Oil market update

https://comms.bp.com/3IMU-KCO8-78HW38BFC/cr.aspx[15/05/2019 11:06:47]

BP oil market updatePrivate and confidential - not for further distribution

View in browser

Oil market updateMarket commentary

April 2019

Crude prices have rebounded so far this year primarily off theback of supply curtailments...

Contact us Got a question? Get in touch - We're happy to help!

Oil market analysisBrent / Saudi Arabia & Russia / Venezuela & Iran / Macroeconomic Outlook / Refining Margins

Brent prices recovered strongly between January-April 2019 to over $74/bbl, driven primarily by theimplementation of OPEC+ production cuts which aimed to rebalance the market following the sharp sell off inQ4 2018.

Saudi Arabia has played a leading role in OPEC+ production cuts, reducing output to 9.8 mbd in March 2019– 500 kbd below its agreed target. Compliance from other key allies has been mixed, with Russia failing to

Oil market update

https://comms.bp.com/3IMU-KCO8-78HW38BFC/cr.aspx[15/05/2019 11:06:47]

meet its target albeit still cutting back production. After cancelling the scheduled April 2019 meeting to allow fora longer time period over which to evaluate the impact of the cuts, the group are due to meet next in June2019 when the current agreement comes to an end.

Disruptions in Venezuela have escalated as a result of ongoing geopolitical unrest and US sanctions onPDVSA. In March 2019, crude production fell 300 kbd month-on-month to below 1 mbd. US sanctions on Irancontinue to suppress crude output, with the announcement that current waivers will expire in May 2019, addingfurther support to prices.

The macroeconomic outlook for 2019 remains in question, however stronger economic data is emerging inkey areas such as China. Accordingly, the IEA maintain their global oil demand growth forecast of 1.4 mbd in2019.

Following a weak Q1 2019, global refining margins have recovered strongly in line with a rebound ingasoline cracks. After hovering around Brent parity from October 2018, gasoline cracks rallied to over $12/bblin April 2019 as the seasonal switch to summer grade fuel coincided with refinery outages.

Source: BP Internal / ICE / IEA

Crude prices have rebounded so far this year primarily off the backof supply curtailmentsQ1 2019 was the strongest quarter for crude prices in recent years, with Brent rallying 27% and WTI over 30%.The price recovery was fuelled by the OPEC+ production cut agreement, with disruptions in Venezuela and Iranadding further upside

Saudi Arabia over-delivers on supply cuts, whilst Russia takes amore gradual approach to cutting supplyThe sharp decline in OPEC crude supply in March 2019 was driven by deepening production cuts in Saudi Arabiaand involuntary losses in Venezuela which is exempt from OPEC cuts. Whilst Saudi Arabia cut output to 500kbdbelow targeted, Russia remained above the target level for production, although output has gradually fallenthroughout Q1 2019.

Oil market update

https://comms.bp.com/3IMU-KCO8-78HW38BFC/cr.aspx[15/05/2019 11:06:47]

Alberta curtailments and involuntary supply cuts in Venezuela andIran remove further heavy barrels from the marketVenezuelan crude supply fell 300kbd month-on-month in March 2019 as power outages and sanctions impactedproduction. Iranian crude supply stayed level in Q1 2019, however remains around 1 mbd below pre-sanctionlevels. Whilst Canadian crude supply has risen so far this year on easing curtailment rules, output remains 200kbd below December 2018 levels.

Net speculative length has been increasingly positive so far in 2019Contracts have risen steadily to over 350 thousand in April 2019, indicating potential additional price support frommanaged money in the market.

Oil market update

https://comms.bp.com/3IMU-KCO8-78HW38BFC/cr.aspx[15/05/2019 11:06:47]

US production continues to outpace takeaway capacityCrude production in the US rose to just under 12mbd in March 2019, although the pace of growth so far this yearhas slowed. The IEA expects US crude oil output growth of 1.2 mbd in 2019, compared to 1.6 mbd in 2018. Stocksat Cushing built sharply in February 2019 and have since levelled off to stand 10 mb higher year-on-year.

Brent-Dubai differential narrows as production cuts support heaviergradesDespite some new infrastructure capacity in the US helping WTI narrow its discount to Brent to $7/bbl in April

Oil market update

https://comms.bp.com/3IMU-KCO8-78HW38BFC/cr.aspx[15/05/2019 11:06:47]

2019, the spread remains relatively wide. Conversely, Dubai grade crude has strengthened to around parity withBrent, as supply cuts in OPEC countries, Iran, Venezuela and Alberta all impact directly on the supply of heavy,sour oil.

Limited availability of heavy crude has impacted product cracksHSFO cracks remain elevated as a result of crude supply disruptions removing heavy barrels from the market.Gasoline cracks recovered strongly in March/April 2019 as the seasonal switch to summer grade fuel coincidedwith refinery outages. Despite the recovery in gasoline cracks, naphtha values remained suppressed at thebeginning of April 2019.

Oil market update

https://comms.bp.com/3IMU-KCO8-78HW38BFC/cr.aspx[15/05/2019 11:06:47]

Refinery margins have recently recovered in line with strongergasoline cracksGlobal RMM has recovered from lows of $6/bbl in January 2019 to around $17/bbl in April 2019 driven by therebound in gasoline cracks. However, the Global RMM of $10.2/bbl recorded in Q1 2019 was the lowest quarterlyvalue since 2010.

US gasoline demand in January/February 2019 was fractionallyhigher than 12 months earlier Colder weather in the US weighed on gasoline demand which despite growing year-on-year in February 2019 wasfrom a weak February 2018 base. Gasoline demand in OECD Europe was above the 2014-2018 range inFebruary 2019.

Oil market update

https://comms.bp.com/3IMU-KCO8-78HW38BFC/cr.aspx[15/05/2019 11:06:47]

LPG and Ethane demand had been strong so far in 2019Across January/February 2019, demand for LPG and ethane was on average 140kbd higher than the same periodin 2018, which was also a strong year overall. Naphtha and jet/kerosene demand in January/February 2019 wereboth very similar to a year earlier.

Refinery outages in the US hit crude runsUS crude runs fell 200kbd year-on-year in 1Q19, and in March 2019 were 600 kbd lower than a year earlier due toa mixture of planned and unplanned outages. Conversely, OECD Europe crude runs rose in February 2019 to

Oil market update

https://comms.bp.com/3IMU-KCO8-78HW38BFC/cr.aspx[15/05/2019 11:06:47]

600 kbd higher than a year earlier despite the low refinery margin environment.

Total OECD crude stocks remain relatively flatOECD crude stocks have remained within a 100 mb range since the significant draws in 2017 and were downfractionally by 20 mb year-on-year in February 2019.

Total OECD product stocks have drawn at similar levels to Q1 2018In line with the typical seasonal downward trend, total OECD product stocks declined 30 mb in February 2019,with gasoline stocks drawing 10 mb after 2 months of significant builds.

Oil market update

https://comms.bp.com/3IMU-KCO8-78HW38BFC/cr.aspx[15/05/2019 11:06:47]

Oil demand growth continues to be dominated by non-OECDcountries The IEA expects OECD oil demand growth to be 0.3 mbd in 2019, with non-OECD oil demand –driven by Asia –growing by 1.1 mbd. While LPG/ethane is the largest contributor to growth, the incremental increase is expectedbe almost half of that seen in 2018.

BP Energy Outlook 2019: Growing demand for liquid fuels inemerging economies is met by increased supplies from low-costproducers

Oil market update

https://comms.bp.com/3IMU-KCO8-78HW38BFC/cr.aspx[15/05/2019 11:06:47]

The global market for liquid fuels is set to continue to expand for a period, with growing demand for developingeconomies met by increased oil supply predominantly from the US and OPEC.

BP Energy Outlook 2019: The transition to a lower-carbon fuel mixcontinues, led by renewables and natural gasRenewables and natural gas are forecast to account for almost 85% of the growth in primary energy out to2040, with their importance increasing relative to all other sources of energy. Oil increases during the first half ofthe outlook, although much slower than in the past, before plateauing in the 2030s.

Upcoming eventsOPEC members are due to meet in Vienna on 25th June 2019They will be joined by other members of OPEC+ on 26th June 2019. The meeting will provide an opportunity toassess the extent to which their production cut has succeeded in rebalancing the market.

Oil market update

https://comms.bp.com/3IMU-KCO8-78HW38BFC/cr.aspx[15/05/2019 11:06:47]

This communication may contain information relating to Iran or Cuba, or which is otherwise sensitive in nature. If you are a US Person, you must not act on or rely on thecontents of this presentation. For the purposes of this presentation, US Persons include but are not limited to US citizens, permanent resident aliens (green card holders),persons employed by US companies and any persons physically present in the US or its territories during the period that he/she is so present. This update and its contentshave been provided to you for informational purposes only. This information is not advice on or a recommendation of any of the matters described herein or any related

Download and printthis update

Download the BPSustainability Report

Download the BPEnergy Outlook

How can we help you?We offer a range of integrated services and innovative products to meet the needs of producers, refiners andconsumers. Our team combines international expertise with deep knowledge of global markets and we have a trackrecord of working with diverse participants, including governments, trading companies, banks, airlines, transport,biofuels, marine, industrial and more.

Contact us Have a question? Get in touch - we are happy to help.

About supply and trading at BPOur supply and trading business connects BP to the world’s traded markets for oil,gas, power, refinery feedstocks and currencies.

We market BP’s equity crude oil and natural gas, import feedstocks for our refinery system and buy products tomeet marketing demand. We offer a combination of unique expertise in physical supply and trading, innovativefinancial structures, and world-class analytics to deliver long-term value, from wellhead to end customer.

Oil market update

https://comms.bp.com/3IMU-KCO8-78HW38BFC/cr.aspx[15/05/2019 11:06:47]

commercial transactions, whether they consist of physical sale or purchase agreements, financing structures (including, but not limited to senior debt, subordinated debtand equity, production payments and producer loans), investments, financial instruments, hedging strategies or any combination of such matters and no informationcontained herein constitutes an offer or solicitation by or on behalf of BP PLC. or any of its subsidiaries (collectively “BP”) to enter into any contractual arrangement relatingto such matters. BP makes no representations or warranties, express or implied, regarding the accuracy, adequacy, reasonableness or completeness of the information,assumptions or analysis contained herein or in any supplemental materials, and BP accepts no liability in connection therewith. BP deals and trades in energy relatedproducts and may have positions consistent with or different from those implied or suggested by this presentation. This presentation also contains forward-lookingstatements. Any statements that are not historical facts, including statements about BP’s beliefs or expectations, are forward-looking statements. These statements arebased on plans, estimates and projections and you should not place undue reliance on them. These statements are not guarantees of future performance and involvecertain risks and uncertainties, which are difficult to predict. Therefore, actual future results and trends may differ materially from what is forecast, suggested or implied inany forward-looking statements in this presentation due to a variety of factors. Factors which could cause actual results to differ from these forward-looking statements mayinclude, without limitation, general economic conditions; conditions in the markets in which BP is engaged; behaviour of customers, suppliers, and competitors;technological developments; the implementation and execution of new processes; and changes to legal, tax, and regulatory rules. In addition, financial risks such ascurrency movements, interest rate fluctuations, liquidity, and credit risks could influence future results. The foregoing list of factors should not be construed as exhaustive.BP disclaims any intention or obligation to publicly or privately update or revise any forward looking statements, whether as a result of new information, future events, orotherwise. Any services to third parties referred to in this presentation concerning BP Risk Management or Structured Products are provided by Britannic Trading Limited(BTL) and Britannic Energy Trading Limited (BETL) which are authorised and regulated by the UK Financial Conduct Authority to provide certain investment services in theUK. Any investment services described herein are intended for only Eligible Counterparties or Professionals as those terms are defined by the UK Financial Services &Markets Act 2000 and the FCA Handbook, or only for Eligible Contract Participants as that term is defined in the U.S. Commodity Exchange Act.

© Copyright 2017 BP Oil International Ltd., 20 Canada Square, London E14 5NJ. Registered in England and Wales, number 322365.

Legal notice | Privacy statement | Unsubscribe from this email