COMPARATIVE ANALYSIS OF MONTHLY REPORTS ON THE OIL MARKET

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1 COMPARATIVE ANALYSIS OF MONTHLY REPORTS ON THE OIL MARKET AN INTERNATIONAL ENERGY FORUM PUBLICATION SEPTEMBER 2018 RIYADH, SAUDI ARABIA SEPTEMBER 2018 SUMMARY FINDINGS FROM A COMPARISON OF DATA AND FORECASTS ON THE OIL MARKET BY THE INTERNATIONAL ENERGY AGENCY (IEA) AND ORGANIZATION OF THE PETROLEUM EXPORTING COUNTRIES (OPEC). FEATURING A COMPARATIVE ANALYSIS OF OIL INVENTORY DATA REPORTED BY JODI, THE IEA, OPEC AND SECONDARY SOURCES IN COLLABORATION WITH THE RAPIDAN ENERGY GROUP. 1. NOTE BY THE SECRETARY GENERAL 2 2. KEY POINTS DEMAND 2.2 SUPPLY 2.3 STOCKS 2.4 SNAPSHOT (mb/d) GLOBAL ANALYSIS DEMAND DATA 3.2 SUPPLY DATA 3.3 STOCK DATA GLOBAL STOCK ANALYSIS COMPARATIVE ANALYSIS OF MONTHLY REPORTS ON THE OIL MARKET RIYADH, SAUDI ARABIA SEPTEMBER 2018

2 1. NOTE BY THE SECRETARY GENERAL The IEF conducts a comprehensive comparative analysis of the short-, medium-, and long-term energy outlooks of the IEA and OPEC, to inform the IEA-IEF-OPEC Symposium on Energy Outlooks that the IEF hosts in Riyadh as part of the trilateral work programme on a yearly basis. To inform IEF stakeholders on how perspectives on the oil market of both organisations evolve over time more regularly, this monthly summary provides: Key findings and a snapshot overview of data points gained from comparing basic historical data and short-term forecasts of the IEA Oil Market Report and the OPEC Monthly Oil Market Report Features a comparative analysis of oil inventory data reported by JODI, the IEA, OPEC, and secondary sources in collaboration with the Rapidan Energy Group Moreover, international developments this month that will have an impact oil market balances are as follows: US-China Trade Conflict China set a 10 percent tariff on U.S. liquefied natural gas (LNG) imports in retaliation to US tariffs. OPEC/Non-OPEC Meeting OPEC members and Russia decided not to raise crude output at the OPEC and non-opec Joint Ministerial Monitoring Committee (JMMC) in Algiers. Supply Adjustments Removal of supply from Venezuela and Iran due to political instability are correlated with increasing oil price. I trust this month s analysis helps to sharpen focus on evolving short-term market perspectives. Dr Sun Xiansheng Secretary General International Energy Forum COMPARATIVE ANALYSIS OF MONTHLY REPORTS ON THE OIL MARKET RIYADH, SAUDI ARABIA SEPTEMBER

3 2. KEY POINTS 2.1 DEMAND IEA and OPEC see a marginal difference in world demand growth. The IEA revised up its growth figure by 30 kb/d while OPEC growth is lowered by 10 kb/d from last month s assessment leading to a 230 kb/d difference in growth between the two organizations. The IEA world demand growth amounts to 1.39 mb/d in OPEC s demand growth stands at 1.62 mb/d in September marking a decline for the second straight month. The IEA and OPEC estimates for absolute world demand for August are mb/d and mb/d respectively. The IEA forecasts increasing demand growth for Non-OECD countries for the first time since February The growth is attributable to Non-OECD Asian demand growth of 1.05 mb/d driven primarily by China and India for total growth of 1.14 mb/d. OPEC Non-OECD demand growth is slightly down by 20 kb/d for a total growth of 1.19 mb/d. The IEA reports OECD growth at 0.25 mb/d down by 110 kb/d. OPEC s OECD demand growth remains stable at 0.43 mb/d compared to 0.42 in last month s assessment. The IEA and OPEC differ on OECD demand growth by 180 kb/d. 2.2 SUPPLY OPEC reports first decrease in Non-OPEC supply growth this year. OPEC s September assessment for Non-OPEC growth is down by 60 kb/d for total growth of 2.02 mb/d compared to 2.08 mb/d in August. In contrast, IEA increased its assessment for Non-OPEC supply for the second straight month to 2.01 mb/d. These assessments represent the closest alignment between IEA and OPEC on Non-OPEC growth since March 2017 when the difference was also a mere 10 kb/d. In absolute values OPEC and the IEA estimate non-opec supply at mb/d and mb/d respectively. OPEC reports highest monthly change in Non-OECD supply growth in OPEC s Non- OECD growth of 0.05 mb/d year-on-year is only slightly less than the IEA s figure of 0.08 mb/d, but marks a 0.12 mb/d drop from last month s assessment of 0.17 mb/d. 2.3 STOCKS The IEA and OPEC continue to report strong alignment on stock figures. The IEA reports 2824 mb in OECD stock that is 50 mb below the five-year average. OPEC s assessment is not far off with 2830 mb in OECD stock that is 43 mb below the five-year average. The divergence between OPEC and the IEA stands at 6 mb for September. Total US crude inventories (excluding SPR) in September stand at about 396 mb, down 75 mb year-on-year according to the US Energy Information Administration (EIA). EIA reports US stocks are 2 percent below the fiveyear average in September and OPEC reports US stock below the five-year average by about 7 mb based on August data. COMPARATIVE ANALYSIS OF MONTHLY REPORTS ON THE OIL MARKET RIYADH, SAUDI ARABIA SEPTEMBER

4 2.4 SNAPSHOT (mb/d) Demand OECD Growth Δ m/m Non- OECD Growth Δ m/m World Growth Δ m/m IEA OPEC Difference Supply OECD Growth Δ m/m Non- OECD Growth Δ m/m NOPEC Growth Δ m/m OPEC Growth Δ m/m IEA OPEC Difference Stocks (mb) OECD US OECD to 5- Year Average US to 5-Year Average IEA OPEC EIA 396-2% below Data obtained from IEA Oil Market Report, 13 September 2018; OPEC Monthly Oil Market Report, 12 September 2018 and Energy Information Administration, Weekly Petroleum Status Report, 26 September, 2018 *Totals in table may not exactly reflect content due to independent rounding. COMPARATIVE ANALYSIS OF MONTHLY REPORTS ON THE OIL MARKET RIYADH, SAUDI ARABIA SEPTEMBER

5 3. GLOBAL ANALYSIS According to the IEA global economic growth is still expected to be a robust 3.9 percent in 2018 and 2019 while OPEC has growth at 3.8 percent and 3.9 percent respectively. Both the IEA and OPEC point to rising trade tensions as a concern to economic growth and has been a major theme over the last couple of months. OPEC also mentions further monetary tightening by G4 central banks, in combination with rising global debt levels, as additional concerns. 3.1 DEMAND DATA Absolute Demand The IEA s estimate for global demand growth in September stands at 1.39 mb/d up by 40 kb/d from 1.35 mb/d in last month s report for an absolute demand of mb/d in The rise in demand implies a tightening of the market given that US sanctions against Iran will come into effect on November 4 and Venezuelan production continues to decline. Unless the loss of this production is offset by other players, tightening of the market is possible and the $70-$80 oil price can be tested. OPEC s global demand outlook also has remained steady at 1.62 mb/d down a mere 20 kb/d compared to last month s projections, mainly due to weaker-than-expected oil demand data from Non-OECD Latin America and the Middle East in 2Q18. This leads to a projected total global consumption of around mb/d for the month of September. OPEC-IEA divergence in overall world demand stands at 0.47 mb/d up from 0.28 mb/d in July. OECD Demand The IEA continues to see robust OECD oil demand growth at 0.25 mb/d, down slightly from last month s figure of 0.36, anticipating total OECD consumption for 2018 at mb/d. OPEC marginally revised up its growth projection for the OECD region to 0.43 mb/d from 0.42 mb/d constituting the eighth consecutive increase in growth this year. OPEC total OECD demand now stands at mb/d. The divergence of OECD oil demand growth between the IEA and OPEC now stands at 0.09 mb/d. The IEA reports a 0.07 mb/d downward revision in OECD Americas demand growth from 0.40 mb/d in last month s report to 0.33 mb/d, while OPEC s estimate only rose slightly by 0.02 mb/d to 0.34 mb/d from 0.32 mb/d. OECD Europe demand growth decreased to mb/d from zero according to IEA data. OPEC s OECD Europe growth figure decreased to 0.07 mb/d from 0.10 mb/d. The IEA s and OPEC s assessments for 2018 OECD total demand differ by 0.09 mb/d. Non-OECD Demand Both, the IEA and OPEC anticipate continued growth in non-oecd demand for this year at 1.14 mb/d and 1.19 mb/d respectively, with total demand forecasts averaging mb/d and mb/d respectively. The IEA revised its growth upwards by 0.14 mb/d mainly due to increased growth in China of 0.64 mb/d for The IEA s and OPEC s assessments for 2018 non-oecd demand growth now differs by 0.05 mb/d. Traditionally, China and India have driven Non-OECD demand, but booming air transport in both countries has increased demand for jet fuel. The IEA s regional demand growth adjustments in 2018 reflect an increased pace of demand growth for China reported at 0.64 mb/d year on year. The higher Chinese assessment is due to increased demand of 0.51 mb/d y-o-y in June and by 1.25 mb/d in July. Since April, however, data issues have hampered the calculation of apparent demand. OPEC has COMPARATIVE ANALYSIS OF MONTHLY REPORTS ON THE OIL MARKET RIYADH, SAUDI ARABIA SEPTEMBER

6 China demand growth pegged at 0.42 with Chinese consumption expected to reach in The IEA maintains that demand growth in India will continue to grow by around 0.27 mb/d to reach 4.84 mb/d in Meanwhile, OPEC reports Indian demand growth at 0.22 mb/d and sees total consumption in India reach of 4.75 mb/d in Projections for non-oecd Asia, as a whole, show growth at 0.87 mb/d according to OPEC and 1.05 mb/d according to the IEA. See the following graph for the monthly revisions of IEA and OPEC annual estimates for 2017 and new estimates for 2018 demand. IEA sees slight increase in world demand growth in September IEA and OPEC Non-OECD demand growth shows strong convergence 2.00 Monthly Revisions of Annual Estimates for Oil Demand Growth 2017/16 and 2018/17 from September Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 IEA (Total Non-OECD) IEA (Total OECD) IEA (World) OPEC (Total Non-OECD) OPEC (Total OECD) OPEC (World) IEF comparative analysis of IEA and OPEC Monthly Reports on the Oil Market September 2018 *monthly estimates rounded to the nearest barrel. 3.2 SUPPLY DATA Non-OPEC Supply OPEC s September assessment of total non-opec supply for 2018 at mb/d. Supply growth has been revised down 0.06 mb/d to 2.02 mb/d driven by expected growth in the US (1.74 mb/d), Canada (0.27 mb/d) and Kazakhstan (0.11 mb/d). Growing output from these countries is offset by declining production from Mexico (-0.12 mb/d), Norway (-0.08 mb/d) and Vietnam (-0.03 mb/d). The IEA forecasts a non-opec supply of mb/d with a year-on-year growth of 2.01 mb/d driven by the U.S. Other increases stem from Russia, where production has rebounded after output cuts were relaxed, and from biofuels. While non-opec supplies are forecast to continue rising through 2019, the pace of growth is expected to slow, from 2.0 mb/d in 2018 to 1.8 mb/d next year given possible logistical challenges and rising costs in the Permian Basin and limited Canadian take-away capacity. By 2019, Brazilian oil output growth, currently reduced by steep declines at mature fields, should resume strongly with a number of new production units coming on-line. COMPARATIVE ANALYSIS OF MONTHLY REPORTS ON THE OIL MARKET RIYADH, SAUDI ARABIA SEPTEMBER

7 OECD Supply OPEC and the IEA both forecast OECD growth at 1.82 mb/d and 1.93 mb/d respectively with total supply reaching mb/d and mb/d respectively. The IEA s data shows OECD Americas liquids supply growth at 1.87 mb/d to reach mb/d total supply while OPEC reports slightly higher growth at 1.89 mb/d with total liquids supply at mb/d for Growth within the region is led by the US for which OPEC revised its liquid supply forecast up to 1.74 mb/d to mb/d while the IEA projects a slightly lower US growth by 1.72 mb/d to amount to mb/d. OECD Europe growth in 2018 is driven primarily by Norway and the UK for total production of 3.86 mb/d. The IEA reports slightly less OECD Europe supply at 3.44 mb/d. OPEC Supply According to OPEC, total OPEC-15 crude oil production averaged mb/d in August, an increase of 0.27 mb/d over the previous month. Crude oil output increased mostly in Libya, Iraq, Nigeria and Saudi Arabia, while production declined in Iran, Venezuela and Algeria. The IEA reports OPEC output rose by 420 kb/d in August after a recovery in Libyan production, near-record Iraqi rates and increases from Nigeria and Saudi Arabia far outweighed losses from Iran ahead of US sanctions. OPEC s biggest month-on-month increase since June 2016 lifted supply from the 15 members to mb/d, a ninemonth high. See the graph below for the monthly revisions of IEA and OPEC annual estimates for 2017 and new estimates for 2018 supply, and the tables for annual estimates for total supply. IEA and OPEC supply see similar Non-OPEC supply growth IEA and OPEC continue to see strong convergence on Non-OECD growth 2.50 Monthly Revisions of Annual Non-OPEC Liquids Supplies Estimates 2017/16, and 2018/17 from September Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 IEA (OECD) IEA (Non-OECD) IEA (Total Non-OPEC Supply) OPEC (OECD) OPEC (Non-OECD) OPEC (Total Non-OPEC Supply) IEF comparative analysis of IEA and OPEC Monthly Reports on the Oil Market September 2018 *monthly estimates rounded to the nearest barrel. COMPARATIVE ANALYSIS OF MONTHLY REPORTS ON THE OIL MARKET RIYADH, SAUDI ARABIA SEPTEMBER

8 3.3 STOCK DATA OECD commercial stocks rose 7.9 mb month-on-month (m-o-m) in July to 2824 mb, only the fourth monthly increase in the last year according to the IEA. At end-month, OECD stocks were 50 mb below the five-year average. According to OPEC, preliminary data for July showed that total OECD commercial oil stocks rose by 8.1 mb m-o-m to stand at 2830 mb. This was 194 mb lower than the same time one year ago and 43 mb below the latest five-year average. While both organizations report closely aligned data on OECD stocks due to a continuous and reliable data stream and data harmonization efforts, comprehensive data on stock developments for non-oecd countries is still work in progress. See the graphs below for monthly estimates of OECD total commercial oil stocks for 2017 and IEA and OPEC data shows convergence on OECD stock draws Comprehensive non-oecd stock data remains missing Mb 3100 Monthly estimates of OECD total commercial oil stocks for 2017 and Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 IEA (OECD total commercial stocks)* OPEC (OECD total commercial stocks) IEF comparative analysis of IEA and OPEC Monthly Reports on the Oil Market September 2018 IEA and OPEC report closely aligned OECD stock balances Surplus stocks data came down to -50 and -43 mb respectively in July Mb OECD total commercial oil stocks relative to 5-year moving average* five-year average = 0-75 May-15 Aug-15 Nov-15 Feb-16 May-16 Aug-16 Nov-16 Feb-17 May-17 Aug-17 Nov-17 Feb-18 May-18 OPEC (OECD total stocks vs 5-y avg) IEA (OECD total stocks vs 5-y avg) IEF comparative analysis of IEA and OPEC Monthly Reports on the Oil Market September 2018 *monthly estimates rounded to the nearest barrel. COMPARATIVE ANALYSIS OF MONTHLY REPORTS ON THE OIL MARKET RIYADH, SAUDI ARABIA SEPTEMBER

9 3.3.1 GLOBAL STOCK ANALYSIS OECD and JODI non-oecd crude and product inventory data show a 7.4 mb build in July IEA data show OECD inventories grew by 7.9 mb in July to 2824 mb but remain 50 mb below the 5-year average. While the July increase was roughly half of the typical seasonal build, preliminary figures for the US (18.2 mb) and Japan (16.5 mb) indicate a much larger than seasonal build in August. Likewise, OPEC estimates OECD commercial stocks grew to 2830 mb in July (+8.1 mb) to 43 mb below the five-year average. JODI non-oecd* data for July imply crude and product stocks each drew by a marginal 0.6 mb. The largest non-oecd crude draw and product build both occurred in Saudi Arabia (-5.5 mb and +2.6 mb, respectively). Meanwhile, the largest crude build occurred in China (+2.7 mb) and product draw in Nigeria (-3.5 mb). Available global inventory data (see table below) imply global crude + product stocks built by 7.4 mb in July and were driven primarily by massive product builds in the US and South Korea. However, this snapshot of the market is incomplete. While the JODI database has improved the accessibility of non-oecd data, only ~25% of participating non-oecd countries (~20 of 80) have submitted crude and product stock change figures for July. IEA warned things are tightening up in the September OMR. But it is challenging to assess the global market balance quickly and with a high confidence given the incomplete and diverging nature of non-oecd data sources and reporting. * Non-OECD data is the aggregate of country-level data through JODI. Not all non-oecd countries report inventory data and the countries in the aggregate may vary monthly depending on regularity of individual country reporting. Global Inventory Changes July H18 (mb) Crude Products Total Crude Products Total OECD Commercial (IEA) OECD SPR (IEA) Available JODI Non- OECD Data* Singapore Fujairah Total IEA s Implied Global Supply Surplus OPEC s Implied Global Supply Surplus * Aggregate of all non-oecd data available through JODI. Not all non-oecd countries report inventory data and the countries in the aggregate may vary monthly depending on regularity of individual country reporting. Source: IEA, JODI, OPEC, Platts, Rapidan Energy Group COMPARATIVE ANALYSIS OF MONTHLY REPORTS ON THE OIL MARKET RIYADH, SAUDI ARABIA SEPTEMBER

10 COMPARATIVE ANALYSIS OF MONTHLY REPORTS ON THE OIL MARKET RIYADH, SAUDI ARABIA SEPTEMBER