© OECD/IEA 2016

Short and Medium-Term Oil Market Outlook

13th Shanghai Derivatives Market Forum - 25 May 2016

© OECD/IEA 2016

Oil world changed on Nov. 27th 2014

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.

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May 14 Sep 14 Jan 15 May 15 Sep 15 Jan 16 May 16

$/bbl Brent crude oil

Copyright © 2016 Argus Media

© OECD/IEA 2016

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

© OECD/IEA 2016

Demand growth revised upwards in 1Q16

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1Q2014 4Q2014 3Q2015

kb/d Global Oil Demand Growth, y-o-y

Japan China India US Total

© OECD/IEA 2016

Indian demand races ahead

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1Q2015 3Q2015 1Q2016

kb/d Indian Demand Growth, y-o-y

LPG/naphtha FO/other

Gasoil/Jet/Kerosene Gasoline

Total

© OECD/IEA 2016

India takes the lead in oil demand growth

© OECD/IEA 2016

China – slowing growth but still strong

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1Q2014 3Q2014 1Q2015 3Q2015 1Q2016

mb/d Chinese Oil Demand

LPG/naphtha Gasoline

Gasoil Others

Growth (RHS) %

© OECD/IEA 2016

OECD momentum evaporates

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Jan-15 May-15 Sep-15 Jan-16

kb/d OECD Oil Demand Growth, y-o-y

OECD Americas OECD Asia Oceania

OECD Europe total

© OECD/IEA 2016

Outages & low prices take toll on supply

-1.5-1.0-0.50.00.51.01.52.02.53.03.54.04.5

Jan 14 Jun 14 Nov 14 Apr 15 Sep 15 Feb 16

mb/d

Thousands

OPEC and Non-OPEC Oil Supply Year-on-Year Change

OPEC Crude Non-OPEC

OPEC NGLs Total Supply

© OECD/IEA 2016

Non-OPEC supply falling fast

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Other North America Total

Total Non-OPEC Supply, y-o-y Change

© OECD/IEA 2016

US supply growth vanishes

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Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16

mb/d US Crude Supply - Yearly Change

© OECD/IEA 2016

OPEC pumps at robust rate

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Jan 14 Jul 14 Jan 15 Jul 15 Jan 16

mb/d OPEC Growth y-o-y

Other OPEC Iraq Saudi Arabia

Iran OPEC

© OECD/IEA 2016

Iran only major growth in OPEC

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mb/d Iran Crude Supply

© OECD/IEA 2016

OECD stocks draw in February

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mb OECD Total Oil Stocks

Range 2011-2015 Avg 2011-2015

2015 2016

© OECD/IEA 2016

Market heading towards balance

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1Q09 3Q10 1Q12 3Q13 1Q15 3Q16

mb/dmb/d Demand/Supply Balance until 4Q16*

Impl. stock ch.&misc (RHS) Demand Supply*

*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

© OECD/IEA 2016

Oil rallies to 4-month high near $45/bbl

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$/bbl Benchmark Crude Prices

WTI Cushing N. Sea Dated Dubai

Copyright © 2016 Argus Media

© OECD/IEA 2016

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

© OECD/IEA 2016

World oil demand growth slows

Cools from 1.7%/yr in 2009-15 to 1.2%/yr in 2016-2021

2009-15

2015-21

© OECD/IEA, 2016(kb/d)

-179 -76138 52

283

27

164 215

104 155

Americas

Africa

Middle East

Europe

FSU

969826

Asia/Pacific

© OECD/IEA 2016

Non-OECD drives global demand

Despite concerns about slowing Chinese demand, overall non-OECD momentum remains strong

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OECD vs NonOECD Total products

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OECD vs NonOECD Motor Gasoline

© OECD/IEA 2016

Chinese demand growth slips a gear

Economy slows and shifts from industry to services

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Naphtha

Motor Gasoline

Jet & Kerosene

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Residual Fuel

Other Products

y-o-y Growth (RHS)

© OECD/IEA 2016

Indian oil use races ahead

Motorists take to the roads

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Other Products

© OECD/IEA 2016

OECD wanes, after rare growth in 2015

Falling OECD demand trend returns post-2016

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mb/dCumulative Demand Growth

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© OECD/IEA 2016

Rampant US gains ease then reverse

0.3 mb/d gain of 2015, more than halves in 2016

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Residual Fuel

Other Products

y-o-y Growth (RHS)

© OECD/IEA 2016

Upstream oil capex cut for 2nd year

Drop of 17% in 2016 follows 24% reduction in 2015

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2002 2004 2006 2008 2010 2012 2014 2016

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America N America S Europe Australia

Middle East Russia Asia Africa

© OECD/IEA 2016

World supply growth plunges

2015-21 growth slows to 4.1 mb/d vs 11 mb/d in 2009-15

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mb/d

OPEC Non-OPEC

*2014 -15 shows actual output growth. 2016 assumes Iran ramp-up. OPEC capacity increases thereafter.

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OPEC Non-OPEC World

*2014 -15 shows actual output growth. 2016 assumes Iran ramp-up. OPEC capacity increases thereafter.

© OECD/IEA 2016

Non-OPEC supply growth collapses

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Other non-OPEC

China

Latin America

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Other Asia

Europe

OECD Americas

Total

© OECD/IEA 2016

US LTO takes biggest hit for now

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2010 2012 2014 2016 2018 2020

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Bakken Eagle Ford W. Texas Niobrara Other LTO

Output to drop by 800 kb/d over 2016-17

© OECD/IEA 2016

US still the world’s growth engine

Gains in Brazil, Canada; drops in Russia, China

Selected sources of non-OPEC supply change 2015-21

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© OECD/IEA 2016

Post-sanctions Iran leads OPEC gains

Output to rise 1 mb/d to 3.9 mb/d by 2021

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Actual production 2010-15, capacity thereafterActual production 2010-15, capacity thereafter

© OECD/IEA 2016

Middle East dominates OPEC growth

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2016 2017 2018 2019 2020 2021

mb/d

Iran Iraq UAE Other Total OPEC

© OECD/IEA 2016

Surplus erodes in 2017

Tightening market drives price recovery - $80/bbl in 2020?

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2004 2006 2008 2010 2012 2014 2016 2018 2020

mb/dmb/d Global balance

Implied Stock Change World Demand World Supply

© OECD/IEA 2016

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 all-time 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

© OECD/IEA 2016

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Market analysis underpins the IEA’s emergency response mandate

Five-year outlook for supply & demand trends.

Complements short-term OMR and long-term World Energy Outlook analysis.

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