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Commodities Research
24 January 2019

The Blue Drum


Great disturbance in the course
US crude and condensate production is
likely to have ended 2018 around 11.7
mb/d, an exit/exit rate of around 1.7
mb/d. What exit to exit production
growth do you expect by December
2019?
(Click here to take the anonymous survey
and see the results so far. This is a client
survey.)
a) Less than 700 kb/d
b) 0.7-0.9 mb/d
c) 1.0-1.2 mb/d
• The recent price decline and fragile rebound has surely shaken the confidence of the d) 1.3-1.5 mb/d
US E&P industry and puts the onus on the OPEC+ group to execute their cuts. Our FREQUENTLY ASKED QUESTIONS
market balances for 2019 look even tighter now than they did in December as a result.
• Satellites: What do they say about Saudi
We take the opportunity to roll out our 2020 balances: we expect the market to Arabia spare capacity?
remain in slight surplus at $75/b Brent. • Venezuela: Is Maduro’s end near? What
would be the effect on oil prices?
• We still expect Brent and WTI prices to continue to increase in 1H19 since we see the • Physical markers: what can they explain?
inventory situation as far better than the last time cuts started in early 2017, and the
cuts have already begun, as shown in December data. We make small adjustments to COMMODITIES RESEARCH BLUE DRUM
our Q1 and Q2 oil price forecasts, and we widen our Brent-WTI spread forecast. IDEAS
We welcome suggestions on which topics,
• Market risks are skewed to the downside in 1H18, in our view. A well-telegraphed themes or questions readers would like the
undersupply can be offset by the efforts of several key market participants, but there is Barclays Oil Research team to address.
no equivalent mechanism for balancing an unknown and unquantifiable oversupply. Click here to submit your suggestions
anonymously.
• In our FAQ section, we analyze high frequency satellite data for Saudi Arabia’s stocks
and conclude that most of the incremental supply to the market came from the Please note that these surveys are being conducted
by a specialist firm on behalf of Barclays, and it will
wellhead. It reaffirms the extent to which Saudi Arabia can swing its barrels. The not be possible for Barclays Research to identify
situation in Venezuela is also deteriorating quickly but price effects may be muted. individual responses. Individual survey responses
will be maintained in compliance with Barclays
Privacy Policy.
FIGURE 1
We revise our Brent price forecast slightly for the year to $70/b and widen Brent-WTI
Barclays energy price forecasts
2018 2019
2016 2017 Q1 Q2 Q3 Q4 2018 Q1 Q2 Q3 Q4 2019 2020 2025 Michael Cohen
Brent 45 55 67 75 76 69 72 65 73 70 73 70 75 80 +1 212 526 3606
WTI 43 51 63 68 69 59 65 55 65 63 66 62 68
michael.d.cohen@barclays.com
WTI-Brent 1.7 -3.9 -4.3 -7.1 -6.4 -9.3 -6.8 -10.0 -8.0 -7.0 -7.5 -8.1 -7.0
Henry Hub 2.49 2.96 3.09 2.83 2.92 3.77 3.15 3.51 2.67 2.74 2.78 2.93 3.06 BCI, US
Brent (vs curve) 4 11 8 9 14 20
Brent (vs consensus) 2 5 0 3 5 n/a
WTI (vs curve) 2 11 8 8 13
www.barclays.com
WTI (vs consensus) -1 5 1 1 5
Previous (Brent, Dec 2018) 75 72 71 75 70 73 72 75 80

Source: Bloomberg (consensus estimates as of 23 Jan), Barclays Research

PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES STARTING AFTER PAGE 51
Barclays | The Blue Drum

CONTENTS
Overview .............................................................................................................. 3

Answers to this month’s key questions ....................................................... 8

Market balances and key changes ..............................................................12

Chartbook ..........................................................................................................17

Prices ..................................................................................................................47

Oil price forecasts ............................................................................................51

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Barclays | The Blue Drum

OVERVIEW

A great disturbance in the course


“The illusion that we understand the past fosters overconfidence in our ability to predict
the future.” – Daniel Kahneman, Thinking, Fast and Slow

The course of the oil market took a sharp turn for the worse at the end of 2018 but has
since rebounded. We see Brent prices improving to $70/b in 2019 and to $75/b in 2020
as the market weighs inventory drawdown against the prospect of macroeconomic
slowdown. As Figure 1 shows, inventories look set to remain below the five-year
average this year. In our view, while a well-telegraphed undersupply can be offset by
the efforts of several key market participants, there is no equivalent mechanism for
balancing an unknown and unquantifiable oversupply. The onus in meeting this
challenge is on OPEC+, especially Saudi Arabia, but we believe they will succeed.

Not the price levels you were looking for


The authoring analyst would It took OPEC producers 18 months to 4Q18 to get inventories back in line with the five-year
like to thank Amarpreet Singh average. They overshot their inventory target thanks to other outages and have now
for his assistance with the overshot their unstated price floor by ramping up output too high and too fast – it seems
preparation of this report key producers decided to ramp up output without sufficient certainty the US would not
provide waivers and despite signs the physical market was not following the move to $85.
They must now suffer the consequences: such is the state of the market in the age of shale.

They and we market observers ought to take three lessons from this experience for the
path of prices in 2019. First, it is bound to happen again. OPEC may even have scheduled
their March and April meetings for this very reason: ie, waiting until January data was
available before confirming whether to keep cuts in place for the rest of 2019. Second, as
we noted in the past the market balance remains prone to sharp revisions (see The Blue
Drum: A Potemkin Balance, July 2015). As shown in Figure 2 below, EIA’s estimate for the
4Q18 market surplus size shows a significant upward revision since the summer. So
targeting a balanced market by adjusting supply in current time risks either over- or under-
producing, depending on where non-OPEC supply and demand are and will be.

FIGURE 2 FIGURE 3
Inventories look set to remain below the five-year average EIA’s 4Q18 balance has evolved by 1.4mb/d from a 0.4mb/d
this year supporting prices deficit to a 1.0mb/d surplus.
OECD industry petroleum stock levels EIA Stock Change Estimate
3.2 400 1.2
1.0
300 0.8
3.0
0.6
200
0.4
2.8 100 0.2
0.0
0
-0.2
2.6 vs 5-yr. avg. (mb, rhs)
Stock Level (bn b) -0.4
-100
Stock Level Fcst (bn b) -0.6
Prior 5-year avg (bn b)
2.4 -200 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19
Jan-13 Jan-15 Jan-17 Jan-19 EIA 4Q18 EIA 2019
Source: IEA, Barclays Research Source: EIA STEO. Note IEA’s 4Q18 balance is also showing a 1.1mb/d build.

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Barclays | The Blue Drum

Third, we have yet to truly understand the elasticity of US tight oil supply and global
demand. OPEC+ should have learned to avoid two price dynamics it experienced in 2018: a
calendar 2020 WTI price that averaged above $60/b for three months in 2H18, spurring
supply; and a prompt price above $75-80 Brent, creating headwinds to global growth. Given
this knowledge, it may suit OPEC+ to slow any price rally until the earnings season is
through. By keeping WTI under $55 they can keep pressure on 2019 spending plans, at
least for small, medium and private producers and at best for larger E&P companies.

A quick rebound above $70 Brent now looks unlikely in 1Q19


We think there is more risk of a downside price move from demand-related issues and
US supply-related outperformance than the risk of bullishness related to sharp OPEC
supply cuts. With the lower start to the year, we rebase our price expectations in 2019 with
a downward revision in Q1 from $71 to $65. OPEC has more than telegraphed its intent to
bring supply down further, yet OECD inventory data will not be available in March, and we
think US inventory data is likely to remain too noisy with refining turnarounds to give
market participants much conviction that cuts in Saudi, Kuwaiti and Iraqi exports to the US
have entirely offset the decline in runs. We think they will have, but that data may not show
it until late March or April. So, barring a sharp deceleration in output in Venezuela and
Nigeria – both possibilities but not our base case – we think it is hard to see a sustainable
price rally above the $65 Brent range in 1Q.

On the demand side, it is likely to get worse before it gets better, and such sentiment may
weigh on markets all the way through Q2 as well. Our global economics team maintains its
3.7% forecast growth rate for the year, the same level as in November (prior to data
showing the economy is slowing). And in China our economists continue to flag downside
risks for their 6.2% real GDP growth forecast in 2019. Their BACA credit impulse (Figure 4)
correlates well with the Li Keqiang index (including rail freight and electricity consumption),
suggesting that the first half of the year will be subject to further downward pressure,
although recently released data show some green shoots (see China: December domestic
demand stabilises at low level, 20 January).

Our analysis shows that China’s total oil demand growth slows by 0.6% for every 1%
reduction in its PPP GDP growth. Macro drivers vary greatly on a product level. While real
GDP growth, retail prices and passenger car sales (plus a small but rapidly growing share of
electric vehicles) affect gasoline demand, diesel demand is more influenced by industrial

FIGURE 4 FIGURE 5
WTI spreads continue to weaken while Brent spreads are China credit impulse signaling further weakness ahead but
now stronger than pre-Nov 2018 then a rebound

Brent WTI 14% Fcst 15.0%


90 1.50
Brent 1-2 WTI 1-2
12%
10.0%
80 1.00 10%
While Brent
8% 5.0%
70 spreads stabilized, 0.50 8.4%
WTI has not
6% 0.0%
60 0.00
4%
-5.0%
50 Brent and WTI spreads did not -0.50 2%
support the upward price move
0% -10.0%
40 -1.00 Jan-12 Jul-13 Jan-15 Jul-16 Jan-18 Jul-19
Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 LKQ index (LHS) BACA Impulse (-6m lag)
Source: Bloomberg, Barclays Research Source: WIND, Barclays Economics Research

24 January 2019 4
Barclays | The Blue Drum

output growth, which has slowed significantly recently. We currently peg China’s 2019
demand growth at 440 kb/d, slightly higher than before due to a methodology update with
the availability of fuel-level trade and stock data, but risks are skewed to the downside.

OPEC Strikes Back: Bullish for the balance of 2019


We see Brent prices averaging $70/b and WTI at $62/b in 2019, around $8/b above
Brent strip prices. Despite our Q1 downward price forecast revision, we make only minor
adjustments for the balance of the year. In our view, the inventory situation remains
conducive to a rebound (we show a 0.5 mb/d draw in Q1). The market is not swimming in
400mb of excess petroleum inventories vs the five-year average, as it was in 2015 (Figure
1). Rather the excess in November was around 40mb. In order to mitigate price downside,
Saudi Arabia’s leadership has expressed that it is willing to export crude and product
volumes to and from areas of excess and with different types depending on the demand –
we think it is capable of doing so.

Also, earnings season starts in the next few weeks, and we think this could be a
constructive signal to the market. Our equity research analysts have coverage for more
than 2mb/d of US supply (see North America Oil & Gas E&P, 16 January 2018), and they
expect these companies to show growth of around 17% in 2019 at strip pricing (~$50/b
WTI), with most companies looking unlikely to change production plans for 2019. The
larger the producer, the less likely they will be to change their production guidance or
spending, in our view.

Though the majors and large cap E&Ps may still grow production significantly by the end
of 2019, oilfield service customers significantly lowered activity levels or completely shut
down. That means that the rest of the companies’ production profiles are highly exposed to
lower end-of-2019 outcomes than assumed. Completions were down 15% q/q in 4Q18
after growing by an average of 5% q/q in 2018 according to our oilfield services research
analysts. They expect completion activity to stay flat in 1Q19. Both SLB and HAL showed
heavy losses in pressure pumping, driving their N. America revenue down more than 10%.
Both are talking about stacking equipment instead of performing work at unreasonably low
pricing levels. As a result, we have lowered our 2019 annual US crude and condensate
production growth forecast by 200 kb/d to 1.0 mb/d (our exit/exit growth forecast is
estimated at 770 kb/d, EIA estimates 520 kb/d).
The physical market is beginning to adjust. Three physical indicators are faring better in
January than in December. Brent front month timespreads dipped into contango for two

FIGURE 6
Iran’s export revenues and volumes have fallen to a new low in January
Iran exports and key sanctions dates
3.0 Exports, mb/d (LHS) Exports, $B/m (RHS) 12
Jan 2012: First full month of NDAA implementation
2.5 March: EU For. Ministers agree to enforce
10
ban on import of Iranian crude and products
2.0 July : EU P&I Club
8
grace period expires May 2018: US withdraws
1.5 from JCPOA, reimposes 6
sanctions
1.0 4

0.5 Oct: EU prohibits storing Jan. 2014: P5+1 2


on EU tanker and blacklists Joint Plan of Action Jan. 2016: Iran reaches
oil-related entities goes in to effect implementation day
0.0 0
Jan-11 Nov-11 Sep-12 Jul-13 May-14 Mar-15 Jan-16 Nov-16 Sep-17 Jul-18
Source: Petrologistics, Bloomberg (for OPEC basket price), Barclays Research

24 January 2019 5
Barclays | The Blue Drum

months (November and December) but have returned to backwardation and substantially
strengthened in the past five trading days (Figure 3). The strength in Forties (vs Brent) has
also helped. Also, Brent-Dubai spreads, a good marker for OPEC’s cuts, have improved on
average in January. A fire at the Priobskoye field in Russia, a new downturn in Libyan output,
delays in the Turkish straits, concerns over Venezuela and lower-than-expected OPEC
exports overall have provided some physical support. Saudi exports to the US are also
strengthening US gulf coast grades, which have now moved to an even greater premium
given concerns over Venezuela.

FIGURE 7
The Trump administration clarifies its Iran sanctions policy: “No new waivers”

US Director of Policy Planning Brian Hook on Iran Sanctions Waivers


“We are not looking to grant any waivers or exceptions to the import of Iranian crude…
The Saudis were very helpful. Khalid al Falih did a terrific job increasing production to
ensure a well-supplied oil market. All I can say is that we believe that … certainly when
we have a better supplied oil market then that puts us in a much better climate to
accelerate the path to zero.”1

“We are not looking to grant any new waivers. That's been our policy from the beginning.
The only reason that we had to grant waivers the last time… and it was just to a
handful… we only granted waivers to eight… three of those eight are no longer
importing Iranian crude. We have been consistent from the time we got out of the deal
that we want to get to zero imports of Iranian crude and that involves a lot of geopolitics
whenever you look at that. We're not looking to grant any new waivers.”2

Source: Bloomberg, CNBC (see footnotes below)

Iranian supplies to the market are likely to decline further in 2019. Iranian exports are
around 900kb/d and some 40% below April 2018 levels, according to Petrologistics data.
Its export revenues and levels have reached record lows, based on preliminary data for
December. Despite the Trump administration’s provision of significant reduction
exemptions (SRE), Iranian production and exports have not increased at all since the Trump
administration provided waivers. The provision of exemptions, in our view, was a catalyst
contributing to the sharp decline in oil prices in Q4 18 as market participants digested the
view that Iranian disruptions were overblown. Now the market may be forced to backtrack
since exports and production have not improved.

The Trump administration seems unlikely to grant waivers to new countries and is likely
to scale back existing waivers, based on statements made by US State Dept official Brian
Hook at a recent conference in the UAE (see box above). But the decision is a judgment call,
sanctions elsewhere and other trade policy issues will influence their decision. Also, if prices
exceed $75 Brent, a level that led to more frequent tweets from President Trump on oil
prices, the administration may no longer see the market as “better supplied” and not require
as much reduction in imports for existing waiver holders.

Furthermore, we expect Iran sanctions and instability in the Middle East to continue to
fuel bullish market sentiment this quarter for a couple reasons. On Iran specifically, we
expect Iranian patience with Europe’s promised special purpose vehicle to facilitate trade is
wearing thin as its oil export revenues collapse. The secretary of Iran’s Supreme National

1 ttps://www.cnbc.com/video/2019/01/14/not-looking-to-grant-waivers-to-import-of-iran-crude-us-
representative.html
2 https://www.bloomberg.com/news/videos/2019-01-13/u-s-won-t-grant-new-waivers-to-iran-brian-hook-says-

video

24 January 2019 6
Barclays | The Blue Drum

Security Council, Ali Shamkhani, reportedly said the opportunity for Europe to execute its
commitments to Iran under the JCPOA, and particularly the special financial channel, has
ended (“Iran National Security Advisor says Europe Missed Chance…”, Al Monitor, 9 January
2018). Also, the WSJ reported that National Security Advisor John Bolton recently
considered strike options against Iran (“White House Sought Options to Strike Iran”, 13 Jan).
This should not be too much of a surprise given past Bolton opinion pieces including “To
Stop Iran’s Bomb, Bomb Iran” (NYTimes, March 26, 2015). Even if the US is not seriously
considering such an action, we believe this news as well as further economic pressure is
likely to escalate tensions, further reduce Iran’s willingness to negotiate, and reduce its risk-
aversion to the use of its own force in the region.

Chance of a widening Brent-WTI spread in 2019


Finally, we have adjusted downward our WTI price forecast in 2019 due to limitations on
two way traffic in the Port of Houston where container ships are limiting the full time use of
the port in two-way mode. Producers and midstream have formed a consortium to address
the bottlenecks, but whatever solution is proposed may not be completed soon enough to
address the continued rise in exports. We also see a temporary lack of ample exit capacity
from Cushing as production in the SCOOP/STACK builds and the 90-kb/d Cimarron Express
line starts up which will connect the basin to Cushing and add to inflows. Use of drag
reducing agents on the Seaway line, exiting Cushing, should open 100 kb/d in January and
diversion of one of the White Cliffs lines inbound from crude to NGL service should reduce
inflows.3 Though we see the risk of a blowout increasing, we see the highest risk
concentrated in late Q1 and early Q2 when the product stock levels might encourage US
refinery run cuts and when planned Permian to USGC pipelines are not yet complete.

Patience you must have


Clearly, the market balance flipped far into surplus in 4Q18, in part due to
misunderstanding US policy and output. It would be rational to conclude that getting our
balances right would be a good price predictor. However, we think that would be the wrong
lesson, since everything makes sense in hindsight. Perhaps the right lesson is that Saudi
Arabia and Russia have significant leverage to mitigate price swings and have learned to
avoid an $85/b Brent price since such levels create disturbances in the oil market outlook.

The last six months have forced the market to consider the elasticity of surplus and surge
capacity, stocks and US tight oil to balance undersupply. The next six months, we believe,
will force the market to consider the elasticity of levers to balance a market veering towards
oversupply. In our view, while a well-telegraphed undersupply can be offset by the efforts of
several key market participants, there is no equivalent mechanism for balancing an
unknown and unquantifiable oversupply. The onus is on OPEC+, especially Saudi Arabia, in
meeting this challenge, and their work has already begun.

3See our MLP team’s recently published 4Q18 Preview: The Crude Push and Pull (16 Jan 2019) in which they highlight
these developments.

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Barclays | The Blue Drum

ANSWERS TO THIS MONTH’S KEY QUESTIONS

• What does satellite data tell us about Saudi spare capacity?


Saudi Arabia increased its oil supply to over 11mb/d last year in preparation for US
sanctions on Iranian crude. However, satellite data provided by Ursa Space shows very
little decline in storage between June and November last year, while JODI data shows the
equivalent of a 170kb/d drawdown in storage over the same period. The discrepancy
between the two sources is likely because Ursa data does not cover oil storage held by
Saudi Arabia internationally, which means it could provide these incremental volumes
by barely dipping into domestic stockpiles. This should put to rest any concerns around
Saudi Arabia’s ability to provide incremental supplies to the market on short notice.

• Would new Venezuela sanctions increase prices?


In 2017, we estimated that a sharp and long disruption in Venezuela could trigger an
increase in oil prices of $5-7/b (see Venezuela sanctions: A game of Jenga, July 27,
2017); however, market conditions now are different. We do not dismiss the possible
impact of a serious oil supply disruption since Venezuela’s oil cannot be replaced
overnight one-for-one by US light tight oil, Arabian light or other grades. Still, we
think the price impact of such a disruption would be less now than it would have been
in the past six months or 2017 this is because the OPEC+’s recent policy to cut supply
has given it an extra 1mb/d capacity and the days forward cover situation is better
than when inventories were forecast to draw sharply in 2018. That said, while the
impact on Brent or WTI prices of an embargo may be muted, we think a disruption
would be far more likely to benefit competing sour grades in the Gulf Coast.

• Is the physical market helping to explain recent price moves?


Most respondents to our survey question last month around the primary reason for the
sharp fall in oil prices in Q4 attributed it to weakness in the global macro outlook and
the provision of waivers for Iranian crude imports. Movements in physical market
indicators like Brent time spreads and the Brent-Dubai spread suggest some respite
from these concerns as the incentive to ship crude to Asia is increasing again and the
Brent term structure is reflecting tightness in physical markets. These indicators point to
further upside in oil prices over the short term, in our view.

US crude and condensate production is likely to have ended 2018


around 11.7mb/d, an exit/exit rate of around 1.7mb/d. What exit
to exit production growth do you expect by December 2019?
(Click here to take the anonymous survey and see the results so far. This is a client survey.)
1. Less than 700kb/d
2. 0.7-0.9mb/d
3. 1.0-1.2mb/d
4. 1.3-1.5mb/d

Commodities Research Blue Drum Ideas


We welcome suggestions on the topics, themes or questions that readers would like the
Barclays Oil Research Team to address.
Click here to submit your suggestions anonymously.

24 January 2019 8
Barclays | The Blue Drum

What does satellite data tell us about Saudi spare capacity?


Rewind four months and many bullish market observers we met with were confident that
Saudi Arabia could not go above 10.6 mb/d. With hindsight, it is clear that Saudi Arabia
provided around 11.0 mb/d to the market. Its decision to produce these levels as the
administration provided sanctions waivers was a primary contributor to the recent price
decline. Saudi Arabian government officials told Bloomberg at the OPEC meeting in Vienna
that they produced 11.1 mb/d and supplied 11.3 mb/d to the market. Satellite data for
Saudi Arabia provided by Ursa Space, however, shows very little decline in storage on a
monthly average basis, while JODI data shows the equivalent of a 170 kb/d drawdown in
storage from June to November.

Why is there such a big discrepancy? First, Ursa Space covers three terminals: Ras Tanura,
Yanbu and Khafji, where storage levels in combination have averaged 65-70mb over the last
year. Stock levels that Saudi Arabia reports to OPEC and to the Joint Oil Data Initiative (JODI)
are assessed at around 230 mb during the same period. Some of this storage is actually held
in key regions around the world, and the country has recently increased its storage capacity
in Japan, where its storable volumes are roughly 8.2 mb. With downstream operations in
China, Malaysia, Indonesia, and South Korea through JVs and other partnerships, Aramco
likely has access to storage volumes in these locations as well. Outside Asia, Aramco has
access to storage use at Fujairah in the UAE, at Europoort in Rotterdam, and with Motiva in
the US, which probably accounts for most of the difference between the satellite coverage
in Saudi Arabia and its reporting to JODI.

Despite Ursa’s small sample size it remains a relevant sanity check on how Saudi Arabia
is meeting the demand for its crude. First, the lack of dramatic change in storage volumes
and the minimal change in JODI data shows that the country was able to ramp up wellhead
supply without large drawdowns in its foreign held storage volumes. Second, Saudi Arabia
was able to provide these incremental volumes by barely dipping into domestic stockpiles,
which still account for 30% of the storage volumes it reports to JODI. That gave customers
quicker access to those volumes. Finally, Saudi Arabia increased crude exports by almost
1.2 mb/d from July to November with barely a blip in domestic storage and the equivalent
of only 170 kb/d from foreign stored volumes. Therefore, Saudi Arabia’s alleged inability to
provide incremental supplies to the market is a poor reason to be bullish on prices.

FIGURE 8 FIGURE 9
Satellite data showed a sharp but relatively small stock draw Aramco’s stocks ex-Saudi bore the brunt of the drawdown,
in October-November but overall stocks remain level though this pales in comparison with the increase in exports

Ursa Space Saudi Domestic Stock Change Saudi Inventories and Crude Exports
12 -35 8500
(Index=June 7, 2018), mb JODI data implies a
10 -30
draw of almost 30
8000
8 -25 mb since June

6 -20 7500
4 -15
-10 But Ursa shows only a small 7000
2
change from domestic
0 -5 storage 6500
-2 0

-4 5 6000
Jan-18 Apr-18 Jul-18 Oct-18 Jan-19
-6
JODI stock change, LHS Ursa stock change, LHS
Jun-18 Aug-18 Oct-18 Dec-18
Exports, RHS (Petrologistics)
Source: Ursa Space Systems Source: JODI, Ursa Space Systems, Petrologistics, Barclays Research

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Barclays | The Blue Drum

Would new Venezuela sanctions increase prices?


In Venezuela: Credible Threat (18 January 2018) we warned of a meaningful escalation of
pressure to try to restore democratic order in Venezuela. We believe any US actions would
have lower costs for it now, which makes its threats to the Maduro regime more credible.
Options that remain on the table include a restriction on imports of diluent from the US to
Venezuela or a full oil embargo on Venezuela’s exports to the US. A new alternative could be
the recognition of an alternative government to Maduro’s, which could allow the
international community to freeze and divert assets and revenues including proceeds from
oil exports. While US exposure to Venezuela has declined, Venezuela’s concentration in the
US market has actually increased. Most of the 120k b/d of diluents and other products that
Venezuela imports comes from the US, and it is sending 500-600 kb/d to the US, about
75% of its total cash-generating exports.

In 2017, we estimated that a sharp and long disruption in Venezuela could trigger an
increase in oil prices of $5-7/b (see Venezuela sanctions: A game of Jenga, July 27, 2017);
however, market conditions now are different. We do not dismiss the possible impact of a
serious oil supply disruption. Venezuela’s oil cannot be replaced one for one with US light
tight oil, Arabian light, or other grades overnight. Still, we think that such a development
would have less of a price effect than it might have had in the past six months or in 2017, a
critical reason why the Trump administration can take a harsher approach.

Although it is clear that a major disruption in Venezuela’s oil flow could be ahead, the oil
market may ignore the possible physical effect in the short term. Despite the recent sharp
production decline, Venezuela is still producing about 1.5mn b/d, according to OPEC
figures, of which nearly 1.2mn b/d are exported. Secondary sources, including the IEA and
Petrologistics, estimate production of 1.25-1.45 mb/d, respectively (Figure 1). With OPEC+’s
recent policy to cut supply, the group has given itself an extra 1 mb/d capacity and the days
forward cover situation is better than when inventories were forecast to draw sharply in
2018. That said, although the Brent or WTI price effect of an embargo may be muted by
such factors, such a disruption is far more likely to benefit competing sour grades in the gulf
coast. The reduction in Saudi exports to the US Gulf Coast would likely exacerbate such a
trend, with benefits to WCS, Mars, and other Lat Am grades.

FIGURE 10
Sanctions could reaccelerate the production decline
2.6

2.4

2.2

2.0

1.8

1.6

1.4

1.2

1.0

0.8
Jan-16 May-16 Sep-16 Jan-17 May-17 Sep-17 Jan-18 May-18 Sep-18
Upgraded Crude Oil Exports Crude Oil Exports
Petrologistics Production IEA Production

Source: Petro-logistics, IEA, Barclays Research

24 January 2019 10
Barclays | The Blue Drum

Is the physical market helping explain recent price moves?


We polled our readership last month to try to assess what the primary causes were of the
price decline. Take the survey for this month by clicking on the link on the front page. The
results below indicate that more than 60% of the respondents believed that the weakening
global macro outlook and Iranian crude-import waivers were behind the downward move.

In our view, physical market indicators such as OPEC export levels and differentials to
benchmark grades would have helped explain the move as well. First, the Brent-Dubai
spread tracked the downward move in prices from the beginning of October. One
explanation is that as Saudi Arabia moved its output to 11 mb/d, the incentive to move
more oil east began to fade. Since the end of December, that spread has increased again,
signalling that OPEC’s cuts are beginning to have an effect. Second, the spread between
Forties and Dated Brent and Brent time spreads also declined quite dramatically. Field starts
played a role in these fluctuations, but based on these indicators’ recent uptrend, we believe
prices are likely to increase further.

FIGURE 11
Brent spreads, Brent-Dubai, and Forties differentials are tracking Brent futures prices
4 90

80
3

70
2
60
1
50

0
40

-1 30
Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19

Brent (1-2) Spread Brent-Dubai Forties Diff to Brent CO1 Comdty (RHS)

Source: Bloomberg, Platts, Barclays Research

FIGURE 12 FIGURE 13
Survey results suggest Iran and macro issues drove oil’s fall OPEC’s exports have fallen 1.5 mb/d since December

Swap dealer negative gamma Brent time spread, Brent-Dubai, and OPEC
effects Exports
-1 23.5
Weakening global
macroeconomic outlook 23.0
0

Higher-than-expected US tight 22.5


oil growth 1
22.0
Provision of waivers for Iranian 2 As OPEC's exports fall, 21.5
crude imports Brentt-Dubai and Brent 1-2
3 spreads should strengthen 21.0
None of the above Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19
Brent (1-2) Spread
Brent-Dubai
0% 10% 20% 30% 40% 50% OPEC ME+AFR Exports (RHS)
Source: Barclays Research Source: Petro-Logistics, Bloomberg, Barclays Research

24 January 2019 11
Barclays | The Blue Drum

MARKET BALANCES AND KEY CHANGES


• Our 2019 balance outlook has changed from a surplus of 0.2mb/d, as published in the
last Blue Drum (see The Blue Drum: Wait for it, 14 December 2018), on average to a
deficit of 0.2mb/d for the full year. This is largely driven by lower US tight oil supply
growth and higher demand growth estimates, primarily due to lower input prices.

• Non-OPEC supply grew almost 2.5mb/d in 2018, far above consensus and our
expectations from early 2018, and beat even the 2.3mb/d in 2014. Furthermore, growth
from L48 onshore accounted for 60% of non-OPEC supply growth vs 50% in 2014.

• We introduce our 2020 forecasts in this edition of the Blue Drum. We see non-OPEC
supply growth of 1.7mb/d in 2019 and 1.6mb/d in 2020, with most growth in the US. We
estimate ex-US non-OPEC growth totals 360kb/d in 2019 and 170kb/d in 2020.

• We have reduced our 2019 estimate for US tight oil by roughly 200kb/d due to a lower
WTI price assumption in the first half of the year and a reduction in pressure pumping
activity. We see exit to exit production (18-19) of roughly 700kb/d.

• Total’s Egina field in Nigeria started in early January and will ramp quickly to around
200kb/d. According to Argus, loadings are forecast for next month at around 160kb/d.
The field produces 27.5 API and 0.17% sulfur, which should have high yields of distillates
just in time for IMO implementation.

• In Norway, further guidance was issued on the start-up of the gigantic Johan Sverdrup
field, which is now expected to start in November and ramp to around 300-400kb/d.

• On the demand side, we have increased our 2019 full-year growth forecast by 160kb/d,
primarily due to a lower input price assumption for the first quarter. We now expect
global oil demand to grow 1.45mb/d y/y this year, led by China (up 0.44mb/d y/y), the
US (up 0.36mb/d y/y) and India (up 0.25mb/d y/y).

• We raise our demand growth estimate for China slightly to 0.44mb/d (vs 0.38mb/d in
December), primarily due to lower input price assumptions and methodology changes to
incorporate product-level trade and stock data. Our demand growth estimates for the US
and India are largely unchanged.

• In India, we expect declining petroleum coke consumption (because of a ban on imports


for use as a fuel due to environmental concerns) to largely offset the boost in gasoline
demand from lower retail prices.

• Similarly, in the US, the ongoing government shutdown is expected to weigh significantly
on GDP growth according to our economists. We expect this to largely offset the positive
effect of lower retail gas prices on gasoline demand.

FIGURE 14
Main changes to Barclays global crude oil market balance forecasts since November (mb/d)
A nnua l A nnua l A nnua l
B a rc la y s 2017 Cha nge Q118 Q218 Q318 Q418 2018 Cha nge Q119 Q219 Q319 Q419 2019 Cha nge
Demand 0.08 - 0.08 0.17 0.09 0.15 0.12 0.04 0.53 -0.09 -0.09 0.28 0.16 0.03
OECD demand - - - 0.03 -0.01 -0.10 -0.02 -0.02 - -0.01 - -0.02 -0.01 0.01
non-OECD demand 0.08 - 0.08 0.14 0.11 0.25 0.14 0.06 0.54 -0.08 -0.09 0.30 0.17 0.02
Non-OPEC supply 1.93 -0.05 1.91 1.93 1.94 2.36 2.04 0.11 2.12 2.03 1.89 1.80 1.96 -0.08
non-OPEC excl. OECD Am. 1.93 -0.05 1.94 1.97 2.00 2.22 2.03 0.11 2.26 2.22 2.18 2.08 2.19 0.15
OECD Americas - - -0.03 -0.04 -0.05 0.14 - - -0.15 -0.19 -0.29 -0.28 -0.23 -0.23
OPEC NGLs/condensates -1.24 -0.04 -1.25 -1.25 -1.26 -1.27 -1.26 -0.02 -1.35 -1.35 -1.35 -1.35 -1.35 -0.09
Call on OPEC crude+stocks -0.61 0.09 -0.58 -0.51 -0.59 -0.94 -0.66 -0.05 -0.24 -0.77 -0.64 -0.17 -0.46 0.20
OPEC crude -0.61 -0.61 -0.60 -0.61 -0.60 -0.78 -0.65 -0.04 -0.73 -0.83 -0.96 -0.86 -0.85 -0.20
Stockbuild & Misc. to Balance - - -0.02 -0.10 -0.01 0.16 - - -0.49 -0.06 -0.33 -0.69 -0.39 -
Source: Barclays Research

24 January 2019 12
Barclays | The Blue Drum

FIGURE 15
Oil market balances from four sources (mb/d)
A nnua l A nnua l A nnua l
B a rc la y s 2018 Cha nge Q119 Q219 Q319 Q419 2019 Cha nge Q120 Q220 Q320 Q420 2020 Cha nge
Demand 99.4 1.4 100.3 100.2 101.2 101.8 100.9 1.5 101.9 101.8 102.6 103.2 102.4 1.5
OECD demand 47.9 0.5 48.6 47.6 48.4 49.1 48.4 0.5 48.9 48.0 48.7 49.3 48.7 0.3
non-OECD demand 51.5 0.8 51.7 52.6 52.7 52.7 52.5 1.0 52.9 53.8 53.9 53.9 53.7 1.2
Non-OPEC supply 62.3 2.5 62.8 63.8 64.6 64.6 64.0 1.7 64.2 65.4 66.2 66.3 65.5 1.6
non-OPEC excl. OECD Am. 39.8 0.2 39.8 40.3 40.6 40.3 40.2 0.4 39.6 40.4 40.8 40.6 40.3 0.1
OECD Americas 22.5 2.2 23.0 23.5 24.0 24.4 23.7 1.2 24.6 25.0 25.5 25.7 25.2 1.5
OPEC NGLs/condensates 5.6 -0.0 5.7 5.7 5.7 5.7 5.7 0.0 5.6 5.6 5.6 5.6 5.6 -0.1
Call on OPEC crude+stocks 31.5 -1.1 31.8 30.7 30.9 31.5 31.2 -0.3 32.1 30.8 30.8 31.3 31.2 0.0
OPEC crude 31.9 -0.1 31.1 30.9 31.1 30.9 31.0 -0.9 31.3 31.3 31.5 31.6 31.4 0.4
Stockbuild & Misc. to Balance 0.4 -0.8 0.2 0.2 -0.5 -0.2 -0.8 0.5 0.8 0.3 0.2
Of which OECD Stockbuilds

A nnua l A nnua l
IE A 2018 Cha nge Q119 Q219 Q319 Q419 2019 Cha nge
Demand 99.2 1.3 99.5 100.4 101.3 101.4 100.7 1.4
OECD demand 47.8 0.4 47.8 47.7 48.4 48.4 48.1 0.3
non-OECD demand 51.4 0.9 51.6 52.7 52.9 53.0 52.6 1.2
Non-OPEC supply 60.5 2.6 61.1 61.8 62.7 62.8 62.1 1.6
non-OPEC excl. OECD Am. 37.8 0.2 37.7 38.1 38.6 38.7 38.3 0.5
OECD Americas 22.7 2.4 23.4 23.7 24.1 24.1 23.8 1.2
OPEC NGLs/condensates 6.9 0.1 7.0 7.0 7.0 7.0 7.0 0.0
Call on OPEC crude+stocks 31.8 -1.4 31.4 31.7 31.6 31.6 31.6 -0.2
OPEC crude 32.5
Stockbuild & Misc. to Balance 0.7

A nnua l A nnua l
OPE C 2018 Cha nge Q119 Q219 Q319 Q419 2019 Cha nge
Demand 98.8 1.5 99.1 99.3 100.7 101.3 100.1 1.3
OECD demand 47.9 0.5 48.0 47.4 48.4 48.6 48.1 0.3
non-OECD demand 50.9 1.1 51.1 51.8 52.2 52.6 52.0 1.0
Non-OPEC supply 62.1 2.6 63.3 63.1 64.3 65.8 64.2 2.1
non-OPEC excl. OECD Am. 38.2 0.2 38.7 38.3 38.7 39.3 38.8 0.6
OECD Americas 23.9 2.4 24.6 24.8 25.6 26.5 25.4 1.5
OPEC NGLs+ non-conv. oil 5.0 0.1 5.1 5.1 5.1 5.1 5.1 0.1
Call on OPEC crude+stocks 31.7 -1.2 30.7 31.1 31.3 30.4 30.8 -0.9
OPEC crude 31.9
Stockbuild & Misc. to Balance 0.2

A nnua l A nnua l A nnua l


US E IA 2018 Cha nge Q119 Q219 Q319 Q419 2019 Cha nge Q120 Q220 Q320 Q420 2020 Cha nge
Demand 100.0 1.4 100.7 101.1 102.2 102.2 101.5 1.5 102.1 102.6 103.8 103.8 103.1 1.5
OECD demand 47.6 0.4 48.0 47.4 48.4 48.4 48.1 0.4 48.3 47.7 48.8 48.7 48.4 0.3
non-OECD demand 52.4 1.1 52.7 53.7 53.8 53.8 53.5 1.1 53.9 54.9 54.9 55.0 54.7 1.2
Non-OPEC supply 63.2 2.5 64.5 65.5 65.9 66.3 65.5 2.4 66.4 67.5 67.8 68.2 67.4 1.9
non-OPEC excl. OECD Am. 38.0 0.1 38.2 38.7 39.0 39.0 38.7 0.8 38.7 39.4 39.5 39.4 39.2 0.5
OECD Americas 25.2 2.3 26.3 26.8 26.9 27.3 26.8 1.6 27.6 28.1 28.3 28.8 28.2 1.4
OPEC NGLs/condensates 5.3 0.1 5.4 5.4 5.3 5.3 5.4 0.0 5.2 5.2 5.1 5.1 5.2 -0.2
Call on OPEC crude+stocks 31.5 -1.1 30.8 30.2 31.0 30.6 30.7 -0.9 30.6 30.0 30.9 30.5 30.5 -0.2
OPEC crude 31.9 -0.1 30.9 30.8 31.0 30.8 30.9 -1.0 30.8 30.9 31.1 30.8 30.9 0.0
Stockbuild & Misc. to Balance 0.4 0.1 0.6 0.1 0.1 0.2 0.2 0.9 0.2 0.4 0.4
Note: Barclays forecasts for OPEC output do not include Indonesia. This will be included in OPEC crude numbers once the country begins reporting its production to
OPEC. Agency numbers come from the latest monthly reports. The IEA and OPEC do not project OPEC crude output. In all numbers, refinery gain is included as part of
non-OPEC supply excluding the FSU. Source: IEA, OPEC, EIA, Barclays Research

24 January 2019 13
Barclays | The Blue Drum

FIGURE 16
Demand forecasts and projected annual changes (mb/d)
B a rc la y s E stima te s 2018 Cha nge s 2019 Cha nge s 2020 Cha nge s
2017 2018 2019 2020 B a rc la y s IE A E IA OPE C B a rc la y s IE A E IA OPE C B a rc la y s E IA
OECD Americas Americas 25.06 25.58 25.99 26.25 0.53 0.51 0.48 0.44 0.41 0.28 0.31 0.26 0.26 0.25
Canada Canada 2.45 2.46 2.48 2.57 0.01 -0.01 -0.03 - 0.02 0.02 0.00 - 0.09 -0.00
Mexico Mexico 1.98 1.99 2.00 2.01 0.00 0.01 0.00 - 0.02 0.02 -0.00 - 0.00 0.01
USA US50 20.27 20.77 21.14 21.29 0.50 0.50 0.50 - 0.36 0.23 0.31 - 0.15 0.24
Chile Chile 0.35 0.37 0.37 0.38 0.01 0.01 - - 0.01 0.01 - - 0.01 -

Non-OECD Americas S+C America 6.45 6.40 6.37 6.45 -0.05 -0.05 -0.10 0.02 -0.03 -0.05 -0.00 0.05 0.09 0.03
Brazil Brazil 3.00 3.01 3.08 3.12 0.01 0.01 0.01 - 0.06 0.03 0.01 - 0.04 0.03
Other Non-OECD Americas Other S+C America 3.45 3.39 3.29 3.34 -0.06 -0.06 -0.10 - -0.10 -0.09 -0.01 - 0.05 0.00

Europe Europe 14.30 14.37 14.49 14.59 0.07 -0.00 0.02 0.07 0.13 0.09 0.09 0.04 0.09 0.10
France France 1.71 1.72 1.72 1.73 0.01 - - - 0.01 - - - 0.01 -
Germany Germany 2.46 2.34 2.35 2.36 -0.12 - - - 0.02 - - - 0.00 -
Italy Italy 1.24 1.28 1.29 1.30 0.04 - - - 0.01 - - - 0.01 -
Spain Spain 1.30 1.33 1.32 1.32 0.03 - - - -0.00 - - - -0.00 -
UK UK 1.58 1.60 1.61 1.62 0.02 - - - 0.00 - - - 0.01 -
EU 5 EU 5 8.28 8.26 8.29 8.32 -0.03 -0.05 - - 0.04 0.02 - - 0.03 -
Other OECD Europe 5.27 5.35 5.43 5.47 0.08 - - - 0.07 - - - 0.04 -
Non-OECD Europe OMRNEUR 0.75 0.76 0.77 0.80 0.01 - - - 0.01 - - - 0.02 -

Middle East Middle East 8.51 8.38 8.36 8.57 -0.13 -0.12 -0.01 -0.06 -0.01 0.12 0.08 0.06 0.21 0.09
Iran Iran 2.04 2.03 1.91 1.96 -0.01 -0.01 - - -0.12 -0.05 - - 0.05 -
Saudi Arabia Saudi Arabia 3.27 3.11 3.15 3.24 -0.16 -0.15 - - 0.03 0.09 - - 0.09 -

Asia Pacific Asia Pacific 34.18 34.93 35.73 36.39 0.75 0.73 0.88 0.80 0.79 0.78 0.89 0.68 0.66 0.86
China China 12.68 13.16 13.60 13.91 0.48 0.47 0.51 0.39 0.44 0.47 0.47 0.34 0.31 0.48
India India 4.57 4.75 4.99 5.23 0.18 0.22 0.23 - 0.25 0.24 0.24 - 0.24 0.22
Japan Japan 3.89 3.80 3.73 3.64 -0.09 -0.10 -0.12 - -0.08 -0.07 -0.07 - -0.09 -0.09
Korea Korea 2.58 2.57 2.58 2.61 -0.02 -0.05 - - 0.02 -0.02 - - 0.02 -
Other Asia-Pacific Other Asia-Pacific 10.46 10.66 10.82 11.00 0.20 0.20 - - 0.16 0.16 - - 0.18 -

Africa Africa 4.27 4.29 4.37 4.51 0.02 0.02 0.08 0.13 0.08 0.10 0.08 0.11 0.15 0.09

Former Soviet
Former Soviet Union 4.53 4.70 4.78 4.83 0.16 0.16 0.10 0.12 0.09 0.10 0.08 0.09 0.05 0.11
Union

World World 98.06 99.41 100.87 102.38 1.36 1.26 1.45 1.50 1.45 1.43 1.54 1.29 1.52 1.53
OECD OECD 47.42 47.94 48.41 48.73 0.52 0.39 0.39 0.45 0.47 0.28 0.43 0.25 0.31 0.34
Non-OECD Non-OECD 50.64 51.47 52.45 53.66 0.83 0.87 1.05 1.05 0.98 1.15 1.11 1.04 1.21 1.19
Source: IEA, OPEC, EIA, Barclays Research

24 January 2019 14
Barclays | The Blue Drum

FIGURE 17
Non-OPEC supply and projected annual changes (mb/d)
B a rc la y s E stima te s 2018 Cha nge s 2019 Cha nge s 2020 Cha nge s
2016 2017 2018 2019 2020 B a rc la y s IE A E IA OPE C B a rc la y s IE A E IA OPE C B a rc la y s E IA
OECD Americas 19.36 20.25 22.49 23.72 25.21 2.24 2.35 2.31 2.40 1.23 1.15 1.62 1.50 1.49 1.38
Canada 4.33 4.67 4.94 4.94 5.12 0.28 0.36 0.25 0.30 -0.01 -0.03 -0.07 -0.10 0.18 0.23
Mexico 2.47 2.23 2.08 2.02 1.95 -0.15 -0.16 -0.15 -0.20 -0.06 -0.16 -0.04 -0.10 -0.07 -0.09
USA 12.56 13.35 15.41 16.73 18.13 2.06 2.15 2.21 2.20 1.32 1.34 1.73 1.70 1.40 1.24
of which L48 onshore crude* 6.73 7.16 8.71 9.65 10.74 1.54 0.94 1.09
0.00
S+C America 4.48 4.54 4.51 4.93 5.06 -0.03 -0.04 0.09 0.00 0.42 0.37 0.33 0.30 0.12 0.25
Argentina 0.60 0.57 0.58 0.60 0.62 0.01 0.01 0.01 0.00 0.02 0.01 -0.01 0.00 0.02 0.01
Brazil 2.61 2.73 2.71 3.09 3.24 -0.02 -0.04 0.08 0.00 0.37 0.36 0.35 0.40 0.15 0.25
Colombia 0.89 0.86 0.87 0.82 0.83 0.01 0.01 0.00 0.00 -0.04 0.00 -0.00 0.00 0.00 -0.01
0.00
OECD Europe 3.53 3.49 3.35 3.17 3.20 -0.14 -0.10 -0.11 -0.10 -0.18 -0.01 0.07 0.00 0.03 0.12
Denmark 0.14 0.14 0.13 0.12 0.11 -0.01 - - 0.00 -0.01 - - 0.00 -0.00 -
Norway 1.96 1.92 1.81 1.73 1.81 -0.11 -0.12 -0.11 -0.10 -0.08 -0.09 0.03 0.00 0.08 0.07
UK 1.01 1.00 1.01 0.94 0.91 0.01 0.01 0.01 0.00 -0.06 0.07 0.05 0.10 -0.04 0.05
0.00
Middle East 1.27 3.22 3.27 3.25 3.29 0.05 0.01 1.96 0.10 -0.02 0.00 0.10 0.00 0.04 0.06
Oman 1.01 0.98 0.99 0.99 1.00 0.01 0.01 0.00 0.00 -0.00 -0.01 0.01 0.00 0.01 0.01
Syria 0.03 0.02 0.02 0.02 0.02 -0.00 -0.00 - 0.00 -0.00 -0.00 - 0.00 -0.00 -
Yemen 0.02 0.03 0.04 0.03 0.03 0.01 0.01 - 0.00 -0.01 0.00 - 0.00 -0.00 -
0.00
Asia Pacific 7.99 7.72 7.58 7.46 7.34 -0.15 -0.14 -0.03 0.00 -0.12 -0.08 0.06 0.10 -0.12 0.00
Australia 0.34 0.31 0.34 0.42 0.40 0.03 0.03 0.03 0.00 0.07 0.08 0.09 0.10 -0.01 0.07
Brunei 0.12 0.11 0.11 0.11 0.11 -0.00 - - 0.00 -0.00 - - 0.00 -0.00 -
China 3.98 3.87 3.83 3.74 3.73 -0.04 -0.04 -0.01 0.00 -0.09 -0.05 0.03 0.00 -0.01 0.01
India 0.85 0.86 0.84 0.82 0.80 -0.02 -0.02 -0.01 0.00 -0.02 -0.02 -0.02 0.00 -0.02 0.01
Malaysia 0.74 0.72 0.72 0.71 0.69 -0.00 -0.00 -0.01 0.00 -0.00 -0.01 -0.01 0.00 -0.02 -0.03
Vietnam 0.31 0.28 0.25 0.23 0.22 -0.03 - -0.03 0.00 -0.02 - 0.01 0.00 -0.01 -0.01
0.00
Africa 1.41 1.41 1.45 1.46 1.45 0.04 0.04 -0.02 0.00 0.01 -0.00 -0.01 0.00 -0.02 -0.04
Chad 0.12 0.12 0.12 0.11 0.11 -0.00 - - 0.00 -0.00 - - 0.00 -0.00 -
Egypt 0.67 0.64 0.65 0.63 0.61 0.01 0.01 0.01 0.00 -0.02 -0.02 -0.05 0.00 -0.02 -0.03
Equatorial Guinea 0.09 0.09 0.09 0.09 0.09 -0.00 - -0.03 0.00 0.00 - -0.10 0.00 0.00 0.00
Sudan and South Sudan 0.20 0.18 0.20 0.21 0.22 0.02 - -0.02 0.00 0.01 - 0.03 0.00 0.02 0.00
0.00
Former Soviet Union 14.20 14.30 14.55 14.77 14.70 0.25 0.25 0.27 0.20 0.22 0.08 0.20 0.20 -0.07 0.12
Azerbaijan 0.83 0.78 0.79 0.78 0.74 0.01 - 0.01 0.00 -0.01 - -0.01 0.00 -0.05 -0.01
Kazakhstan 1.65 1.82 1.90 1.91 1.87 0.08 - 0.09 0.10 0.01 - 0.10 0.00 -0.04 0.01
Russia 11.33 11.32 11.49 11.72 11.73 0.17 0.17 0.18 0.20 0.23 0.10 0.14 0.10 0.01 0.15

Other 6.79 4.88 5.09 5.20 5.29 0.21 0.11 0.10


0
Total Non-OPEC Supply 59.01 59.82 62.29 63.96 65.53 2.47 2.55 2.45 2.60 1.67 1.64 2.38 2.10 1.57 1.90
Source: IEA, OPEC, EIA, Barclays Research

24 January 2019 15
Barclays | The Blue Drum

FIGURE 18
OPEC crude oil production forecast (mb/d)
A nnua l A nnua l A nnua l
B a rc la y s 2018 Cha nge Q119 Q219 Q319 Q419 2019 Cha nge Q120 Q220 Q320 Q420 2020 Cha nge
Algeria 1.04 -0.00 1.00 1.00 1.00 1.00 1.00 -0.04 0.97 0.97 0.97 0.98 0.97 -0.03
Angola 1.51 -0.14 1.53 1.60 1.65 1.60 1.60 0.09 1.65 1.65 1.65 1.60 1.64 0.04
Ecuador 0.52 -0.01 0.52 0.52 0.52 0.52 0.52 -0.00 0.52 0.52 0.52 0.52 0.52 0.00
Equatorial Guinea 0.12 -0.00 0.12 0.13 0.13 0.14 0.13 0.01 0.12 0.12 0.13 0.13 0.13 -0.00
Congo 0.32 0.07 0.34 0.35 0.36 0.36 0.35 0.03 0.33 0.34 0.35 0.35 0.34 -0.01
Gabon 0.19 -0.01 0.16 0.16 0.16 0.17 0.16 -0.02 0.15 0.15 0.16 0.17 0.16 -0.00
Iraq 4.54 0.06 4.55 4.57 4.64 4.73 4.62 0.09 4.83 4.82 4.87 5.00 4.88 0.26
Iran 3.61 -0.20 3.18 2.90 2.80 2.78 2.91 -0.70 2.74 2.72 2.70 2.64 2.70 -0.21
Kuwait 2.74 0.04 2.79 2.80 2.81 2.83 2.81 0.06 2.86 2.88 2.91 2.93 2.89 0.09
Libya 0.96 0.14 0.85 0.85 0.85 0.85 0.85 -0.11 0.95 0.95 0.95 0.95 0.95 0.10
Nigeria 1.60 0.08 1.53 1.70 1.70 1.70 1.66 0.06 1.72 1.73 1.75 1.76 1.74 0.08
Saudi Arabia 10.33 0.37 10.25 10.30 10.40 10.20 10.29 -0.04 10.35 10.30 10.40 10.25 10.33 0.04
UAE 3.00 0.07 3.14 3.07 3.10 3.15 3.11 0.11 3.18 3.21 3.24 3.27 3.23 0.11
Venezuela 1.37 -0.60 1.10 1.00 0.95 0.90 0.99 -0.38 0.90 0.90 0.95 1.00 0.94 -0.05
Neutral Zone 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.10 0.03 0.03
OPEC Crude 31.86 -0.15 31.05 30.94 31.08 30.92 31.00 -0.86 31.25 31.28 31.54 31.63 31.43 0.43
OPEC Non-Crude 5.63 -0.01 5.68 5.68 5.68 5.68 5.68 0.05 5.63 5.61 5.62 5.63 5.62 -0.06
OPEC Total Liquids 39.26 -0.23 36.73 36.62 36.76 36.60 36.68 -2.58 36.88 36.88 37.16 37.26 37.05 0.37

Source: IEA, Barclays Research

24 January 2019 16
Barclays | The Blue Drum

Chartbook

24 January 2019 17
Barclays | The Blue Drum

OPEC+ supply trends


FIGURE 19 FIGURE 20
World crude oil output market share by producer group Declaration of cooperation members target and actual crude
output (mb/d)
43% OPEC (lhs) 23.5% 51
Actual output Target
Other Non-OPEC (lhs)
42% Non-OPEC DC members 50
23.0%
41%
49
40% 22.5% 48
39%
47
38% 22.0%
46
37%
21.5%
36% 45

35% 21.0% 44
Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18
Source: IEA, EIA, OPEC, MEES, Barclays Research Source: IEA, EIA, OPEC, MEES, Barclays Research

FIGURE 21 FIGURE 22
Saudi Arabia target and actual crude output (mb/d) Russia target and actual crude output (mb/d)
11.50 Actual output Target 11.6
Actual output Target
11.4
11.00
11.2

10.50
11.0

10.8
10.00

10.6
9.50
10.4

9.00 10.2
Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18
Source: IEA, EIA, OPEC, MEES, Barclays Research Source: IEA, EIA, OPEC, MEES, Barclays Research

FIGURE 23 FIGURE 24
Iran target and actual crude output (mb/d) Iraq target and actual crude output (mb/d)
4.00 5.30 Actual output Target
Actual output Target
3.80
4.80
3.60

3.40 4.30
3.20

3.00 3.80

2.80
3.30
2.60

2.40 2.80
Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18
Source: IEA, EIA, OPEC, MEES, Barclays Research Source: IEA, EIA, OPEC, MEES, Barclays Research

24 January 2019 18
Barclays | The Blue Drum

FIGURE 25 FIGURE 26
UAE target and actual crude output (mb/d) Venezuela target and actual crude output (mb/d)
3.30 2.60
Actual output Target Actual output Target
3.20 2.40

3.10 2.20

3.00 2.00

2.90 1.80

2.80 1.60

2.70 1.40

2.60 1.20

2.50 1.00
Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18
Source: IEA, EIA, OPEC, MEES, Barclays Research Source: IEA, EIA, OPEC, MEES, Barclays Research

FIGURE 27 FIGURE 28
Nigeria target and actual crude output (mb/d) Angola target and actual crude output (mb/d)
2.20 1.85
Actual output Target Actual output Target
1.80
2.00
1.75
1.80
1.70

1.60 1.65

1.60
1.40
1.55
1.20
1.50

1.00 1.45
Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18
Source: IEA, EIA, OPEC, MEES, Barclays Research Source: IEA, EIA, OPEC, MEES, Barclays Research

FIGURE 29 FIGURE 30
Algeria target and actual crude output (mb/d) Libya target and actual crude output (mb/d)
1.20 1.20
Actual output Target Actual output Target

1.00
1.15

0.80
1.10
0.60
1.05
0.40

1.00
0.20

0.95 0.00
Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18
Source: IEA, EIA, OPEC, MEES, Barclays Research Source: IEA, EIA, OPEC, MEES, Barclays Research

24 January 2019 19
Barclays | The Blue Drum

International oil rig count trends (ex. NAM)


FIGURE 31 FIGURE 32
Total international oil rig count ex. NAM Middle East oil rig count
900 400
Middle East Latin America Asia Other Saudi Iraq
800 Africa Europe 350 Kuwait UAE Qatar
700 300
600
250
500
200
400
150
300
100
200

100 50

0 0
Jan-16 Sep-16 May-17 Jan-18 Sep-18 Jan-16 Sep-16 May-17 Jan-18 Sep-18
Source: Baker Hughes, Barclays Research Source: Baker Hughes, Barclays Research

FIGURE 33 FIGURE 34
Latin America oil rig count Asia oil rig count
250 Venezuela Argentina 200
India Other
Mexico Brazil 180
Indonesia China
200 Colombia Ecuador 160
Other
140
150 120
100
100 80
60
50 40
20
0 0
Jan-16 Sep-16 May-17 Jan-18 Sep-18 Jan-16 Sep-16 May-17 Jan-18 Sep-18
Source: Baker Hughes, Barclays Research Source: Baker Hughes, Barclays Research

FIGURE 35 FIGURE 36
Africa oil rig count Europe oil rig count
100 100
Algeria Angola Other
90 Nigeria Libya 90
Turkey
80 Other 80 Norway
70 70 UK
60 60
50 50
40 40
30 30
20 20
10 10
0 0
Jan-16 Sep-16 May-17 Jan-18 Sep-18 Jan-16 Sep-16 May-17 Jan-18 Sep-18
Source: Baker Hughes, Barclays Research Source: Baker Hughes, Barclays Research

24 January 2019 20
Barclays | The Blue Drum

Non-OPEC supply trends


FIGURE 37 FIGURE 38
Non-OPEC supply growth in the context of global demand Non-OPEC liquids production growth by quarter (mb/d)
growth (mb/d)
3.5 Non-OPEC ex-NAM North America (NAM)
Forecast
2.5
2.5
2.0

1.5 1.5

1.0
0.5
0.5
-0.5 0.0

-0.5
-1.5 Difference (Chg in call on OPEC)
Non-OPEC + OPEC noncrude (y/y) -1.0
-2.5 Global Demand (y/y) -1.5 *Not including OPEC non-crude liquids
Q1 13 Q1 14 Q1 15 Q1 16 Q1 17 Q1 18 Q1 19
Q1 13 Q1 14 Q1 15 Q1 16 Q1 17 Q1 18 Q1 19
Source: IEA, Barclays Research Source: IEA, EIA, Barclays Research

FIGURE 39 FIGURE 40
Former Soviet Union production growth (mb/d) China oil production growth (kb/d)
15.0 Russia 1.2
Kazakhstan 4,400 y-o-y chg (RHS) Production 500
Azerbaijan 1.0 400
14.5 Other FSU 4,200
0.8 Forecast
300
Forecast 4,000
14.0 0.6 200
0.4 3,800 100
13.5
0.2 0
3,600 -100
13.0 0.0
3,400 -200
-0.2
12.5 -300
-0.4 3,200
-400
12.0 -0.6 3,000 -500
Q1 09 Q3 10 Q1 12 Q3 13 Q1 15 Q3 16 Q1 18 Q3 19 Q1 09 Q3 10 Q1 12 Q3 13 Q1 15 Q3 16 Q1 18 Q3 19

Source: IEA, Barclays Research Source: IEA, Barclays Research

FIGURE 41 FIGURE 42
Non-OPEC Middle East oil production growth (kb/d) Non-OPEC African oil production growth (kb/d)
y-o-y chg (RHS) y-o-y chg (RHS)
3,700 300 1,800 300
Production Production
250 Forecast
3,600 1,700 200
200
3,500 150 100
100 1,600
3,400 50 0
1,500
3,300 0
-100
-50
1,400
3,200 -100 -200
-150 1,300
3,100 -300
Forecast -200
3,000 -250 1,200 -400
Q1 09 Q3 10 Q1 12 Q3 13 Q1 15 Q3 16 Q1 18 Q3 19 Q1 09 Q3 10 Q1 12 Q3 13 Q1 15 Q3 16 Q1 18 Q3 19

Source: IEA, Barclays Research Source: IEA, Barclays Research

24 January 2019 21
Barclays | The Blue Drum

FIGURE 43 FIGURE 44
Brazilian oil production growth (kb/d) Colombian oil production growth (kb/d)
y-o-y chg (RHS) Production y-o-y chg (RHS) Production
3,500 600 1,100 200
3,300 500
1,000 Forecast 150
3,100 400
100
2,900 900
300
2,700 50
200 800
2,500 0
100 700
2,300
-50
0
2,100 600
-100 -100
1,900
Forecast -200 500 -150
1,700
1,500 -300 400 -200
Q1 09 Q3 10 Q1 12 Q3 13 Q1 15 Q3 16 Q1 18 Q3 19 Q1 09 Q3 10 Q1 12 Q3 13 Q1 15 Q3 16 Q1 18 Q3 19

Source: ANP, Barclays Research Source: ANH, IEA, Barclays Research

FIGURE 45 FIGURE 46
BFOE loadings and production forecast (kb/d) Oil sands (in situ) production growth forecast (kb/d)

1,200 BFOE Field Prod'n Est. 300

250
1,000
- BFOE Loadings
200
800
150
600
100
400
50
200
0
0
-50
Feb-17 Aug-17 Feb-18 Aug-18 Feb-19
Brent Forties Oseberg Ekofisk -100
Note: Loadings and wellhead production forecast may vary Q1 11 Q1 12 Q1 13 Q1 14 Q1 15 Q1 16 Q1 17 Q1 18 Q1 19
due to UK and Norway data lags and loading delays.
Source: Reuters, Bloomberg, Barclays Research Source: Statistics Canada, AER, Barclays Research

FIGURE 47 FIGURE 48
Mexican oil production growth (kb/d) Mexican field-level oil production (mb/d)
y-o-y chg (RHS) Production 3.5 Chicontepec 10%
3,300 50
Forecast Tsimin
3,100 0 3.0 Cantarell Decline Rate (rhs)
0%
2,900 -50 2.5
2,700
-100 -10%
2,500 2.0
Other
-150
2,300 1.5
-200 -20%
2,100
-250 1.0
1,900 KMZ
-30%
1,700 -300 0.5
Cantarell
1,500 -350
0.0 -40%
Q1 09 Q3 10 Q1 12 Q3 13 Q1 15 Q3 16 Q1 18 Q3 19
Q1 08 Q1 10 Q1 12 Q1 14 Q1 16 Q1 18
Source: CNH, SENER, Barclays Research Source: CNH, SENER, Barclays Research

24 January 2019 22
Barclays | The Blue Drum

US crude oil supply and demand trends


FIGURE 49 FIGURE 50
US oil production growth (kb/d) Monthly production revisions (PSM–EOM 4wk avg in kb/d)
y-o-y chg (RHS) Production 600
19,000 3000
Forecast 500
17,000 2500
400
2000 300
15,000
1500 200
13,000
1000 100
11,000 0
500
-100
9,000
0
-200
7,000 -500 -300

5,000 -1000 -400


Q1 09 Q3 10 Q1 12 Q3 13 Q1 15 Q3 16 Q1 18 Q3 19 Oct-15 Oct-16 Oct-17 Oct-18

Source: EIA, IEA, Barclays Research Source: EIA, Barclays Research

FIGURE 51 FIGURE 52
Total oil demand, including NGLs and other liq. (mb/d) Y/y change in monthly finished product demand (mb/d)

21.5 Y/y change (kb/d, rhs) 800 1.3


U.S. total demand (mb/d) 1.1
21.0 600 0.9
0.7
0.5
20.5 400 0.3
0.1
20.0 200 -0.1
-0.3
-0.5
19.5 0 -0.7
Gasoline Jet
-0.9 Distillate Residual
19.0 -200 -1.1 LPG Others
Q1 15 Q1 16 Q1 17 Q1 18 Q1 19E -1.3
Oct-15 Oct-16 Oct-17 Oct-18
Source: IEA, EIA, Barclays Research Source: EIA, Barclays Research

FIGURE 53 FIGURE 54
Y/y change in monthly petroleum exports (mb/d) Y/y change in monthly petroleum imports (mb/d)
mb/d Crude Oil NGL/LPG mb/d Crude Oil NGL/LPG
2.5 Unf. Oils MoGas 1.5 Unf. Oils MoGas
Jet-Kero Distillate Jet-Kero Distillate
2.0 RFO Coke RFO Coke
Other 1.0 Other
1.5
0.5
1.0

0.5 0.0

0.0
-0.5
-0.5

-1.0 -1.0
Oct-15 Oct-16 Oct-17 Oct-18 Oct-15 Oct-16 Oct-17 Oct-18

Source: EIA, Barclays Research Source: EIA, Barclays Research

24 January 2019 23
Barclays | The Blue Drum

Trends in US tight oil


FIGURE 55 FIGURE 56
US production forecast (y/y): Major play detail (mb/d) Y/y production growth by play (kb/d)
3.0 Eagle Ford Williston Basin -ND 1,200 Bakken Eagle Ford
Permian Alaska Permian Niobrara
1,000
US Gulf of Mexico Other Crude Anadarko
2.0 NGLs 800

600

400
1.0
0.17 0.28 0.86 200
0.25 0.55
0.45 0
0.0 0.14
-200

-400
-1.0 -600
2013 2014 2015 2016 2017 2018 2019 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18

Source: EIA, Bentek, Barclays Research Source: EIA Barclays Research

FIGURE 57 FIGURE 58
Drilling productivity (production per day per rig) by play Monthly completion activity by play (wells)
2,500 500 Anadarko
Bakken Eagle Ford
Permian Niobrara Eagle Ford
Niobrara
2,000 Anadarko 400
Bakken
Permian
1,500 300

1,000 200

500 100

0 0
Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Apr-16 Oct-16 Apr-17 Oct-17 Apr-18 Oct-18

Source: EIA, Barclays Research Source: EIA, Barclays Research

FIGURE 59 FIGURE 60
Drilled but uncompleted wells (ducs) by play US crude oil production forecast (mb/d)
4,500 14
Anadarko
4,000 Eagle Ford
12
Niobrara
3,500
Bakken
10
3,000 Permian

2,500 8 Eagle Ford


Williston
2,000
6 Permian
1,500
4 Alaska
1,000 GOM
500 2
Other
0
0
Apr-16 Oct-16 Apr-17 Oct-17 Apr-18 Oct-18
Q1 09 Q2 11 Q3 13 Q4 15 Q1 18
Source: EIA, Barclays Research Source: EIA, Barclays Research

24 January 2019 24
Barclays | The Blue Drum

FIGURE 61 FIGURE 62
US rig count and y/y change Canadian rig count and y/y change
600 1200 250 400

500 200 350


1000
Vertical 150 300
400
Horizontal
800 100 250
300 Directional
Total Rig Count (rhs) 50 200
200
600
0 150
100
-50 100
400 Vertical
0 -100 Horizontal 50
Directional
-100 200 -150 Total Rig Count (rhs) 0
Dec-16 Jun-17 Dec-17 Jun-18 Dec-18 Dec-16 Jun-17 Dec-17 Jun-18 Dec-18

Source: Baker Hughes, Barclays Research Source: Baker Hughes, Barclays Research

FIGURE 63 FIGURE 64
Permian rig count and y/y change Eagle Ford rig count and y/y change
300 Vertical 550 80 100
Horizontal
Directional 500
250 60
Total Rig Count (rhs) 80
450
200
400 40
60
150 350
20
100 300
40
250 0
50
200 Vertical 20
-20 Horizontal
0
150 Directional
Total Rig Count (rhs)
-50 100 -40 0
Dec-16 Jun-17 Dec-17 Jun-18 Dec-18 Dec-16 Jun-17 Dec-17 Jun-18 Dec-18

Source: Baker Hughes, Barclays Research Source: Baker Hughes, Barclays Research

FIGURE 65 FIGURE 66
Bakken rig count and y/y change DJ-Niobrara rig count and y/y change
30 100 20 40

35
20 15
80
30
10 10
60 25

0 5 20
40 15
-10 0
Vertical Vertical 10
Horizontal 20 Horizontal
-20 -5
Directional 5
Directional
Total Rig Count (rhs)
-30 0 -10 Total Rig Count (rhs) 0
Dec-16 Jun-17 Dec-17 Jun-18 Dec-18 Dec-16 Jun-17 Dec-17 Jun-18 Dec-18

Source: Baker Hughes, Barclays Research Source: Baker Hughes, Barclays Research

24 January 2019 25
Barclays | The Blue Drum

Permian
FIGURE 67 FIGURE 68
Permian oil production forecast by vintage (mb/d) Permian rig count
6.0 600
Horizontal Vertical Directional

5.0 500

4.0 2020 400

2019
3.0 300
2018
2.0 2017 200
2016
2015
2014
1.0 100
Pre-2014
0.0 0
Q1 13 Q1 14 Q1 15 Q1 16 Q1 17 Q1 18 Q1 19 Q1 20 Dec-15 Dec-16 Dec-17 Dec-18
Source: DrillingInfo, Rystad Energy, WoodMackenzie, EIA, Barclays Research Source: Baker Hughes, Barclays Research

FIGURE 69 FIGURE 70
Permian horizontal well oil type curves (b/d) Permian horizontal well first 12-month oil output (kb)

800 160
2015
700 140
2016
600 2017 120

500 2018E 100

400 2019E 80

300 60

200 40

100 20
Months
0 0
1 5 9 13 17 21 25 29 33 37 41 45 49 53 57 2013 2014 2015 2016 2017 2018E 2019E

Source: DrillingInfo, Rystad Energy, WoodMackenzie, Barclays Research Source: DrillingInfo, Rystad Energy, WoodMackenzie, Barclays Research

FIGURE 71 FIGURE 72
Permian horizontal well first full month oil output (b/d) Horizontal wells brought online in Permian

800 6,000

700
5,000
600
4,000
500

400 3,000

300
2,000
200
1,000
100

0 0
2013 2014 2015 2016 2017 2018E 2019E 2013 2014 2015 2016 2017 2018E 2019E
Source: DrillingInfo, Rystad Energy, WoodMackenzie, Barclays Research Source: DrillingInfo, Rystad Energy, WoodMackenzie, Barclays Research

24 January 2019 26
Barclays | The Blue Drum

Eagle Ford
FIGURE 73 FIGURE 74
Eagle Ford oil production forecast by vintage (mb/d) Eagle Ford rig count
1.8 100
Horizontal Vertical Directional
1.6 90

1.4 80
2015 2020 70
1.2 2019
2018 60
1.0 2014
2016 2017 50
0.8
40
0.6 30
0.4 20
0.2 Pre-2014 10

0.0 0
Q1 13 Q1 14 Q1 15 Q1 16 Q1 17 Q1 18 Q1 19 Q1 20 Dec-15 Dec-16 Dec-17 Dec-18

Source: DrillingInfo, Rystad Energy, WoodMackenzie, EIA, Barclays Research Source: Baker Hughes, Barclays Research

FIGURE 75 FIGURE 76
Eagle Ford horizontal oil well oil type curves (b/d) Eagle Ford horizontal oil well first 12-month oil output (kb)

800 2015 140


2016
700 2017 120

600 2018E
2019E 100
500
80
400
60
300
40
200

100 20

Months 0
0
1 5 9 13 17 21 25 29 33 37 41 45 49 53 57 2013 2014 2015 2016 2017 2018E 2019E

Source: DrillingInfo, Rystad Energy, WoodMackenzie, Barclays Research Source: DrillingInfo, Rystad Energy, WoodMackenzie, Barclays Research

FIGURE 77 FIGURE 78
Eagle Ford horizontal oil well first full month oil output (b/d) Horizontal oil wells brought online in Eagle Ford

800 4,000

700 3,500

600 3,000

500 2,500

400 2,000

300 1,500

200 1,000

100 500

0 0
2013 2014 2015 2016 2017 2018E 2019E 2013 2014 2015 2016 2017 2018E 2019E
Source: DrillingInfo, Rystad Energy, WoodMackenzie, Barclays Research Source: DrillingInfo, Rystad Energy, WoodMackenzie, Barclays Research

24 January 2019 27
Barclays | The Blue Drum

Bakken
FIGURE 79 FIGURE 80
Bakken oil production forecast by vintage (mb/d) Bakken rig count
1.6 60
Horizontal Vertical Directional
1.4
2020 50
1.2 2019
2018 40
1.0
2015 2017
2016
2014
0.8 30

0.6
20
0.4
Pre-2014 10
0.2

0.0 0
Q1 14 Q1 15 Q1 16 Q1 17 Q1 18 Q1 19 Q1 20 Dec-15 Dec-16 Dec-17 Dec-18

Source: DrillingInfo, Rystad Energy, WoodMackenzie, EIA, Barclays Research Source: Baker Hughes, Barclays Research

FIGURE 81 FIGURE 82
Bakken horizontal well oil type curves (b/d) Bakken horizontal well first 12-month oil output (kb)
800 2015 200
2016
700 180
2017
160
600 2018E
2019E 140
500 120
400 100
80
300
60
200
40
100 20
Months 0
0
1 5 9 13 17 21 25 29 33 37 41 45 49 53 57 2013 2014 2015 2016 2017 2018E 2019E

Source: DrillingInfo, Rystad Energy, WoodMackenzie, Barclays Research Source: DrillingInfo, Rystad Energy, WoodMackenzie, Barclays Research

FIGURE 83 FIGURE 84
Bakken horizontal well first full month oil output (b/d) Horizontal wells brought online in Bakken

800 3,000

2,500
600
2,000

400 1,500

1,000
200
500

0 0
2013 2014 2015 2016 2017 2018E 2019E 2013 2014 2015 2016 2017 2018E 2019E

Source: DrillingInfo, Rystad Energy, WoodMackenzie, Barclays Research Source: DrillingInfo, Rystad Energy, WoodMackenzie, Barclays Research

24 January 2019 28
Barclays | The Blue Drum

Definition of US PADDs
FIGURE 85

WA
ME
MT ND
VT
OR MN NH
ID WI NY MA
SD
PADD 4 MI
CT RI
WY
PADD 5 IA PA NJ
NE
PADD 2 IL
OH MD DE
NV UT IN
CO WV
CA VA
KS MO
KY
PADD 1
TN NC
OK
AZ AR SC
NM
GA
MS AL
PADD 3 LA

PADD 5 also contains the states TX


of Alaska and Hawaii FL

ME

VT
NH
PADD1A
PADD 1X
NY MA
CT RI

PA
NJ

MD DE PADD 1Y
PADD 1B
Subdivisions of PADD 1 WV
VA

NC

SC

GA
PADD 1Z
PADD 1C

FL

Source: EIA, Barclays Research

24 January 2019 29
Barclays | The Blue Drum

US crude oil imports


FIGURE 86 FIGURE 87
PADD 1 imports by quality (mb/d) PADD 2 imports by quality (mb/d)
1.2 Heavy Medium 3.5 Heavy Medium
Medium Light Light Medium Light Light
Super light Condensate 3.0
1.0 Super light Condensate 2.83

2.5
0.8
0.61 2.0
0.6
1.5
0.4
1.0

0.2 0.5

0.0 0.0
Oct-15 Oct-16 Oct-17 Oct-18 Oct-15 Oct-16 Oct-17 Oct-18
Source: EIA, Barclays Research Source: EIA, Barclays Research

FIGURE 88 FIGURE 89
PADD 3 imports by quality (mb/d) PADD 5 imports by quality (mb/d) (ex. AH)
4.0 Heavy Medium 1.6 Heavy Medium
Medium Light Light Medium Light Light
3.5
Super light Condensate Super light Condensate
3.0 1.2 1.16

2.5 2.26

2.0 0.8

1.5

1.0 0.4

0.5

0.0 0.0
Oct-15 Oct-16 Oct-17 Oct-18 Oct-15 Oct-16 Oct-17 Oct-18
Source: EIA, Barclays Research Source: EIA, Barclays Research

FIGURE 90 FIGURE 91
Light imports by PADD (> 31 API) (mb/d) Total US imports by region (mb/d)

3.0 PADD1 PADD2 10 NA ME


PADD3 PADD4 C & S America Africa
Europe Other
2.5 PADD5
8 7.31

2.0 1.80
6
1.5
4
1.0

2
0.5

0.0 0
Oct-15 Oct-16 Oct-17 Oct-18 Oct-15 Oct-16 Oct-17 Oct-18
Source: EIA, Barclays Research Source: EIA, Barclays Research

24 January 2019 30
Barclays | The Blue Drum

US crude inventory data


FIGURE 92 FIGURE 93
Total US crude inventories (excl. SPR) (mb) PADD 1 crude inventories (mb)

550 23 5 Yr. Range 2018


2019 5 Yr. Avg.
500
19
450

400 15

350
5 Yr. Range 11
300 2018
2019
5 Yr. Avg.
250 7
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Source: EIA (Weekly Petroleum Status Report), Barclays Research Source: EIA (Weekly Petroleum Status Report), Barclays Research

FIGURE 94 FIGURE 95
PADD 2 crude inventories (mb) Cushing, OK, crude inventories (mb)
165 80 5 Yr. Range 2018
2019 5 Yr. Avg.
70
145
60

125 50

40
105

5 Year Range 30

85 2018
2019 20
5 Yr. Avg.
10
65
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Source: EIA (Weekly Petroleum Status Report), Barclays Research Source: EIA (Weekly Petroleum Status Report), Barclays Research

FIGURE 96 FIGURE 97
PADD 3 crude inventories (mb) PADD 5 crude inventories (mb)

300 5 Yr. Range 63


5 Yr. Range
2018
2018
275 2019
2019
5 Yr. Avg.
5 Yr. Avg.
250
57
225

200
51
175

150

125 45
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Source: EIA (Weekly Petroleum Status Report), Barclays Research Source: EIA (Weekly Petroleum Status Report), Barclays Research

24 January 2019 31
Barclays | The Blue Drum

US refinery utilization and product data


FIGURE 98 FIGURE 99
US refinery utilization rates (%) PADD 1 refinery utilization rates (%)
100 100

95
95 90

85
90
80

75
85
70
5 Yr. Range
5 Yr. Range 65
80 2018 2018
2019 60 2019
5 Yr. Avg. 5 Yr. Avg.
75 55
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Source: EIA (Weekly Petroleum Status Report), Barclays Research Source: EIA (Weekly Petroleum Status Report), Barclays Research

FIGURE 100 FIGURE 101


PADD 2 refinery utilization rates (%) PADD 3 refinery utilization rates (%)
105 105

100 100
95
95
90
90
85
85 80

80 75
70 5 Yr. Range
75
65 2018
5 Yr. Range 2018
70 2019
2019 5 Yr. Avg. 60
5 Yr. Avg.
65 55
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Source: EIA (Weekly Petroleum Status Report), Barclays Research Source: EIA (Weekly Petroleum Status Report), Barclays Research

FIGURE 102 FIGURE 103


PADD 4 refinery utilization rates (%) PADD 5 refinery utilization rates (%)
105 100

100
95
95
90
90

85 85

80
80
75 5 Yr. Range
2018 75
70 5 Yr. Range 2018
2019
5 Yr. Avg. 2019 5 Yr. Avg.
65 70
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Source: EIA (Weekly Petroleum Status Report), Barclays Research Source: EIA (Weekly Petroleum Status Report), Barclays Research

24 January 2019 32
Barclays | The Blue Drum

FIGURE 104 FIGURE 105


Total US product stocks (mb) Total US jet kerosene product stocks (mb)

900 48

46
850
44
800
42

750 40

38
700
5 Yr. Range 36
650 2018
2019 34 5 Yr. Range 2018
5 Yr. Avg. 2019 5 Yr. Avg.
600 32
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Source: EIA (Weekly Petroleum Status Report), Barclays Research Source: EIA (Weekly Petroleum Status Report), Barclays Research

FIGURE 106 FIGURE 107


Total US distillate product stocks (mb) Total US motor gasoline product stocks (mb)
180 260 5 Yr. Range
5 Yr. Range
2018 2018
2019 250 2019
160 5 Yr. Avg. 5 Yr. Avg.
240

140 230

220
120
210

100 200
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Source: EIA (Weekly Petroleum Status Report), Barclays Research Source: EIA (Weekly Petroleum Status Report), Barclays Research

FIGURE 108 FIGURE 109


Total US distillate days cover Total US gasoline days cover

60 5 Yr. Range 33 5 Yr. Range


2018 2018
55 2019
2019
5 Yr. Avg. 5 Yr. Avg.
50
29
45

40

35
25
30

25

20 21
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Source: EIA (Weekly Petroleum Status Report), Barclays Research Source: EIA (Weekly Petroleum Status Report), Barclays Research

24 January 2019 33
Barclays | The Blue Drum

OECD Europe oil demand


FIGURE 110 FIGURE 111
OECD Europe oil demand and y/y change forecast Germany oil demand and y/y change forecast

15.0 Y/y change (kb/d, rhs) 500 2.55 Y/y change (kb/d, rhs) 200
OECD Europe total demand (mb/d) Germany total demand (mb/d)
2.50 150
400
14.5 100
2.45
300 50
2.40
14.0 200 0
2.35
-50
100
2.30
13.5 -100
0 2.25 -150

13.0 -100 2.20 -200


Q1 15 Q1 16 Q1 17 Q1 18 Q1 19E Q1 15 Q1 16 Q1 17 Q1 18 Q1 19E

Source: IEA, Barclays Research Source: IEA, Barclays Research

FIGURE 112 FIGURE 113


France oil demand and y/y change forecast UK oil demand and y/y change forecast
1.80 Y/y change (kb/d, rhs) 80 1.63 70
France total demand (mb/d)
60 1.61
50
1.75 40 1.59
30
20 1.57

1.70 0 1.55 10

-20 1.53
-10
1.65 -40 1.51
Y/y change (kb/d, rhs) -30
-60 1.49
UK total demand (mb/d)
1.60 -80 1.47 -50
Q1 15 Q1 16 Q1 17 Q1 18 Q1 19E Q1 15 Q1 16 Q1 17 Q1 18 Q1 19E

Source: IEA, Barclays Research Source: IEA, Barclays Research

FIGURE 114 FIGURE 115


Italy oil demand and y/y change forecast Spain oil demand and y/y change forecast
1.37 Y/y change (kb/d, rhs) 80 1.35 Y/y change (kb/d, rhs) 80

Italy total demand (mb/d) 60 Spain total demand (mb/d)


60
1.32 40 1.30

20 40
1.27 0 1.25

-20 20

1.22 -40 1.20


0
-60

1.17 -80 1.15 -20


Q1 15 Q1 16 Q1 17 Q1 18 Q1 19E Q1 15 Q1 16 Q1 17 Q1 18 Q1 19E

Source: IEA, Barclays Research Source: IEA, Barclays Research

24 January 2019 34
Barclays | The Blue Drum

China oil demand drivers


FIGURE 116 FIGURE 117
Total demand y/y change by product (mb/d) Conventional passenger car sales (‘000 units)
1.5 Gasoline Diesel 3000
Kerosene LPG & Naphtha
Bitumen Other
1.0 Total 2500

0.5 2000

0.0 1500

-0.5 1000 5-yr.range 2017


2018 5-yr.avg
500
-1.0
Jan Feb Mar Apr May June Jul Aug Sep Oct Nov Dec
2009 2011 2013 2015 2017 2019E
Source: NBS, Bloomberg, Barclays Research Source: NBS, Bloomberg, Barclays Research

FIGURE 118 FIGURE 119


Electric passenger car sales (‘000 units) and y/y change Industrial production y/y change (%)
250 BEV sales 300% 11
PHEV sales
Total EV sales y/y (3mma, rhs) 250% 10
200
200%
9

150 150%
8
100%
7
100 50%
6
0%
50
-50% 5 5.2

0 -100% 4
Dec-16 Jun-17 Dec-17 Jun-18 Dec-18 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18
Source: NBS, Bloomberg, Barclays Research Source: NBS, Bloomberg, Barclays Research

FIGURE 120 FIGURE 121


Manufacturing PMI Civil aviation passenger-km y/y change
53.0 20%
52.5
18%
52.0
51.5 16%

51.0
14%
50.5
50.0 12%

49.5 10% 10%


49.0 49.4
8%
48.5
48.0 6%
Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Nov-14 Nov-15 Nov-16 Nov-17 Nov-18
Source: NBS, Bloomberg, Barclays Research Source: NBS, Bloomberg, Barclays Research

24 January 2019 35
Barclays | The Blue Drum

Brazil oil stats


FIGURE 122 FIGURE 123
Gasoline demand and y/y change (kb/d) Diesel demand and y/y change (kb/d)
150 Y/y change (kb/d, lhs) 950 150 Y/y change (kb/d, lhs) 1100
Gasoline sales (kb/d) Diesel sales (kb/d)
100 100
850 1000
50 50

0 0
750 900
-50 -50

-100 -100
650 800
-150 -150

-200 550 -200 700


Nov-14 Nov-15 Nov-16 Nov-17 Nov-18 Nov-14 Nov-15 Nov-16 Nov-17 Nov-18
Source: ANP, Barclays Research Source: ANP, Barclays Research

FIGURE 124 FIGURE 125


Refinery runs and y/y change (kb/d) Crude oil net exports and y/y change (kb/d)
200 2200 950 2200
Y/y change (kb/d, lhs)
Refinery Runs (kb/d) 750 1800
100 2100
550
1400
2000
0 350
1000
1900 150
-100 600
1800 -50
200
-200 -250
1700
-200
-450 Y/y change (kb/d, lhs)
-300 1600
-650 Crude oil net exports (kb/d) -600

-400 1500 -850 -1000


Nov-14 Nov-15 Nov-16 Nov-17 Nov-18 Nov-14 Nov-15 Nov-16 Nov-17 Nov-18
Source: ANP, Barclays Research Source: ANP, Barclays Research

FIGURE 126 FIGURE 127


Implied total crude oil stock build (kb/d) Hydrous ethanol demand and y/y change (kb/d)
900 200 450
Y/y change (kb/d, lhs)
600 150 Hydrous ethanol sales (kb/d)

300 100
350
0 50

-300 0
250
-600 -50

-900 -100

-1,200 -150 150


Nov-14 Nov-15 Nov-16 Nov-17 Nov-18 Nov-14 Nov-15 Nov-16 Nov-17 Nov-18
Source: ANP, Barclays Research Source: ANP, Barclays Research

24 January 2019 36
Barclays | The Blue Drum

India oil stats


FIGURE 128 FIGURE 129
Total products demand and y/y change (kb/d) Diesel demand and y/y change (kb/d)

800 5000 300 1900


250
1800
600
200
150 1700
400 4600
100
1600
200 50
1500
0
0 4200
-50 1400
-100
-200 Y/y change (kb/d) Y/y change (kb/d) 1300
-150 Diesel (kb/d,rhs)
Total products (kb/d,rhs)
-400 3800 -200 1200
Dec-15 Dec-16 Dec-17 Dec-18 Dec-15 Dec-16 Dec-17 Dec-18
Source: Bloomberg, Barclays Research Source: Bloomberg, Barclays Research

FIGURE 130 FIGURE 131


Gasoline demand and y/y change (kb/d) LPG demand and y/y change (kb/d)

140 700 120 850

120
800
100 650 80

80 750
600 40
60
700
40
550 0
20 650

0 500 -40 Y/y change (kb/d) 600


Y/y change (kb/d)
-20 LPG (kb/d,rhs)
Gasoline (kb/d,rhs)
-40 450 -80 550
Dec-15 Dec-16 Dec-17 Dec-18 Dec-15 Dec-16 Dec-17 Dec-18
Source: Bloomberg, Barclays Research Source: Bloomberg, Barclays Research

FIGURE 132 FIGURE 133


Naphtha demand and y/y change (kb/d) Fuel oil demand and y/y change (kb/d)

200 400 60 160


Y/y change (kb/d)
50 Y/y change (kb/d)
150 Naptha (kb/d,rhs)
40 Fuel Oil (kb/d,rhs)
100 350 30 140

50 20
10
0 300 120
0
-50 -10

-100 250 -20 100


-30
-150
-40
-200 200 -50 80
Dec-15 Dec-16 Dec-17 Dec-18 Dec-15 Dec-16 Dec-17 Dec-18
Source: Bloomberg, Barclays Research Source: Bloomberg, Barclays Research

24 January 2019 37
Barclays | The Blue Drum

Middle East oil demand


FIGURE 134 FIGURE 135
Saudi crude burn, mb/d Oil demand (kb/d)*
1.2 Nov 18 change from 2018 ch. from
Oct 18 Nov 17 to date 2017
1.0 Gasoline 1,514 105 107 1,402 56
Diesel 1,320 29 29 1,285 -45
0.8 Kerosene 288 28 -59 364 -10
Residual 1,078 -96 4 1,060 -7
0.6 Other 920 9 -251 870 -159
Total 5,120 75 -171 4,981 -165
0.4

0.2

0.0
Nov-13 Nov-14 Nov-15 Nov-16 Nov-17 Nov-18
Source: JODI, Barclays Research Note: *Saudi Arabia, Iraq, Kuwait, Iran and Qatar. Source: JODI, Barclays Research

FIGURE 136 FIGURE 137


Total products demand y/y change (kb/d) Gasoline demand y/y change (kb/d)
600
400

400 300

200 200

0 100

-200 0

-400 -100

-600 -200
Nov-13 Nov-14 Nov-15 Nov-16 Nov-17 Nov-18 Nov-13 Nov-14 Nov-15 Nov-16 Nov-17 Nov-18
Source: JODI, Barclays Research Source: JODI, Barclays Research

FIGURE 138 FIGURE 139


Diesel and kerosene demand y/y change (kb/d) Fuel oil demand y/y change (kb/d)
300 400
Kerosene Diesel
200 300

200
100
100
0
0
-100
-100
-200
-200

-300 -300

-400 -400
Nov-13 Nov-14 Nov-15 Nov-16 Nov-17 Nov-18 Nov-13 Nov-14 Nov-15 Nov-16 Nov-17 Nov-18
Source: JODI, Barclays Research Source: JODI, Barclays Research

24 January 2019 38
Barclays | The Blue Drum

Saudi Arabia oil stats


FIGURE 140 FIGURE 141
Total products demand y/y change (kb/d) Gasoline demand y/y change (kb/d)
400 200

300
150
200
100
100

0 50

-100 0
-200
-50
-300
-100
-400

-500 -150
Nov-13 Nov-14 Nov-15 Nov-16 Nov-17 Nov-18 Nov-13 Nov-14 Nov-15 Nov-16 Nov-17 Nov-18
Source: JODI, Barclays Research Source: JODI, Barclays Research

FIGURE 142 FIGURE 143


Diesel and kerosene demand y/y change (kb/d) Fuel oil demand y/y change (kb/d)
300 300
Kerosene Diesel
200 200

100 100

0 0

-100 -100

-200 -200

-300 -300
Nov-13 Nov-14 Nov-15 Nov-16 Nov-17 Nov-18 Nov-13 Nov-14 Nov-15 Nov-16 Nov-17 Nov-18
Source: JODI, Barclays Research Source: JODI, Barclays Research

FIGURE 144 FIGURE 145


Crude oil and product stocks m/m change (mb) Crude oil and product net exports y/y change (mb/d)
15 1.5
Products Crude Oil Products Crude Oil
10 1.0

5 0.5

0 0.0

-5 -0.5

-10 -1.0

-15 -1.5
Nov-13 Nov-14 Nov-15 Nov-16 Nov-17 Nov-18 Nov-13 Nov-14 Nov-15 Nov-16 Nov-17 Nov-18
Source: JODI, Barclays Research Source: JODI, Barclays Research

24 January 2019 39
Barclays | The Blue Drum

Regional spot cracks


FIGURE 146 FIGURE 147
New York Harbor 3:2:1 crack US Gulf Coast 3:2:1 crack
35 30
5 year range 5 year range
y-1 y-1
30 25
Current Current
Average Average
25
20
20
15
15
10
10

5
5

0 0
Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun

Source: Platts, Bloomberg, Barclays Research Source: Platts, Bloomberg, Barclays Research

FIGURE 148 FIGURE 149


Midwest 3:2:1 crack Northwest Europe 3:1:2 crack
50 25
5 year range
y-1
40 Current 20
Average

30 15

20 10

5 year range
10 5 y-1
Current
Average
0 0
Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun

Source: Platts, Bloomberg, Barclays Research Source: Platts, Bloomberg, Barclays Research

FIGURE 150 FIGURE 151


Mediterranean 3:1:2 crack Singapore 2:1:1 crack
25 5 year range 19 5 year range
y-1
y-1
Current 17 Current
Average
Average
20
15

13
15
11

9
10
7

5 5
Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun

Source: Platts, Bloomberg, Barclays Research Source: Platts, Bloomberg, Barclays Research

24 January 2019 40
Barclays | The Blue Drum

OECD inventories overview


FIGURE 152 FIGURE 153
Petroleum inventories relative to the five-year average (mb) Crude oil inventories relative to the five-year average (mb)
500 240 OECD America
Commercial crude oil
400 200 OECD Europe
Products
300 160 OECD Asia-Pacific

200 120

100 80

0 40

-100 0

-200 -40

-300 -80
Nov-14 Nov-15 Nov-16 Nov-17 Nov-18 Nov-14 Nov-15 Nov-16 Nov-17 Nov-18

Source: IEA, Barclays Research Note: IEA, Barclays Research

FIGURE 154 FIGURE 155


OECD total commercial crude oil inventories (mb) OECD Americas commercial crude oil inventories (mb)
1300 750
1250 700
1200
650
1150
1100 600

1050 550
1000
500
950
5-yr. range 2017 450 5-Yr. range 2017
900
2018 5-yr. avg. 2018 5-Yr. avg.
850 400
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Source: IEA, Barclays Research Source: IEA, Barclays Research

FIGURE 156 FIGURE 157


OECD Europe commercial crude oil inventories (mb) OECD Asia-Pacific commercial crude oil inventories (mb)
380 220

370
200
360
350
180
340
330
160
320
310 140
5-yr. range 2017 5-yr. range 2017
300 2018 5-yr. avg. 2018 5-yr. avg.
290 120
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Source: IEA, Barclays Research Source: IEA, Barclays Research

24 January 2019 41
Barclays | The Blue Drum

FIGURE 158 FIGURE 159


Product inventories relative to the five-year average by Product inventories relative to the five-year average by
region (mb) product (mb)
200 OECD America 200
Gasoline
160 OECD Europe 160 Distillates
120 OECD Asia-Pacific 120 Other

80 80

40 40

0 0

-40 -40

-80 -80

-120 -120
Nov-14 Nov-15 Nov-16 Nov-17 Nov-18 Nov-14 Nov-15 Nov-16 Nov-17 Nov-18

Source: IEA, Barclays Research Source: IEA, Barclays Research

FIGURE 160 FIGURE 161


OECD total product inventories (days of cover) OECD total gasoline inventories (days of cover)
35 33
5-yr. range
2017
33 31
2018

29 5-yr. avg.
31

29 27
5-yr. range
2017 25
27
2018
5-yr. avg.
25 23
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Source: IEA, Barclays Research Source: IEA, Barclays Research

FIGURE 162 FIGURE 163


OECD total distillate inventories (days of cover) OECD total other product inventories (days of cover)
53 32
5-yr. range 2017 2018 5-yr. avg.
51
30
49
47 28

45
26
43
5-yr. range
41 24
2017
39
22 2018
37 5-yr. avg.
35 20
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Source: IEA, Barclays Research Source: IEA, Barclays Research

24 January 2019 42
Barclays | The Blue Drum

FIGURE 164 FIGURE 165


OECD Americas all product inventories (days of cover) OECD Americas gasoline inventories (days of cover)
33 5-yr. range 2017 30
5-yr. range
2018 5-yr. avg. 29
32 2017
28
31 2018
27
5-yr. avg.
30 26

29 25
24
28
23
27 22

26 21
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Source: IEA, Barclays Research Source: IEA, Barclays Research

FIGURE 166 FIGURE 167


OECD Americas distillate inventories (days of cover) OECD Americas other product inventories (days of cover)
55 38
5-yr. range 2017
36
2018 5-yr. avg.
50 34
32
45
30
28
40 5-yr. range
26
2017
24
35 2018
22
5-yr. avg.
30 20
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Source: IEA, Barclays Research Source: IEA, Barclays Research

FIGURE 168 FIGURE 169


OECD Europe all product inventories (days of cover) OECD Europe gasoline inventories (days of cover)
49 5-yr. range 2017 67
5-yr. range
47 2018 5-yr. avg.
62 2017
45 2018
57
43 5-yr. avg.

41 52

39
47
37
42
35

33 37
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Source: IEA, Barclays Research Source: IEA, Barclays Research

24 January 2019 43
Barclays | The Blue Drum

FIGURE 170 FIGURE 171


OECD Europe distillate inventories (days of cover) OECD Europe other product inventories (days of cover)
60 34
5-yr. range 2017
33
55 2018 5-yr. avg.
32

50 31
30
45
29

40 28

5-yr. range 2017 27


35
2018 5-yr. avg. 26

30 25
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Source: IEA, Barclays Research Source: IEA, Barclays Research

FIGURE 172 FIGURE 173


OECD Asia-Pacific all product inventories (days of cover) OECD Asia-Pacific gasoline inventories (days of cover)
25 20

19
23
18

17
21
16
19 5-yr. range 15
5-yr. range
2017 14 2017
17 2018
13 2018
5-yr. avg.
5-yr. avg.
15 12
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Source: IEA, Barclays Research Source: IEA, Barclays Research

FIGURE 174 FIGURE 175


OECD Asia-Pacific distillate inventories (days of cover) OECD Asia-Pacific other product inventories (days of cover)
44 22

42
20
40

38 18
36
16 5-yr. range
34
5-yr. range 2017
32
2017 14 2018
30 2018 5-yr. avg.
5-yr. avg.
28 12
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Source: IEA, Barclays Research Source: IEA, Barclays Research

24 January 2019 44
Barclays | The Blue Drum

Global stocks
FIGURE 176
Global petroleum stocking by region (mb/d)
2.5 N America Europe Asia Pacific S&C America
Middle East Africa Floating storage World
2.0
1.5
1.0
0.5
0.0
-0.5
-1.0
-1.5
-2.0
-2.5
Q1 11 Q3 11 Q1 12 Q3 12 Q1 13 Q3 13 Q1 14 Q3 14 Q1 15 Q3 15 Q1 16 Q3 16 Q1 17 Q3 17 Q1 18 Q3 18

FIGURE 177
Global crude oil stocking by region (mb/d)
2.0 N America Europe Asia Pacific S&C America
Middle East Africa Floating storage World
1.5

1.0

0.5

0.0

-0.5

-1.0

-1.5

-2.0

-2.5
Q1 11 Q3 11 Q1 12 Q3 12 Q1 13 Q3 13 Q1 14 Q3 14 Q1 15 Q3 15 Q1 16 Q3 16 Q1 17 Q3 17 Q1 18 Q3 18

FIGURE 178
Global oil products stocking by region (mb/d)

1.2 N America Europe Asia Pacific S&C America Middle East Africa World

0.8

0.4

0.0

-0.4

-0.8

-1.2
Q1 11 Q3 11 Q1 12 Q3 12 Q1 13 Q3 13 Q1 14 Q3 14 Q1 15 Q3 15 Q1 16 Q3 16 Q1 17 Q3 17 Q1 18 Q3 18

Note: Data for all OECD countries, India, Brazil, Saudi Arabia, Iraq, Qatar, Thailand, and Algeria are included in the above charts.
Source for all charts: IEA, PPAC, ANP, JODI, Bloomberg, Barclays Research

24 January 2019 45
Barclays | The Blue Drum

INVESTOR POSITIONING
FIGURE 179 FIGURE 180
Managed money positioning in WTI futures Managed money positioning in Brent futures
120 Long (K contracts) 600 140 Long (K contracts) 700
Short (K contracts) Short (K contracts)
WTI ($/b, lhs) 500 Brent ($/b, lhs) 600
Net (K contracts) 120 Net (K contracts)
100 400 500
400
300 100
80 300
200
80 200
100
60 100
0 60
0
40 -100 -100
40
-200 -200
20 -300 20 -300
Jan-12 Jul-13 Jan-15 Jul-16 Jan-18 Jan-12 Jul-13 Jan-15 Jul-16 Jan-18
Source: CFTC, ICE, Barclays Research Source: CFTC, ICE, Barclays Research

FIGURE 181 FIGURE 182


Managed money positioning in US heating oil futures Managed money positioning in European gasoil futures
150 Long (K contracts) 150 150 Long (K contracts) 250
Short (K contracts) Short (K contracts)
ULSD ($/b, lhs) Gasoil ($/b, lhs) 200
130 Net (K contracts) 130 Net (K contracts)
100
150
110 110
50 100

90 90 50
0 0
70 70
-50
-50
50 50
-100

30 -100 30 -150
Jan-12 Jul-13 Jan-15 Jul-16 Jan-18 Jan-12 Jul-13 Jan-15 Jul-16 Jan-18
Source: CFTC, ICE, Barclays Research Source: CFTC, ICE, Barclays Research

FIGURE 183 FIGURE 184


Managed money positioning in RBOB gasoline futures Managed money positioning in US natural gas futures
150 Long (K contracts) 150 6 Long (K contracts) 500
Short (K contracts) Short (K contracts)
RBOB ($/b, lhs) Henry Hub ($/MMBtu, lhs) 400
130 Net (K contracts) Net (K contracts)
100 5 300
200
110
50 4 100
90 0
0 3 -100
70
-200
-50 2 -300
50
-400
30 -100 1 -500
Jan-12 Jul-13 Jan-15 Jul-16 Jan-18 Jan-12 Jul-13 Jan-15 Jul-16 Jan-18
Source: CFTC, ICE, Barclays Research Source: CFTC, ICE, Barclays Research

24 January 2019 46
Barclays | The Blue Drum

Prices

24 January 2019 47
Barclays | The Blue Drum

Recent trends in crude oil futures prices


FIGURE 185 FIGURE 186
ICE Brent and WTI daily front-month prices ($/b) Front-month WTI 321 crack ($/b)
90 30
85
80 25
75
70 20
65
60 15
55
50 10
45
WTI Brent
40 5
Jan-18 May-18 Sep-18 Jan-19 Jan-18 May-18 Sep-18 Jan-19
Source: Bloomberg, Barclays Research Source: Bloomberg, Barclays Research

FIGURE 187 FIGURE 188


ICE Brent futures curve ($/b) NYMEX WTI futures curve ($/b)
90 6 month range 80
6 month range
1/22/2019
85 1 month ago 75 1/22/2019
6 months ago 1 month ago
80 70 6 months ago
75
65
70
60
65
55
60
50
55

50 45
Months Months
forward forward
45 40
1 11 21 31 41 1 11 21 31 41

Source: Bloomberg, Barclays Research Source: Bloomberg, Barclays Research

FIGURE 189 FIGURE 190


Front-month ICE gasoil crack ($/b) Front-month ICE Brent and time spreads ($/b)
22
100 4

20 3
90
18 2
80
16 1
70
14 0
60
12 -1
Front-month Brent (lhs)
10 50 -2
Brent 1st - 3rd month
Brent 1st - 7th month
8 40 -3
Jan-18 May-18 Sep-18 Jan-19 Jan-18 Apr-18 Jul-18 Oct-18 Jan-19
Source: Bloomberg, Barclays Research Source: Bloomberg, Barclays Research

24 January 2019 48
Barclays | The Blue Drum

Crude oil price differentials to WTI ($/b)


FIGURE 191 FIGURE 192
WTI minus Brent WTI minus LLS
3
1
0

-3 -2

-6
-5
-9
-8
-12

-15 -11
Jan-16 Jan-17 Jan-18 Jan-19 Jan-16 Jan-17 Jan-18 Jan-19

Source: Bloomberg, Barclays Research Source: Bloomberg, Barclays Research

FIGURE 193 FIGURE 194


WTI minus Syncrude WTI minus Bakken
35 23

28 19

15
21
11
14
7
7
3
0 -1

-7 -5
Jan-16 Jan-17 Jan-18 Jan-19 Jan-16 Jan-17 Jan-18 Jan-19

Source: Bloomberg, Barclays Research Source: Bloomberg, Barclays Research

FIGURE 195 FIGURE 196


WTI minus Mars WTI minus WCS
7 54
48
4
42
36
1
30
24
-2
18

-5 12
6
-8 0
Jan-16 Jan-17 Jan-18 Jan-19 Jan-16 Jan-17 Jan-18 Jan-19

Source: Bloomberg, Barclays Research Source: Bloomberg, Barclays Research

24 January 2019 49
Barclays | The Blue Drum

Crude oil price differentials to Brent ($/b)


FIGURE 197 FIGURE 198
Dated Brent minus Dubai (5dma) Dated Brent minus Tapis
7 1

5 0

-1
3
-2
1
-3

-1
-4

-3 -5
Jan-16 Jan-17 Jan-18 Jan-19 Jan-16 Jan-17 Jan-18 Jan-19
Source: Platts, Barclays Research Source: Platts, Barclays Research

FIGURE 199 FIGURE 200


Dated Brent minus Forties (5dma) Dated Brent minus Urals
0.0 5

-0.2 4

3
-0.4

2
-0.6
1

-0.8
0

-1.0 -1
Jan-16 Jan-17 Jan-18 Jan-19 Jan-16 Jan-17 Jan-18 Jan-19

Source: Platts, Barclays Research Source: Platts, Barclays Research

FIGURE 201 FIGURE 202


Dated Brent minus Bonny Light Dated Brent minus Oseberg
2 0.0

1 -0.5

0 -1.0

-1 -1.5

-2 -2.0

-3 -2.5

-4 -3.0
Jan-16 Jan-17 Jan-18 Jan-19 Jan-16 Jan-17 Jan-18 Jan-19

Source: Platts, Barclays Research Source: Platts, Barclays Research

24 January 2019 50
Barclays | The Blue Drum

OIL PRICE FORECASTS


FIGURE 203 FIGURE 204
Barclays price forecasts Value of OPEC basket of crude oil, 1999-2019 ($/b)

WTI Brent US nat gas 150

$/b $/b $/mmbtu


125
Forecasts
2017 (actuals) 51 55 2.96 100
2018 (actuals) 65 72 3.14
Q1 63 67 3.05 75
Q2 68 75 2.82
Q3 69 76 2.95 50
Q4 59 69 3.72
2019 62 70 2.92 25
Q1 55 65 3.51
Q2 65 73 2.67
0
Q3 63 70 2.74 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19
Q4 66 73 2.78 Source: OPEC, Barclays Research
2020 68 75 3.06
2025 - 80 - FIGURE 205
Log of changes to Barclays oil price forecasts
History
1985 28 28 2.60 Year WTI Brent
1986 15 14 1.71 2018 14-Oct-15 74 initiation
1987 19 18 1.53
19-Jul-16 77
1988 16 15 1.71
1989 20 18 1.77 24-Feb-17 65 67 initiation
1990 25 23 1.70 3-May-17 55 58
1991 22 20 1.53 6-Jun-17 54 57
1992 21 19 1.73
11-Jul-17 49 52
1993 19 17 2.11
1994 17 16 1.94 3-Nov-17 51 55
1995 18 17 1.69 23-Jan-18 55 60
1996 22 20 2.50
12-Apr-18 58 63
1997 21 19 2.48
1998 14 13 2.16 18-May-18 65 70
1999 19 18 2.32 10-Jul-18 66 72
2000 30 29 4.32 2-Oct-18 67 74
2001 26 25 4.05
13-Nov-18 66 73
2002 26 25 3.37
2003 31 29 5.49 14-Dec-18 72
2004 42 38 6.18 2019 14-Oct-15 83 initiation
2005 57 55 9.48 19-Jul-16 85
2006 66 66 6.98
23-Jan-18 52 57 initiation
2007 72 73 7.12
2008 100 98 8.90 12-Apr-18 55 60
2009 62 63 4.16 18-May-18 59 65
2010 80 80 4.39
10-Jul-18 65 71
2011 95 111 4.03
2012 94 112 2.82 2-Oct-18 65 72
2013 98 109 3.73 24-Jan-19 62 70
2014 93 100 4.27
2015 49 54 2.62
2016 43 45 2.49
2017 51 55 2.96
2018 65 72 3.14
Source: Bloomberg, Barclays Research Source: Barclays Research

24 January 2019 51
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