OIL SUPPLY

AGENDA

CHAPTER ONE

BATTLEBARREL

CHAPTER TWO

OIL WAR

CHAPTER THREE

OUTLOOK

OIL SUPPLY

AGENDA

CHAPTER ONE

BATTLEBARREL

CHAPTER ONE

BATTLE FOR MARKET SHARE

Source: Investopedia, CIA World Fact Book

Oil &Gas42%

Oil & Gas30% Country’s

GDP

Economic DiversificationDiversify & invest in education,

science and technology

Rely heavily on Oil & Gas, but want to diversify

Saudi Arabia

11%Market Share

16%Market Share

Russia

Country’s GDP

CHAPTER ONE

NEW MAJOR OIL SUPPLY INFLUENCER

0

40

80

120

160

2010 2012 2014 2016 2018 2020

Unit: USD/BBL

OPEC (SAUDI)

& RUSSIA IN CONTROL

U.S. SHALE

Ruins the status quo, more supply, leads to price war

40USD/BBL

Source: BP Statistical Review

CHAPTER ONE

UNEXPECTED OIL SUPPLY

• Advanced Tech. • Costs typically higher, but

improved via:• Economies of scale• Govt. policy support

CONVENTIONAL WAY:

VERTICAL DRILLING HORIZONTAL DRILLING& FRACTURING

SHALE WAY:

U.S. oil industry found new hope in Shale

• Conventional Tech.• Costs vary greatly

• Onshore• Offshore & Deepwater

Shale rocks Previously thought to have no production

potential

Source: James Scherrer

CHAPTER ONE

U.S. SHALE RISES

The U.S., from importer to exporter

2014 2015 2016 2017 2018 2019

U.S.

Saudi Arabia

Russia

U.S. Shale becomes quicker to drill and cheaper

as production rises

Source: IHS Markit

CHAPTER ONE

MAINTAINING SUPPLY LEADERSHIP

OPEC+

To compete with U.S. Shale & remain top exporter

Once enemies, now allies

Jan 16 Jul 16 Jan 17 Jul 17

50-55 USD/BBL

35 USD/BBL

To balance the market

Source: BP Statistical Review

OIL SUPPLY

AGENDA

CHAPTER TWO

OIL WAR

CHAPTER TWO

COVID-19 PILES ON THE PRESSURE

Early 2020,COVID-19 Crashes demand, starting from China

Saudi Arabia • Yes more cuts

• Wants to balance market

Russia• No more cuts• Wants market share

OPEC+ failed to agree to any further cuts

CHAPTER TWO

CARTEL VS. FREE MARKETFree market companies act independently

“U.S. kept producing until storage full”

The lowest WTI ever on 20th April 2020

-37.6 USD/BBLOnly shut-in wells if they are

no longer making money

“U.S. Shale is a free market”

CHAPTER TWO

THE OIL WAR BEGINS

Demand-Supply Gap

Supplies remain high, inventories overflow, price collapses

Unit: USD/BBL

Jan 20 Feb 20 Mar 20 Apr 20

Unit: MBD Crude Price

-4

-7

-11

-21

Source: IHS Markit

CHAPTER TWO

HISTORIC DEAL TO END THE OIL WAR

Source: CNBC

Once enemies, now allies again

“Producers joinedforces to fight disaster”

• Budget deficits

• Job cutsPrice rises to 34-45 USD/BBL

May-July ‘20

Aug-Dec’20

2021

7.75.8

9.7

“Severe impacts from very low prices”

• Higher debts

• Bankruptcies

CHAPTER TWO

RESERVES SITUATION

“…we’re confident that there are around 50 years of oil left..”

- HSBC, 2011

“…~50 Years of oil left…”

- BP, 2020

Lower production and refinery runs help prolonging supply life even further

OIL SUPPLY

AGENDA

CHAPTER THREE

OUTLOOK

OPEC+ attempts to balance market but faces potential issues

CHAPTER THREE

POTENTIAL SUPPLY GROWTH IN 2021

Supply WatchlistCompliance Concern

Russia

Nigeria

Iran & Venezuela“Sanction”

Libya“Civil War”

Non-OPEC“Revival”

U.A.E.

Iraq

CHAPTER THREE

2021 OIL MARKET BALANCEGlobal Supply and Demand Changes

Demand(MBD)

Supply(MBD)

Balance(Demand – Supply)

Base Case

45-55 USD/BBL+3.5

• COVID-19 under control• Good economic recovery

• Good compliance rate• Moderate growth from

“Supply Watchlist”

+5.3

+1.8

Low Case

• COVID-19 persists• Poor economic recovery+1.3

+5.7• Poor compliance rate• Significant growth from

“Supply Watchlist”

-4.4 35-45 USD/BBL

Price Forecast : Price Forecast :

Source: IHS Markit, PRISM

OIL SUPPLY