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7/30/2019 Oil Market Report: Product supply increasing again
1/12
Oil Market ReportProduct supply increasing again afterpre-winter refinery maintenance
22 NOVEMBER 2012
7/30/2019 Oil Market Report: Product supply increasing again
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2
SEB Oil Market Report
Crude oil market
Since its first release in July 2011, the IEA 2012 global oildemand forecast has been progressively reduced by1.4 mb/d. Given current high macroeconomicheadwinds and/or uncertainties affecting all majorregional markets, it is hard to imagine the situationchanging in the foreseeable future. In addition,expected long-term supply continues to increase astight US oil production has exceeded expectations.Taking mainly these factors into account we recentlylowered our Brent crude oil price forecast with riskskewed to the downside. Nevertheless, we stillanticipate record high global oil consumption in 2012.While marginal unconventional barrels remainexpensive to produce, middle distillate marketscontinue tight, geopolitical risk is extraordinarily high,and oil producers retain strong incentives to defendprices. Given all these factors, a deep, prolongeddownturn in the oil market appears neither imminentnor likely unless the risk of a global recession increasessignificantly.
While most recent data suggest the oil market was relativelybalanced in Q3-12, there appears to be an oversupply of
around 1 mb/d in the current quarter, partly due to lowerconsumption as a result of Hurricane Sandy and reactivation
of North Sea production following maintenance. Overall,current OECD industry oil stocks are well above their fiveyear average due to high North American and Asian crude
oil stocks. Conversely, global oil product stocks are belownormal.
The International Energy Agencys (IEA) World EnergyOutlook was optimistic regarding tight US oil production,
which it now expects will increase from approximately 1mb/d in 2011 to over 4 mb/d by the mid-2020s. As a result,
the US may replace Saudi Arabia as the worlds largest oilproducer by around 2020 and become virtually energy self-
sufficient by the mid-2030s. Furthermore, North Americacould become a net exporter by around 2030. However,considering the novelty of tight oil production considerable
uncertainty still surrounds these projections, e.g. regardingnon-US potential and the life span of such resources.
Geopolitical conditions in the MENA region continue todeteriorate, Gaza being the latest example and a source of
significant market turbulence since the present conflictbegan. At the time of writing a ceasefire has at least
postponed an Israeli ground invasion though the situationwill probably remain tense until a more far reaching peaceagreement is in place. Meanwhile, the civil war in Syria is
increasingly impacting surrounding countries, such asTurkey, Lebanon and Israel. Other conflicts also remain
unresolved, including Iran, Egypt and Bahrain, and couldrevive at any time even though attention is currentlyfocused elsewhere.
(NYMEX/ICE, $/b, front month, daily closing)
65
70
75
80
85
90
95
100
105
110
115120
125
130
jan-10
feb-10
mar-1
0
apr-10
maj-1
0
jun-10
jul-10
aug-10
sep-10
okt-10
nov-1
0
dec-10
jan-11
feb-11
mar-1
1
apr-11
maj-1
1
jun-11
jul-11
aug-11
sep-11
okt-11
nov-1
1
dec-11
jan-12
feb-12
mar-1
2
apr-12
maj-1
2
jun-12
jul-12
aug-12
sep-12
okt-12
nov-1
2
NYMEXWTI
ICE Brent
(mb/d)
79
80
81
82
83
84
85
86
87
88
89
90
91
92
jul-09
okt-09
jan-10
apr-10
jul-10
okt-10
jan-11
apr-11
jul-11
okt-11
jan-12
apr-12
jul-12
okt-12
2010 2011 2012 2013
Chart Sources: IEA, Bloomberg, SEB Commodity Research
2012
(mb/d)
Revision
(kb/d)
2013
(mb/d)
Revision
(kb/d)IEA 89.6 -80 90.4 -70EIA 89.05 -40 89.94 -70
OPEC 88.80 -10 89.57 -20
($/b) Q1 Q2 Q3 Q4 FullYear
2012 - - - 110 111.72013 105 105 110 110 107.52014 - - - - 110.02015 - - - - 115.0
7/30/2019 Oil Market Report: Product supply increasing again
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7/30/2019 Oil Market Report: Product supply increasing again
4/12
7/30/2019 Oil Market Report: Product supply increasing again
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SEB Oil Market Report
European oil product markets
Most European refineries are now back online afterpre-winter maintenance despite restart delaysoccurring. Production at Asian and Middle Eastern
refineries has also largely resumed with the US alsoalmost back to normal. Over the last two months, oilproduct cracks have mainly trended lower in all partsof the barrel, in most cases from high levels. Europeantemperatures remain relatively warm, depressing oilproduct demand, which is good news for the still tightmiddle of the barrel. Although refineries are back inproduction, easing worst fears of a middle distillatecrunch, it is still too early to assume the threat haspast. This part of the barrel will remain sensitive andshould be monitored closely, particularly given itspotential impact on overall oil sector sentiment.
Light ends: With high stock levels and good physical supplythe naphtha market appears to have passed its peak inrelatively strength this time around. Off driving seasondemand from gasoline blenders is weak while
petrochemical demand is low due to economic headwindsand consumers seeking to reduce stocks before the yearend. However, flow to Asia, where demand is stronger, and
still high propane prices offer support. As we expected, withthe strong market seasonally over-extended, falls in
gasoline cracks in October were inevitable. AlthoughEuropean inventories remain low, their US counterpartshave normalised. Meanwhile, relatively stronger US demand
continues to pull barrels out of Europe. A more robust Asian
market may also help drive the current crack rebound.
Middle distillates: Relatively soft demand, inboundarbitrage cargoes and refineries coming back online have
cooled the overheated diesel market which seems to haveweathered the eye of the storm. For now at least, the focus
has switched to the jet fuel market which has tightenedgradually since refineries began maximising diesel
production. Demand is good, stocks are low and futurearbitrage inflow appears limited as Asia is prioritising itskerosene output ahead of winter. With European oil product
stocks for heating purposes still low, the big test for middledistillates will probably occur when temperatures first fall
sharply. We expect the middle part of the barrel to remainrelative strong, at least for now.
Heavy ends: Fuel oil remains the weakest link in productmarkets. However, after more than two months of falling
cracks relative downside may well be more limited. Plentifulsupply and weak demand are weighing on the Europeanmarket while so far supportive flow to Asia need not
necessarily continue given strong local supply andmoderate demand. Lower relative prices may however
stimulate some feedstock demand. The high-low spread hasnarrowed on better European LS supply.
($/t, daily closing)
600
650
700
750
800
850
900
950
1000
1050
1100
1150
1200
jan-1
0
feb-1
0
mar-10
apr-10
maj-1
0
jun-1
0
jul-10
aug-1
0
sep-1
0
okt-10
nov-10
dec-1
0
jan-1
1
feb-1
1
mar-11
apr-11
maj-1
1
jun-1
1
jul-11
aug-1
1
sep-1
1
okt-11
nov-11
dec-1
1
jan-1
2
feb-1
2
mar-12
apr-12
maj-1
2
jun-1
2
jul-12
aug-1
2
sep-1
2
okt-12
nov-12
Naphtha
Gasoline
($/t, daily closing)
550
600
650
700
750
800
850
900
950
1000
1050
1100
1150
jan-10
feb-10
mar-1
0
apr-1
0
maj-1
0
jun-10
jul-10
aug-10
sep-10
okt-1
0
nov-1
0
dec-10
jan-11
feb-11
mar-1
1
apr-1
1
maj-1
1
jun-11
jul-11
aug-11
sep-11
okt-1
1
nov-1
1
dec-11
jan-12
feb-12
mar-1
2
apr-1
2
maj-1
2
jun-12
jul-12
aug-12
sep-12
okt-1
2
nov-1
2
Jet fuel
Diesel 10 ppm
Gasoil 0.1%
($/t, daily closing)
350375400425450475500525550575600625650675700725750775800
jan-10
feb-10
mar-1
0
apr-10
maj-1
0
jun-10
jul-10
aug-10
sep-10
okt-10
nov-10
dec-10
jan-11
feb-11
mar-1
1
apr-11
maj-1
1
jun-11
jul-11
aug-11
sep-11
okt-11
nov-11
dec-11
jan-12
feb-12
mar-1
2
apr-12
maj-1
2
jun-12
jul-12
aug-12
sep-12
okt-12
nov-12
High sulphur fuel oil (3.5%)
Low sulphur fuel oil (1.0%)
Chart Sources: Bloomberg, SEB Commodity Research
7/30/2019 Oil Market Report: Product supply increasing again
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6
SEB Oil Market Report
Oil products
(DOE, mb, weekly data) (NYMEX, /gal, front month, daily closing)
110
120
130
140
150
160
170
180
190
200
210220
230
240
j f m a m j j a s o n d
Gasoline 5 year average
Gasoline 2012
Distillate fuel oil 5 year average
Distillate fuel oil 2012
180190200210220230240250260270280290300310320330
340350360
jan-10
feb-10
mar-1
0
apr-10
maj-1
0
jun-10
jul-10
aug-10
sep-10
okt-10
nov-10
dec-10
jan-11
feb-11
mar-1
1
apr-11
maj-1
1
jun-11
jul-11
aug-11
sep-11
okt-11
nov-11
dec-11
jan-12
feb-12
mar-1
2
apr-12
maj-1
2
jun-12
jul-12
aug-12
sep-12
okt-12
nov-12
Gasoline
Heating oil
(%, weekly data) ($/t, daily closing)
81
82
83
84
85
86
87
88
89
90
91
92
93
j f m a m j j a s o n d
2007-2011 avg.
2012
550
600
650
700
750
800
850
900
950
1000
1050
1100
jan-10
feb-1
0
mar-1
0
apr-10
maj-1
0
jun-10
jul-10
aug-10
sep-10
okt-10
nov-1
0
dec-10
jan-11
feb-11
mar-1
1
apr-11
maj-1
1
jun-11
jul-11
aug-11
sep-11
okt-11
nov-1
1
dec-11
jan-12
feb-12
mar-1
2
apr-12
maj-1
2
jun-12
jul-12
aug-12
sep-12
okt-12
nov-1
2-20
-10
0
10
20
30
40
50
60
70
80
90
100
110
ICE Gasoil 0.1% (left)Jet fuel premium (right)Diesel 10 ppm premium (right)
($/b, daily closing) ($/t, daily closing)
-25
-20
-15
-10
-5
0
5
10
15
20
25
30
35
jan-
10
feb-10
mar-1
0
apr-1
0
maj-1
0
jun-
10
jul-10
aug-1
0
sep-1
0
okt
-10
nov-1
0
dec-1
0
jan-
11
feb-11
mar-1
1
apr-1
1
maj-1
1
jun-
11
jul-11
aug-1
1
sep-1
1
okt
-11
nov-1
1
dec-1
1
jan-
12
feb-12
mar-1
2
apr-1
2
maj-1
2
jun-
12
jul-12
aug-1
2
sep-1
2
okt
-12
nov-1
2
Naphtha GasolineJet fuel Gasoil 0.1%Low sulphur fuel oil High sulphur fuel oilDiesel 10 ppm
-15-10-505
101520253035404550
5560657075
jan-10
feb-10
mar-1
0
apr-10
maj-1
0
jun-10
jul-10
aug-10
sep-10
okt-10
nov-10
dec-10
jan-11
feb-11
mar-1
1
apr-11
maj-1
1
jun-11
jul-11
aug-11
sep-11
okt-11
nov-11
dec-11
jan-12
feb-12
mar-1
2
apr-12
maj-1
2
jun-12
jul-12
aug-12
sep-12
okt-12
nov-12
Chart Sources: Bloomberg, SEB Commodity Research
7/30/2019 Oil Market Report: Product supply increasing again
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7
SEB Oil Market Report
Oil products
($/b, daily closing) (kt, monthly data)
-6-4-202468
10121416182022242628303234
36384042
jan-10
feb-10
mar-1
0
apr-1
0
maj-1
0
jun-10
jul-10
aug-10
sep-10
okt-1
0
nov-1
0
dec-10
jan-11
feb-11
mar-1
1
apr-1
1
maj-1
1
jun-11
jul-11
aug-11
sep-11
okt-1
1
nov-1
1
dec-11
jan-12
feb-12
mar-1
2
apr-1
2
maj-1
2
jun-12
jul-12
aug-12
sep-12
okt-1
2
nov-1
2
Asia (Minas)US (WTI)Europe (Brent)
Persian Gulf (Dubai)
20
30
40
50
60
70
80
90
100
110
120
130
140150
160
170
180
j f m a m j j a s o n d
4 year range, top
4 year range, bottom
2012
4 year average
(kt, monthly data) (kt, monthly data)
400
450
500
550
600
650
700
750
800
850
900
950
1000
1050
1100
1150
j f m a m j j a s o n d
4 year range, top
4 year range, bottom
2012
4 year average
100
150
200
250
300350
400
450
500
550
600
650
700
750
800
850
900
j f m a m j j a s o n d
4 year range, top
4 year range, bottom
2012
4 year average
(kt, monthly data) (kt, monthly data)
1000110012001300140015001600170018001900200021002200230024002500260027002800290030003100
j f m a m j j a s o n d
4 year range, top
4 year range, bottom
2012
4 year average
400
450
500
550
600
650
700
750
800
850
900
950
1000
1050
j f m a m j j a s o n d
4 year range, top
4 year range, bottom
2012
4 year average
Chart Sources: Bloomberg, PJK International, SEB Commodity Research
7/30/2019 Oil Market Report: Product supply increasing again
8/12
8
SEB Oil Market Report
Oil products
(DOE, mb/d, weekly data) (DOE, mb/d, weekly data)
13,4
13,6
13,8
14,0
14,2
14,4
14,6
14,8
15,0
15,215,4
15,6
15,8
j f m a m j j a s o n d
5y avg.
2011
2012
8,5
8,7
8,9
9,1
9,3
9,5
9,7
j f m a m j j a s o n d
5y avg.
2011
2012
(DOE, mb/d, weekly data) ($/t, daily closing)
4,0
4,2
4,4
4,6
4,8
5,0
5,2
5,4
5,6
j f m a m j j a s o n d
5y avg.
2011
2012
-24-20-16-12-8
-404
81216202428
32364044
jan-11
feb-11
mar-1
1
apr-11
maj-1
1
jun-11
jul-11
aug-1
1
sep-1
1
okt-11
nov-11
dec-1
1
jan-12
feb-12
mar-1
2
apr-12
maj-1
2
jun-12
jul-12
aug-1
2
sep-1
2
okt-12
nov-12
($/t, daily closing)
-25
-20
-15
-10
-5
0
5
10
15
20
jan-11
feb-1
1
mar-11
apr-11
maj-1
1
jun-11
jul-11
aug-11
sep-11
okt-11
nov-1
1
dec-11
jan-12
feb-1
2
mar-12
apr-12
maj-1
2
jun-12
jul-12
aug-12
sep-12
okt-12
nov-1
2
Heating oil/Gasoil
Jet fuel/Kerosene
Chart Sources: Bloomberg, SEB Commodity Research
7/30/2019 Oil Market Report: Product supply increasing again
9/12
9
SEB Oil Market Report
Related energy markets
(NYMEX, $/MMBtu, front month, weekly closing) (ICE, front month, weekly closing)
1
2
3
4
5
6
7
8
9
10
1112
13
14
2007
2008
2009
2010
2011
2012
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
2007
2008
2009
2010
2011
2012
10
20
30
40
50
60
70
80
90$/MMBtu (left axis)
GBp/therm (right axis)
(Nord Pool, /MWh, front quarter, weekly closing) (EEX, /MWh, front quarter, weekly closing)
20
25
30
35
40
45
50
55
60
65
70
75
80
2009
2010
2011
2012
20
25
30
35
40
45
50
55
60
65
70
75
80
85
90
95
2007
2008
2009
2010
2011
2012
(ECX ICE, /t, Dec. 11, weekly closing) (CIF ARA steam coal, API#2, daily closing)
6
8
10
12
14
16
18
20
22
24
26
28
30
32
34
2007
2008
2009
2010
2011
2012
70
75
80
85
90
95
100
105
110
115
120
125
130
135
apr-10
maj-1
0
jun-1
0
jul-10
aug-10
sep-1
0
okt-10
nov-1
0
dec-1
0
jan-11
feb-1
1
mar-11
apr-11
maj-1
1
jun-11
jul-11
aug-11
sep-1
1
okt-11
nov-1
1
dec-1
1
jan-12
feb-1
2
mar-12
apr-12
maj-1
2
jun-12
jul-12
aug-12
sep-12
okt-12
nov-1
2
Chart Sources: Bloomberg, SEB Commodity Research
7/30/2019 Oil Market Report: Product supply increasing again
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10
SEB Oil Market Report
Market indicators
(weekly closing) (price index, weekly closing)
600
700
800
900
1000
1100
1200
1300
1400
1500
1600
1700
2005
2006
2007
2008
2009
2010
2011
2012
600
700
800
900
1000
1100
1200
1300
1400
1500
1600
1700
1800
2005
2006
2007
2008
2009
2010
2011
2012
(monthly, PMIs >50 expansive) (monthly data)
32
34
36
3840
42
44
46
48
50
52
54
56
58
2005
2006
2007
2008
2009
2010
2011
2012
30
35
40
45
50
55
60
65
mar-06
jun-06
sep-0
6
dec-0
6
mar-07
jun-07
sep-0
7
dec-0
7
mar-08
jun-08
sep-0
8
dec-0
8
mar-09
jun-09
sep-0
9
dec-0
9
mar-10
jun-10
sep-1
0
dec-1
0
mar-11
jun-11
sep-1
1
dec-1
1
mar-12
jun-12
sep-1
2
US
Eurozone
ChinaReference
(%, y/y, monthly data) (monthly, 100 corresponds to long term trend growth in industrial production)
-25
-20
-15
-10
-5
0
5
10
15
20
25
mar-0
6
jun-06
sep-06
dec-06
mar-0
7
jun-07
sep-07
dec-07
mar-0
8
jun-08
sep-08
dec-08
mar-0
9
jun-09
sep-09
dec-09
mar-1
0
jun-10
sep-10
dec-10
mar-1
1
jun-11
sep-11
dec-11
mar-1
2
jun-12
sep-12
US
Eurozone
China
93
94
95
96
97
98
99
100
101
102
103
104
2005
2006
2007
2008
2009
2010
2011
2012
China
Eurozone
OECD
USA
Reference
Chart Sources: Bloomberg, OECD, SEB Commodity Research
7/30/2019 Oil Market Report: Product supply increasing again
11/12
11
SEB Oil Market Report
COMMODITY RESEARCH DISCLAIMER
This statement affects your rightsThis report has been compiled by SEBs Commodity Research, a division within Skandinaviska Enskilda Banken AB (publ) (SEB),
to provide background information only. It is confidential to the recipient, any dissemination, distribution, copying, or other use ofthis communication is strictly prohibited.
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connection with its distribution in the US. The distribution of this document may be restricted in certain jurisdictions by law, andpersons into whose possession this documents comes should inform themselves about, and observe, any such restrictions.
The SEB Group: members, memberships and regulators
Skandinaviska Enskilda Banken AB (publ) is incorporated in Sweden, as a Limited Liability Company. It is regulated byFinansinspektionen, and by the local financial regulators in each of the jurisdictions in which it has branches or subsidiaries,including in the UK, by the Financial Services Authority; Denmark by Finanstilsynet; Finland by Finanssivalvonta; Germanyby Bundesanstalt fr Finanzdienstleistungsaufsicht and Norway by Finanstilsynet. In the US, SEBAB is a U.S. broker-dealer,registered with the Financial Industry Regulatory Authority (FINRA). SEBAB is a direct subsidiary of SEB. SEB is active onmajor Nordic and other European Regulated Markets and Multilateral Trading Facilities, in as well as other non-Europeanequivalent markets, for trading in financial instruments. For a list of execution venues of which SEB is a member or
participant, visit http://www.seb.se.
7/30/2019 Oil Market Report: Product supply increasing again
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