by relief that US crude stocks would not breach capacity, strong demand and rising Middle East tensions. The rise in prices was further supported by oil screening as cheap relative to E&P equities, drawing cross-asset investors into buying crude. But while the rally in oil prices has closed the valuation gap to equities, these trade on historically high multiples and oil itself is now trading at a premium to its own still weak fundamentals in our view. We therefore view this rally as derailing this rebalancing and setting the stage for sequentially weaker prices, especially with oil speculative length as long as when oil traded at $1/bbl. Damien Courvalin (212) damien.courvalin@gs.com Goldman, Sachs & Co. Jeffrey Currie (212) jeffrey.currie@gs.com Goldman, Sachs & Co. Abhisek Banerjee +44(2) abhisek.banerjee@gs.com Goldman Sachs International Raquel Ohana +44(2) raquel.ohana@gs.com Goldman Sachs International given still weak current and forward fundamentals First, while US crude builds turn to draws, it is total petroleum stocks that matter, as rising product stocks will depress refining margins and weigh on crude prices. Second, our updated supply and demand balance points to an only gradual decline in elevated inventories in 216 as production growth from low-cost producers such as Saudi, Iraq and Russia help offset strong demand growth and declining non-opec ex. US production. Further, we don t see the US rig curtailment as large enough yet to put production on a persistent downward trend with risk to our flat Iranian production path skewed to the upside. Third, we believe that WTI oil prices settling above $6/bbl will eventually lead US producers to ramp up activity, draw down a large well backlog and hedge, given improved returns with costs down by c.2%. Fourth, the broader imbalance of too much capital looking for opportunities in the energy space remains intact. Sequential price decline still required As a result, while low prices precipitated the market rebalancing, we view the recent rally as premature with crude oil prices expensive relative to current and forecast fundamentals. Ultimately, with evidence at hand that US producers responded aggressively to low prices, the burden of proof has shifted to how they will respond to the recent recovery and whether low-cost producers can sustainably deliver higher production. This may as a result delay the sequential decline in prices until this fall, especially as we approach a period of seasonally stronger summer demand. Investors should consider this report as only a single factor in making their investment decision. For Reg AC certification and other important disclosures, see the Disclosure Appendix, or go to The Goldman Sachs Group, Inc. Global Investment Research

2 A self-defeating rally The oil market rebalancing is ongoing: following weak prices in 1Q15 non-opec producers have cut capex and idled rigs aggressively while demand has recovered strongly. The decline in activity, especially in the US has been faster than we had expected, while the demand response was stronger than even our out-of-consensus optimistic expectations, although helped by weather. This early evidence of improving oil fundamentals has led to a recovery in prices, further fueled by oil screening cheap relative to energy equities. Despite this perception of improving fundamentals, our updated supply and demand balance points to a still well oversupplied market in 215. In fact, we project OECD inventories to only gradually draw in 216 despite rising Chinese SPR builds and non-opec production declining outside of the US. In particular, we don t see the US rig curtailment as large enough yet to put production on a persistent downward trend, given continued efficiency gains, signs of high grading and an elevated well backlog which could add at least 25 kb/d of production when redeployed. Further, recent Saudi, Iraq and Russia production growth has surprised to the upside and we expect this trend to continue as this represents the next logical step to raising revenues in the New Oil Order. This growth helps offset declining production elsewhere, with risk to our flat Iranian production path skewed to the upside. As a result, we believe that the recent price rally is premature. In fact, we believe that should WTI remain near $6/bbl, US producers would eventually ramp up activity, hedge and complete wells, given improved returns with costs down by at least 2%. We therefore believe that prices need to sequentially weaken, to resume the oil market rebalancing as well as help correct the still intact imbalance of too much capital looking for opportunities in the energy space. The longer this price decline takes to materialize, the greater the upside risks to our already projected high inventories into 216, especially in the US. With evidence at hand that US producers responded aggressively to low prices, the burden of proof has nonetheless shifted to how they will respond to the recent recovery and whether low-cost producers can sustainably deliver higher production. This may as a result delay the sequential decline in prices until this fall as we approach seasonally stronger summer demand which will also help temper the petroleum product inventory build. The shift of the crude surplus into a product surplus, however, will be the additional driver to lower crude prices as rising product stocks will depress refining margins globally. The relief rally has overshot The oil market focus has dramatically shifted over the past month, from fearing a breach of US crude oil storage capacity to reflecting a well under way oil market rebalancing. We view this shift in sentiment and positioning as excessive relative to still weak fundamentals. - US crude inventories have finally drawn. However, this was inevitable once refinery runs increased. And while weekly EIA data point to US crude production stabilizing, this is consistent with our modeling of US production on rig activity and has occurred thanks to a rise in drilled but uncompleted wells. Further, our modeling points to an only modest sequential decline in production absent significant additional rig count declines. Going forward, we expect (1) an only gradual decline in US crude inventories, (2) crude stocks to become high product stocks as refineries return from maintenance weighing on refining margins and eventually crude prices, (3) crude stocks to resume their build this fall, at least in PADD2. See Still too much light crude at the end of the tunnel, April 6, Rising Middle East geopolitical risk but production too. Saudi Arabia and Iraq production increased in March by 1. mb/d, even more than we had expected, with Iran exports likely to increase from April. However, this significant increase in production was Goldman Sachs Global Investment Research 2

3 overshadowed by the conflict in Yemen and fears over rising Shiite-Sunny tension in the region. Further, diverging comments from Iran and P5+1 officials regarding the implementation of the deal announced on April 2 leaves uncertain the timing of a potential lift of Iranian sanctions. Going forward, and as we discuss in more detail below, we expect that Saudi Arabia and Iraq production will continue to increase while we conservatively assume that Iranian production remains stable through 216. Exhibit 1: Low-cost producers have increased production and we expect them to continue Million barrels per day (mb/d) Saudi Arabia, Iraq, Russia combined crude oil production Source: IEA. - Cheap oil relative to E&Ps, not fundamentals. The rise in oil prices was further supported by oil prices screening as cheap relative to E&P equities, drawing cross-asset investors into buying oil. This relative value opportunity is a reversal of February, when E&P looked cheap relative to long-dated oil prices which led investors to accommodate $12bn of equity issuance and sell the back-end of oil prices. While the recent oil price rally has closed the valuation gap to equities, E&P stocks trade on historically high multiples, leaving oil itself trading at a premium to its own still weak fundamentals in our view. Interestingly, this flow is consistent with the nature of the recent oil rally, with back-end cross-asset buying triggering a short covering of short spread positions, leading to the front of the curve to outperform the back-end despite unchanged fundamentals. Exhibit 2: Oil screened cheap to equities before the rally Cumulative XLE-SPX vs. WTI 2-yr swap returns (.6 to 1) Exhibit 3: Both now trade at expensive valuations One-year rolling forward consensus EV/EBITDA 8% 6% WTI 2-yr swap expensive vs. XLE 9.x One-year rolling forward consensus EV/EBITDA Current 216 multiple implied by $65/bbl WTI and $3.8/MMBtu gas 4% 8.x 2% % -2% -4% -6% EV/EBITDA multiple 7.x 6.x 5.x 4.x WTI 2-yr swap cheap vs. XLE -8% 3.x Apr-13 Aug-13 Dec-13 Apr-14 Aug-14 Dec-14 Apr-15 +/- 1 st. dev. Commodity-Equity Divergence Jan-4 Jan-5 Jan-6 Jan-7 Jan-8 Jan-9 Jan-1 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Source: Bloomberg, Goldman Sachs Global Investment Research. Source: FactSet, Goldman Sachs Global Investment Research Goldman Sachs Global Investment Research 3

4 Following this rally, net speculative positioning in the crude oil and total oil markets is back to net long, at its highest level since last July when Brent traded at $11/bbl. To quantify just how extreme the increase in length has been relative to history and fundamentals, we regress changes in net speculative positioning on inventory shifts and find that the market is trying to price in OECD inventories drawing to their 3Q14 level by 3Q15 (Exhibit 5). We believe that this shift in positioning has far exceeded even the consensus (but not our) shift to expecting a faster market rebalancing than earlier this year. And while it is possible that markets have become more forward looking and are already looking beyond the near-term fundamentals, just like they did last fall, we ultimately don t share this forward view of sharply improving fundamentals, even in 216. Exhibit 4: Net speculative length is back to summer/fall 214 level WTI (lhs) and Brent (rhs) crude oil net speculative length (million barrels) Exhibit 5: implying a sharp draw in inventories in 2H15 Change in OECD petroleum inventories ex. US NGLs and other products (lhs, mmb); change in crude oil net spec. length (rhs, inverted, million barrels, 5-mo ahead); % yoy Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 NYMEX WTI ICE Brent (rhs) Source: CFTC, ICE Yoy change in OECD inventory level (lhs) Yoy change in specs (rhs, inverted) Source: ICE, CFTC, IEA, Goldman Sachs Global Investment Research. The oil market rebalancing is far from over We see three reasons why this rally is inconsistent with current and forward fundamentals: (1) current and forward crude and product balances remain weak, (2) current prices over time lead to higher US activity, and (3) the capital imbalance remains intact. 1. Current and forward balances remain weak We estimate that the global oil market will be oversupplied by 1.9 mb/d in 2Q15, the quarter of largest stock build. This is a larger build than the 1.3 mb/d we had expected in January as increases in Iraq, Russia and Saudi production and a higher peak in US production more than offset demand on track to exceed even our out-of-consensus optimistic forecast. While demand inevitably rises during the summer, we forecast the inventory build to continue in 215 and only gradually decline in 216 (see page 1): We expect US production to sequentially decline from current levels but grow in 216. This production path is based on (1) further rig count declines before a modest recovery in 2H15, (2) gradual high grading which county level rig data suggests is occurring, (3) a gradual drawdown of drilled but uncompleted wells, which we assume adds 15 kb/d to US production when gradually brought online from 4Q15, although well level data suggests the backlog may be even larger than we assume (see Exhibit 12 and Still too much light crude at the end of the tunnel, April 6, 215). Goldman Sachs Global Investment Research 4

5 We expect less production from non-opec outside of the US. We expect the rest of non-opec production growth to decelerate to 5 kb/d yoy in 215 vs. 35 kb/d previously. We also downgrade our 216 production forecast, to expecting non-opec ex. US Lower 48 (crude and NGL) to decline by 2 kb/d in 216 vs. growing 19 kb/d previously. Key downward revisions include Brazil, Mexico and the North Sea for both years, China in 216. We in turn reiterate our forecast for rising Russia production, consistent with realized year-to-date production and Russia s incentive to grow output. We expect OPEC production to grow and more than offset our downward revisions to non-opec ex. US production declines in 216. Specifically, we believe that the aim of maintaining exports while ramping up refining capacity will lead Saudi production to remain above 1 mb/d this year with further growth next year, consistent with the observed increase in rig activity. Medium term, we expect Saudi production to continue to increase as this is the next logical step to maximizing revenues in the New Oil Order (see our work last October on the dominant firm/competitive fringe market structure in The new oil order, October 26, 214). And while the decrease in OPEC spare capacity on the back of stronger Saudi production may be viewed as mediumterm bullish, higher production keeps the market oversupplied today: this should net be supportive of call skew, not prices. We reiterate our prior expectation for growing production in Iraq. For now we conservatively assume that Iran production remains near its current level given uncertainty on the timing of a potential lift of sanctions. Should sanctions be lifted over the next 18 months, risk to our Iran production path would be skewed to the upside. Exhibit 6: US production does not decline sharply at the current US oil rig count US Lower 48 oil production (kb/d) implied by the current oil rig count (see our Weekly Rig Monitor for details) Exhibit 7: The Saudi oil rig count has increased sharply, comforting us in our expectation for rising production Saudi Arabia oil rotary rig count 8, 7,5 7, ,5 6, 5,5 5, 4,5 4, Jan-12 Dec-12 Nov-13 Oct-14 Sep-15 Aug-16 Forecasts 1% of 4Q14-2Q15 wells delayed to 4Q15-1Q16 US Lower 48 assuming May 8 rig count Source: IHS, BHI, EIA, Goldman Sachs Global Investment Research Source: BHI. Baker Hughes Saudi Arabia Oil Rotary Rig Count We expect global oil demand to remain strong on the combination of accelerating GDP growth and the continued gradual impact of low oil prices on demand and efficiencies. Our 215 demand growth forecast increases slightly to 1.4 mb/d from 1.35 mb/d and remains 1.5 mb/d in 216 given our economists global GDP growth and our low oil price forecasts. From a regional perspective, we increase our Europe and Emerging Asia demand forecasts, consistent with both realized data and our economists growth forecast revisions year-to-date, while we downgrade Latin America demand growth. Goldman Sachs Global Investment Research 5

6 Our updated inventory path leaves the market oversupplied in 215 and OECD inventories only gradually drawing in 216. This forecast points to sequentially lower oil prices nearterm and an only gradual recovery in prices into 216. Key risks include a larger roll-over in non-opec ex. US production and volatile OPEC production given elevated geopolitical tensions. However, the impact would remain limited given a high inventories starting point and risk to our Iranian production path skewed to the upside. Further, we believe a tighter balance could be offset by higher US production than we forecast without prices having to rally above the current forward curve, while lower US production than we currently project in 216 would in our view be in response to sequentially lower prices not the slowdown in activity observed so far. Exhibit 8: We expect the global market imbalance to persist into 216 Quarterly global market imbalance (kb/d) Exhibit 9: leaving OECD inventories high in 216 OECD ex. US NGL and other oil inventories (million barrels) 2,5 2, ,6 2,55 2,5 1,5 2,45 1, 2,4 5 2,35 2,3 2, , 1Q 2Q 3Q 4Q 2,2 2,15 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: IEA, EIA, JODI, Goldman Sachs Global Investment Research. Source: IEA, EIA, JODI, Goldman Sachs Global Investment Research. Our inventory path points to front-month to 5-year forward Brent timespreads reversing their recent rally in the short term. Importantly though, our projected OECD stock build remains short of our projected global market imbalance with crude also absorbed by a large increase in Chinese SPR capacity. This is different from the past year, when the sources of supply surge (North America, Brazil) and demand weakness as well as competitive OSP to Asia left the inventory build predominantly in OECD countries. As a result, our OECD inventory path and its historical relationship to Brent timespreads does not suggest that Brent structure will need to reflect floating storage economics (Exhibit 1). Given the constraints of the US export ban, we in turn expect US inventories to remain elevated. Under our production, refinery run and net import forecasts, US crude stocks build again this fall, especially in PADD2, as well as next spring. In fact, we see potential for US crude inventories to exceed the peak they are currently setting during next spring s turnarounds, creating downside risks to WTI timespreads and the WTI- Brent differential. This accumulation of crude in the US in turn accelerates the tightening of the OECD-ex US balance. This points to higher WTI than Brent price volatility, although the impact on timespreads may be more limited as our modeling still points to Brent timespreads reflecting total rather than OECD ex. US stocks. Goldman Sachs Global Investment Research 6

7 Exhibit 1: Inventories day of forward demand coverage will only normalize by 2H16 OECD ex. US and other oil inventories in days of OECD forward coverage vs. 3-year average (lhs) vs. Brent timespreads (%, rhs, inverted) 15% GS -5% 1% 5% % -5% -1% -15% -3% -1% 1% 3% 5% 7% OECD inventories vs. 3-yr average (in days of forward demand coverage) 1-mo vs. 5-yr Brent timespread (rhs, inverted) Source: IEA, EIA, JODI, ICE, Goldman Sachs Global Investment Research. While the market has over the past few months been fixated on crude inventories, these will inevitably draw and show up in product inventories, as illustrated with last week s large build in US gasoline. Given high crude stocks and favorable refining margins, strong refinery runs globally will lead to a sharp rise in product stocks, eventually depressing refining margins and weighing on crude prices. As we approach the summer driving season and as distillate-geared new refineries ramp up, we expect this to be particularly the case for distillates, although strong European distillate demand has so far postponed this weakness. Ultimately, our balances point to a decline in front-month to 5-yr forward Brent and WTI timespreads. We also expect the recent rally in differed prices to reverse as long-term oil prices are currently trading above our long-term marginal cost forecasts of $65/bbl for WTI and $7/bbl for Brent which reflects our expectation for sustained cost deflation as we move into the Exploitation phase of the oil supply cycle (see Lower for longer to keep capital sidelined, January 11, 215). In fact, earnings commentary so far point to even greater cost deflation than we had expected, with a potential ramp-up in US hedging a likely catalyst to drive differed oil prices lower in coming months. 2. Beware of the US reaction function In addition, we view the recent rally as undermining the current market rebalancing. Specifically, we believe that WTI oil prices settling above $6/bbl would eventually lead US producers to ramp up activity given improved returns with costs down by at least 2%. This would be consistent with recent producer comments during the 1Q15 earnings season that they would seek to resume activity once prices stabilize above $6-$65/bbl. Admittedly, the rapid rally to $6/bbl is not sufficient for producers to resume activity. Further, with evidence at hand that US producers responded aggressively to low prices, the burden of proof has shifted to whether they will indeed respond to WTI prices settling above $6/bbl. Nonetheless, recent producer hedging activity, a slowdown in the rig count decline coupled with high grading, suggest that producers are indeed increasingly comfortable at the current costs/revenue/funding mix. It is also noteworthy that production guidance has been raised by several producers, likely a reflection of greater productivity and potentially cost visibility. Goldman Sachs Global Investment Research 7

8 Finally, we continue to see evidence of a growing backlog of drilled but uncompleted wells. We currently assume that 1% of drilled wells are likely uncompleted, which would represent 25 kb/d of production over 6 months if all were brought online at the same time (unlikely) with well level data through March pointing to a backlog twice as large, although this data can be incomplete for recent months. Importantly, our modeling of the incentive to delay completion showed that a well drilled but not completed in 1Q would generate a 12% return if costs declined 25% by completion time and WTI oil prices returned to $65/bbl, suggesting the incentive to complete may not be far away. Exhibit 11: While the rig count has collapsed, high grading has translated into higher productivity Rig count and county level weighted Permian well average production in first month (kb/d); Permian horizontal rig count.25 4 Exhibit 12: The backlog of drilled but uncompleted well has increased sharply Estimated well backlog (wells drilled but not producing after 2 months) 4, ,5 3, 2,5 2, Feb-14 Apr-14 Jun-14 Aug-14 Oct-14 Dec-14 Feb-15 Apr-15 Rig weighted average Permian IP Permian horizontal rig count Source: BHI, IHS, Goldman Sachs Global Investment Research ,5 1, 5 Jan-11 Nov-11 Sep-12 Jul-13 May-14 Mar-15 Estimated Big 3 Well Backlog through March 215 Source: BHI. 3. Capital imbalance remains intact Our bearish view has been driven by two surpluses: excess hydrocarbons but just as importantly excess capital. Apart from January, access to capital has been remarkably smooth with HY energy debt issuance back to accounting for 2% of US issuance and the equity market absorbing $12 bn of equity issuance since February without a glitch. This led some producers to comment on a lesser need to deleverage given strong funding liquidity. Exhibit 13: The credit markets have reopened HY Energy issuance vs. total HY issuance 35% Exhibit 14: along with equity markets EPX vs. basket of companies having issued equity % 25% 2% 15% % 5% % Energy share of HY issuance Source: Dealogic Jan-15 2-Feb-15 2-Mar-15 2-Apr-15 Equity issuance basket (12.4% dilution) EPX Source: Bloomberg. Goldman Sachs Global Investment Research 8

9 As a result, the imbalance of too much capital looking for opportunities in the energy space remains intact. For example, the combined dry powder for M&A from the three US oil majors and of North America natural resources private equity funds currently stands at $15 billion, above our analysts forecast capex for the US E&P sector in 215. Exhibit 15: Substantial amount of capital remains available to fund E&Ps Billion USD E US Majors M&A Firepower Private Equity North America natural resources dry powder US land E&P capex Source: Preqin, Company data, Goldman Sachs Global Investment Research. While ultimately, the long-run asset value of shale oil reserves bodes well for their ability to attract capital, capital investments are now part of the adjustment process given the collapsed time lag shale has created between when capital is spent and when production rises. With credit and equity access not currently part of the adjustment process, the market has one lever left to balance itself: cash flow through oil prices. This large availability of low-cost external capital therefore exacerbates the need for sustained low prices in our view to keep US producing assets from quickly being redeployed in a lower cost environment. As a result, while low prices precipitated the market rebalancing, we view the recent rally as premature with crude oil prices expensive relative to current and forecast fundamentals. Calling the timing for prices to sequentially decline is challenging in the short run as we approach a period of seasonally stronger summer demand and China SPR fill. Nonetheless, we expect evidence of this fundamental weakness and expected US producer reaction to gradually materialize in the US weekly rig count, hedging flows, weakening refinery margins and monthly OPEC production and rig count growth. Goldman Sachs Global Investment Research 9

10 Global oil balance Exhibit 16: Global supply and demand estimates (thousand barrels per day) Non-OPEC Supply Non-OPEC Supply 1Q213 2Q213 3Q213 4Q213 1Q214 2Q214 3Q214 4Q214 1Q215E 2Q215E 3Q215E 4Q215E yoy 13 yoy 14 yoy 15 yoy 16 US Lower 48 5,494 5,754 6,59 6,26 6,46 6,86 7,145 7,435 7,532 7,576 7,515 7,555 5,892 6,948 7,544 7, , US NGL 2,388 2,432 2,61 2,673 2,654 2,897 3,66 3,64 3,68 3,112 3,171 3,149 2,523 2,92 3,125 3, US GoM 1,298 1,219 1,25 1,254 1,318 1,421 1,426 1,423 1,468 1,516 1,531 1,553 1,255 1,397 1,517 1, Alaska US ethanol Total US 1,586 1,835 11,279 11,7 11,869 12,631 13,24 13,436 13,559 13,666 13,575 13,717 11,1 12,74 13,629 14,129 1,137 1, Canada 4,51 3,75 3,991 4,12 4,232 4,81 4,12 4,374 4,34 4,261 4,253 4,374 3,974 4,22 4,37 4, Mexico 2,912 2,875 2,88 2,897 2,869 2,845 2,764 2,712 2,663 2,615 2,619 2,592 2,891 2,798 2,622 2, Total North America 17,549 17,461 18,151 18,699 18,97 19,557 19,99 2,522 2,563 2,542 2,448 2,683 17,965 19,74 2,559 21,24 1,34 1, Argentina Brazil 2,76 2,11 2,123 2,183 2,176 2,283 2,394 2,492 2,49 2,425 2,49 2,42 2,123 2,336 2,432 2, Colombia 1,12 1,2 1,19 1,5 1, , , , Other Latam Non-OPEC LatAm 4,138 4,16 4,187 4,227 4,219 4,282 4,433 4,55 4,494 4,451 4,468 4,467 4,178 4,371 4,47 4, Norway 1,838 1,837 1,798 1,878 1,96 1,791 1,858 1,96 1,937 1,765 1,83 1,95 1,838 1,892 1,853 1, UK Other Europe Total Europe 3,525 3,462 3,332 3,517 3,644 3,381 3,273 3,597 3,61 3,315 3,28 3,439 3,459 3,474 3,391 3, Azerbaijan Kazakhstan 1,746 1,664 1,676 1,765 1,71 1,643 1,679 1,721 1,73 1,626 1,642 1,676 1,713 1,688 1,668 1, Russia 1,823 1,82 1,849 1,981 11,7 1,936 1,843 11,3 11,3 11,6 1,958 11,93 1,869 1,947 11,22 11, Other FSU Total FSU 13,855 13,785 13,81 14,41 14,28 13,85 13,817 13,972 14,14 13,926 13,911 14,53 13,872 13,917 13,976 13, China 4,22 4,235 4,47 4,223 4,235 4,231 4,168 4,129 4,275 4,231 4,148 4,89 4,177 4,191 4,186 4, India Indonesia Malaysia Rest of Asia-Pacific 1,663 1,687 1,63 1,596 1,641 1,621 1,642 1,628 1,658 1,596 1,572 1,545 1,644 1,633 1,593 1, Non-OPEC Asia 8,38 8,321 8,36 8,194 8,255 8,228 8,131 8,182 8,346 8,213 8,61 8,24 8,215 8,199 8,161 8, Non-OPEC Middle East 1,41 1,37 1,353 1,349 1,352 1,321 1,37 1,294 1,273 1,231 1,227 1,229 1,353 1,318 1,24 1, Non-OPEC Africa 2,23 2,269 2,293 2,421 2,357 2,38 2,298 2,32 2,34 2,313 2,299 2,32 2,296 2,316 2,314 2, Processing gains 2,179 2,156 2,23 2,175 2,29 2,188 2,244 2,215 2,215 2,218 2,274 2,245 2,178 2,214 2,238 2, Other Biofuels 671 1,155 1,57 1, ,394 1,69 1, ,367 1,717 1,383 1,141 1,288 1,344 1, Total non-opec supply 53,829 54,76 54,871 55,854 55,821 56,59 57,21 57,998 57,752 57,577 57,613 57,826 54,657 56,837 57,692 57,942 1,434 2, Non-OPEC ex. US Lower 48 & NGL 45,947 45,89 46,211 46,922 46,761 46,86 46,81 47,499 47,152 46,889 46,927 47,122 46,242 46,969 47,23 46, OPEC Supply Algeria 1,153 1,153 1,147 1,14 1,66 1,143 1,147 1,127 1,17 1,1 1,94 1,8 1,148 1,121 1,95 1, Angola 1,758 1,76 1,715 1,641 1,574 1,63 1,715 1,724 1,783 1,75 1,75 1,69 1,718 1,661 1,721 1, Ecuador Iran 2,699 2,677 2,637 2,713 2,819 2,84 2,785 2,83 2,816 2,84 2,785 2,83 2,682 2,812 2,811 2, Iraq 3,29 3,162 3,42 3,85 3,287 3,329 3,225 3,484 3,467 3,614 3,675 3,79 3,8 3,331 3,616 3, Kuwait 2,793 2,837 2,817 2,79 2,786 2,797 2,838 2,779 2,8 2,775 2,8 2,775 2,89 2,8 2,788 2, Libya 1,379 1, Nigeria 2, 1,937 1,966 1,99 1,933 1,913 1,887 1,877 1,83 1,8 1,8 1,8 1,953 1,92 1,87 1, Qatar Saudi Arabia 9,233 9,538 1,13 9,772 9,721 9,715 9,84 9,637 9,9 1,15 1,35 9,95 9,661 9,719 1,88 1, UAE 2,746 2,773 2,797 2,732 2,734 2,742 2,85 2,752 2,84 2,835 2,85 2,82 2,762 2,758 2,836 2, Venezuela 2,445 2,547 2,524 2,47 2,448 2,48 2,48 2,44 2,394 2,394 2,374 2,354 2,496 2,462 2,379 2, Total OPEC Crude 3,476 3,929 3,613 29,811 3,4 3,78 3,531 3,515 3,537 3,81 31,143 3,66 3,457 3,282 3,785 31, Total OPEC NGL 6,211 6,26 6,32 6,276 6,314 6,33 6,434 6,454 6,515 6,623 6,649 6,75 6,262 6,383 6,623 6, Total OPEC supply 36,687 37,189 36,915 36,87 36,318 36,48 36,964 36,969 37,52 37,423 37,791 37,365 36,719 36,665 37,48 37, World supply 9,516 91,265 91,785 91,941 92,139 92,917 93,985 94,967 94,84 95, 95,45 95,19 91,377 93,52 95,1 95, ,125 1, Global Demand USA 18,963 19,9 19,56 19,574 19,148 18,994 19,465 19,759 19,468 19,325 19,7 19,815 19,263 19,341 19,577 19, Canada 2,454 2,422 2,448 2,431 2,429 2,338 2,458 2,426 2,39 2,345 2,415 2,42 2,439 2,413 2,393 2, Mexico 2,48 2,83 2,3 2,17 1,954 1,975 1,956 1,978 1,882 1,955 1,96 2,1 2,44 1,966 1,952 1, North America 23,465 23,514 23,984 24,21 23,531 23,37 23,88 24,163 23,741 23,625 24,75 24,245 23,746 23,72 23,921 24, LatAm ex. Mexico 6,714 6,972 7,16 7,111 6,923 7,91 7,25 7,216 6,97 7,15 7,33 7,35 6,976 7,12 7,2 7, OECD Europe 13,22 13,899 14,33 13,614 13,1 13,48 13,878 13,539 13,425 13,49 13,95 13,69 13,687 13,457 13,639 13, Non-OECD Europe Total Europe 13,817 14,545 14,689 14,287 13,646 14,63 14,554 14,21 14,99 14,17 14,635 14,385 14,334 14,118 14,322 14, Japan 5,48 4,74 4,261 4,78 5,22 3,877 3,876 4,426 4,662 3,825 3,92 4,32 4,523 4,3 4,182 4, OECD Asia-Pacific ex. Japan 3,56 3,524 3,51 3,655 3,594 3,551 3,559 3,651 3,78 3,59 3,545 3,685 3,56 3,589 3,65 3, China 9,887 1,17 1,166 1,38 1,153 1,42 1,391 1,731 1,43 1,75 1,8 1,95 1,117 1,419 1,726 11, Other non-oecd Asia 11,94 11,883 11,565 12,34 12,222 12,118 11,849 12,254 12,671 12,645 12,335 12,76 11,856 12,111 12,63 12, Total Asia 3,434 29,588 29,493 3,75 3,991 29,948 29,675 31,61 31,515 3,81 3,6 31,715 3,55 3,419 31,16 31, FSU 4,471 4,657 4,937 4,96 4,632 4,83 5,4 4,972 4,644 4,695 4,865 4,79 4,756 4,868 4,749 4, Total Middle East 7,89 8,181 8,642 8,3 8,3 8,422 8,89 8,181 8,17 8,575 9, 8,325 8,159 8,361 8,52 8, Total Africa 3,895 3,877 3,71 3,816 3,927 3,943 3,831 3,921 4,61 4,9 3,995 4,85 3,825 3,95 4,58 4, OECD demand 45,857 45,6 46,357 46,554 45,715 44,72 45,756 46,32 46,169 45,91 46,7 46,499 46,92 45,623 45,957 46, non-oecd demand 44,747 45,734 46,24 46,35 45,966 46,92 47,283 47,43 46,969 48,24 48,43 48,396 45,759 46,889 47,955 49,11 1,128 1,13 1,66 1,155 World Demand 9,65 91,334 92,561 92,94 91,681 91,64 93,39 93,723 93,138 93,115 94,5 94,895 91,851 92,512 93,912 95,412 1, ,4 1,5 Source: IEA, EIA, JODI, NBS, Goldman Sachs Global Investment Research. Goldman Sachs Global Investment Research 1

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