Current State of The Global Oil Market Webinar Slides

Current State of the Global Oil Market
Dominick A Chirichella, Senior Partner Energy Management Institute

Jodi Quinnell, Oil Product Manager, Spring Rock
Hillary Stevenson, Oil Market Business Development, Analyst
February 17, 2016
2016,
Genscape Incorporated. All rights reserved.
info@genscape.com
US: +1 502 583 3435 | EU: +31 20 524
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2016, Genscape Incorporated. All rights reserved.
Presenters
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Dominick Chirichella
Founding Partner
Energy Management
Institute
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with
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Jodi Quinnell
Oil Product Manager
Genscape
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with
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Hillary Stevenson
Oil Markets and
Business Development
Analyst
Genscape
Questions?
The Global Oil Market

Dominick A Chirichella, Senior Partner Energy Management Institute
2016,
info@genscape.com
US: +1 502 583 3435 | EU: +31 20 524
4089
As Inventories Hit Record High Levels Prices Remain on the Defensive
Feb 17, 2016 Energy Management Institute www.emi.org

5
Is the Saudi Arabian Led Market Share Strategy Working?

Price Decline Since Peaking
WTI
Brent
OPEC Basket
Brent/WTI Spread
RBOB Gasoline, $/gal
ULS HO, $/gal
Gasoil, $/mton
BH US Oil Rigs
US Crude Prod,MilBpd
OPEC Production
Tot US Crude Inv
US HO Stocks
US RBOB Stocks
Price Peak
Mid-June,2104
$/bbl
$107.26
$115.06
$110.48
$7.80
$3.1277
$3.0524
$938.75
Latest
2/16/16
$/bbl
$29.39
$33.42
$26.74
$4.03
$1.0252
$1.0675
$316.25
Latest
1,545
439
8.446
9.186
29.720
32.300
Thousands of Barrels
388,090
501,958
120,566
160,976
214,977
255,657
Change
Change
%
($77.87)
($81.64)
($83.74)
($3.77)
($2.1025)
($1.9849)
($622.50)
-72.6%
-71.0%
-75.8%
-48.3%
-67.2%
-65.0%
-66.3%
Change
(1,106)
0.740
2.580
Change
-71.6%
8.8%
8.7%
113,868
40,410
40,680
29.3%
33.5%
18.9%
Is there a light at the end of the tunnel?

World Liquid Fuels Production and
Consumption Balance
million barrels per day (MMb/d)
MMb/d
100
98
96
94
Forecast
Implied stock change and balance (right axis)

World production (left axis)
5
4
World consumption (left axis)
92
90
88
86
-1
84
-2
82
2011-Q1
-3
2012-Q1
2013-Q1
2014-Q1
2015-Q1
2016-Q1
Source: Short-Term Energy Outlook, February 2016.
2017-Q1
Evolution of WTI Price Since the Collapse
Will they or Will They Not? A Few Questions to Discuss
Will global Supply and Demand rebalance in a reasonable period of time solely based on
low oil price environment?
Absent a production cut how low will prices have to go for the global oil market to enter
into a sustained rebalancing pattern?
Will the elevated geopolitical risk in the main oil producing regions of the world impact
prices going forward?
How will the uncertainty in the global economies impact oil demand and thus price?
Will the new Deal to freeze production levels proposed on Tuesday garner support?
Will Iran buy into the deal? If they do will they cheat?
Will Russia abide by deal or cheat?
For the short term the announcement of this deal is likely to keep a floor on prices and
possibly push some additional shorts out of the market especially if tomorrows meet with
Iran and Iraq is successful.
North American Crude Production

Jodi Quinnell, Oil Product Manager, Spring Rock
10
2016,
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Agenda
Overview: Implications for crude oil production due to lower prices

CAPEX reductions
Oil rigs have fallen dramatically
Economics of key shale plays are being challenged
Forecast: Yr/yr declines in 2016 and 2017

Hyperbolic declines from shale impacting base declines
Efficiency gains happening, but not enough to overcome
steep declines
11
CAPEX Cuts Continue to Run Deep (26 Companies so far; $41 bn cut to date)
$250,000
23%
$200,000
Million USD
25%
$150,000
$100,000
$50,000
$FY2014
FY2015
FY2016
Source: Spring Rock, Company Filings
12
U.S. Oil Rigs Have Not Hit Bottom

Oil Rig Forecast
1,800
1,600
No. of Rigs
1,400
1,200
1,000
800
Another 219 Rig Drop (252 in Aug)
600
400
200
Currently at 471
2/5/2016 Fcst
Actuals
Source: Spring Rock as of 9/11 Main Forecast
13
Oil and Horizontal Rigs at All Time High in Oct. 2014; Now Approaching
Levels Not Seen Since Bottom in 2009
Total Rigs by Play
600
2,000
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
500
No. of Rigs
No. of Rigs
Total U.S. Rigs
400
300
200
100
0
Eagle Ford
Gas
Oil
Horz
Source: Spring Rock, Rig Data as of 2/5
14
Permian
Bakken
Niobrara
Permian Oil Breakeven Economics; Little to No Areas of the Permian are

Economic at Current Strip Prices
15
U.S. Crude Oil Production Is Declining
Year on Year Change

1,500
U.S. Production Forecast
1288
12,000
980
1,000
Production Peaked in April at 9.6 MMb/d
841
10,000
649
8,000
128
Mb/d
Mb/d
500
173
6,000
4,000
Set to decline to 7.8 MMb/d by mid 2017
2,000
-
-500
-762
-1,000
-724
2010 2011 2012 2013 2014 2015 2016 2017

U.S.
Source: Spring Rock
16
Total US Fcst as of 2/5/2016
Yr/Yr Growth- GoM and Permian Only Growth Driver in 2016

Regional Production 2016 Yr/Yr Change (Mb/d)
Regional Production 2017 Yr/Yr Change (Mb/d)
(-218)
(-314)
(-48)
(-54)
(-14)
(-1)
(-63)
(-85)
(-2)
(-1)
(-14)
+4
(-10)
(-21)
+15
(-150)
(-275)
(-167)
+46
(-48)
(-48)
17
(-20)
Hyperbolic Decline From Shale Impacting Base Decline

2,500
1,095 Mb/d decline 1st year (2014)

915 Mb/d decline 1st year; 276 Mb/d decline in 2014
2,000
525 Mb/d decline 1st year; 107 Mb/d decline in 2014
Mb/d
1,500
~360 Mb/d decline 1st year; 70 Mb/d decline in 2014
1,000
500
1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 55 58 61 64 67 70 73 76 79 82
2008
2009
Months
2010
2011
Source: Spring Rock
18
2012
2013
Canadian Supply Forecast Revised Down, But Still Expecting Growth From
Oil Sands
Current forecast vs. 08/01/2014
6,000
Mb/d
5,000
4,000
2016
+117 Mb/d
3,000
2,000
2017
+193 Mb/d
1,000
0
Bitumen
SCO
Heavy
Light+Med
Cond
Prev (08/01/2014)
Short term conventional forecast downward revision alongside significant oil sands permit pushbacks
Source: Spring Rock
19
North American Supply Chain Dynamics

Hillary Stevenson, Oil Markets and Business Development Analyst
info@genscape.com
US: +1 502 583 3435 | EU: +31 20 524 4089
A Blast from the Past
21
Cushing Storage
100
100%
90
80
80%
70
04/14/15, 65.08
mn bbls
60
60%
50
01/05/16, 66.32
40
40%
30
20
02/05/16, 66.21
20%
10
0
0%
Cushing Storage
22
Cushing Capacity
Cushing Capacity Utilization
$120.00
70
$100.00
60
$80.00
50
$60.00
40
$40.00
30
$20.00
20
$$(20.00)
May-13
10
Aug-13
Nov-13
Feb-14
May-14
Aug-14
Nov-14
Feb-15
May-15
Aug-15
NYMEX Light Sweet Crude Oil (WTI) Calendar Spread Electronic (12 Month) (Front Month)
NYMEX Light Sweet Crude Oil (WTI) Futures Electronic (Front Month)
Cushing Storage
23
Nov-15
0
Feb-16
mn bbls
Cushing Stocks and WTI
Impact of Cushing Pipeline Balance

70
1,200
65
60
55
800
225,000 bpd
400
mn bbls
Mbpd
50
45
40
35
30
0
25
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2012
2013
2014
2015
2016
20
-400
24
Cushing Storage
Storage and Transportation Trends

Cushing To Gulf Utilization
Into Cushing Utilization
Canada Storage
90%
PADD 3 Storage
PADD 2 Storage
120
80%
100
70%
80
mn bbls
60%
50%
40%
60
40
30%
20%
20
10%
0%
Source: Genscape
25
End of the Year Effect

EIA Cushing Stocks (mn bbls)
60
Gulf Coast Domestic Waterborne Loadings
50
40,000,000
40
35,000,000
30
30,000,000
20
10
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
November
December
bbls
25,000,000
20,000,000
15,000,000
EIA PADD 3 Stocks (mn bbls)

10,000,000
140
120
5,000,000
100
80
0
1
60
40
2015
10
11
12
2016
20
0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Novemeber
26
December
Canadian East Coast
U.K
U.S. Gulf Coast
U.S. Mid-Atlantic
U.S. West Coast
Western Europe
Caribbean
Southern Europe
Storage Domino Effect
80
600
500
Cushing
60
400
Corpus Christi
Beaumont-Nederland
Houston
40
300
Midland-Basin
Patoka
St. James
200
EIA PADD III
20
100
0
0
Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16
27
EIA US
PADD 3 Capacity Growth

250
80
200
60
mn bbls
150
40
100
20
50
0
2014 2015 2016 2014 2015 2016 2014 2015 2016 2014 2015 2016 2014 2015 2016
BeaumontNederland
Corpus Christi
Existing
28
Houston
Midland-Basin
St. James
Projected
0
2014
2015
Total PADD 3
Existing
Projected
2016
Waterborne Imports
US Imports
NYMEX Light Sweet Crude Oil (WTI) Futures Pit from

today [Last, Price]
$10.00
ICE Brent Crude Oil Futures from today [Last, Price]
$9.00
$55.00
$8.00
3
$50.00
$6.00
2
$5.00
$/bbl
$45.00
$4.00
$3.00
1
$/bbl
mn bpd
$7.00
$40.00
$2.00
$1.00
0
$35.00
$-
$30.00
29
Dec-24
Oct-23
May-24
Mar-23
Aug-22
Jan-22
Jun-21
Nov-20
Apr-20
Sep-19
Brent-WTI Spread
Jul-18
Hawaii
Feb-19
Northeast
Dec-17
West
$25.00
May-17
Gulf Coast
Oct-16
Alaska
Mar-16
Pacific Northwest
Crude by Rail
U.S. East Coast Rail Unloadings
vs. Brent-WTI Spread
North Dakota Rail Loadings

vs. Brent-WTI Spread
550,000
$10
400,000
$9
350,000
$10
$9
$8
$8
300,000
$7
$7
250,000
450,000
$4
bpd
$5
$/bbl
$6
bpd
500,000
$6
200,000
$5
$4
150,000
$3
$3
100,000
North Dakota Loadings
Brent-WTI Spread
$1
USEC average unloadings
Jan-16
Dec-15
Nov-15
Oct-15
Sep-15
Aug-15
Jul-15
Jun-15
May-15
$0
Apr-15
Mar-15
Jan-16
Dec-15
Oct-15
Nov-15
Sep-15
Aug-15
Jul-15
Jun-15
May-15
Apr-15
Mar-15
Feb-15
$0
Jan-15
350,000
50,000
Feb-15
$1
30
$2
$2
Jan-15
400,000
Brent-WTI Spread
$/bbl
600,000
Where do we go from here?
31
2016,
info@genscape.com
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4089
Storage
Storage Utilization
80%
70%
60%
50%
40%
30%
20%
10%
0%
PADD 1
PADD 2
PADD 3
EIA/Genscape
32
PADD 4
PADD 5
Genscape Monitored
US
Storage Outlook
US Storage
600
6/17/2016,
540.868
550
mn bbls
500
450
400
350
300
33
EIA Stocks Crude Oil
Projected Stocks Crude Oil
Trend
80% Capacity
Refinery Utilization
Mid Continent Primary Processing

Maintenance
Announced 2016 Rate Cuts
35%
Refinery
Valero Memphis
PBF Toledo
PES Philadelphia
Monroe Energy - Trainer
Exxon Baytown
30%
25%
20%
15%
10%
5%
7/1
7/8
7/15
7/22
7/29
8/5
8/12
8/19
8/26
9/2
9/9
9/16
9/23
9/30
10/7
10/14
10/21
10/28
11/4
11/11
11/18
11/25
12/2
12/9
12/16
12/23
12/30
0%
2013
34
2014
2015
Capacity
195,000
160,000
335,000
185,000
584,000
Rate
Cut
25%
6.25%
10%
10%
13%
Bpd
rate cut
48,750
10,000
33,500
18,500
75,920
186,670
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Contact Us:
Dominick Chirichella
Founding Partner, EMI
dchirichella@emimail.org
Jodi Quinnell
Oil Product Manager
jquinnell@genscape.com
Hillary Stevenson
Analyst, Oil Markets and Business Development
hstevenson@genscape.com
502-238-1555
info@genscape.com
US: +1 502 583 3435 | EU: +31 20 524 4089
USA
Louisville
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Current State of the Global Oil Market

Dominick A Chirichella, Senior Partner Energy Management Institute

2016, Genscape Incorporated. All rights reserved.