Trade and Commodity Finance

Energy Commodities

Trading Margarita Brouwer-Boulankova September 2018

36th USAEE/IAEE North American Conference

2

Key Message

Crude and refined products are the largest traded commodities in the

world by volume and value

US production is growing & the US is increasingly playing a large role

as a Global Trader

The Market has evolved and dynamics are changing rapidly especially

in recent years

Financial players are changing the trading environment from a

traditional fundamental supply & demand focus to more opportunistic

and short-term event driven trading

3

Who are the Traders

Physical Trader

Financial Trader

Moving Physical Commodity

Speculative Trading

4

Commodities in the Supply Chain

End

Market

Crude Oil

Storage /

Terminaling

Refining

Export

Exploration &

Production

Truck

Pipeline

Rail

Barge

Tanker

Refined Products

Storage /

Terminaling

Truck

Pipeline

Rail

Barge

Tanker

Trading and Hedging Trading and Hedging

5

Global Crude Oil & Liquids Production

USA 18%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

0

10

20

30

40

50

60

70

80

90

100

110

2010 2011 2012 2013 2014 2015 2016 2017 2018 F

Crude Oil & Liquids production

Global USA Russia Saudi Arabia (crude)

Iraq (crude) China Canada USA %

Source: EIA

1,000,000 bbls

per day

6

Crude Oil Import to the US

Source: EIA

Total

OPEC

Non-OPEC

0

1.000

2.000

3.000

4.000

5.000

6.000

7.000

8.000

9.000

10.000

2010 2011 2012 2013 2014 2015 2016 2017

US Crude Oil Import

Persian Gulf Saudia Arabia Venezuela Iraq Canada

Mexico Columbia Total OPEC Non-OPEC

14% decline since 2010

1,000 bbls per day

7

Crude Oil Export from the US

Total

0

200

400

600

800

1.000

1.200

2010 2011 2012 2013 2014 2015 2016 2017

US Crude Oil Exports

Canada China UK The Netherlands Korea Other Total

Source: EIA

1,000 bbls per day

8

Refined Products Export from the US

0

500

1.000

1.500

2.000

2.500

3.000

3.500

4.000

4.500

2000 2010 2011 2012 2013 2014 2015 2016 2017

US Refined Products (liquid) Exports

Other Liquids (excl. LNGs) Renewables (incl. Ethanol) Gasoline

Jet Fuel Distillate Total Export

Finished Petroleum products

Source: EIA

1,000 bbls per day

9

US as the Global Trading Partner 10 years Ago Imports / Exports from selected key regions

Crude imports

Crude imports (larger volumes)

Refined products imports

Crude exports

Refined Products exports Source: EIA

10

US as the Global Trading Partner Today Imports / Exports from selected key regions

Crude imports

Crude imports (larger volumes)

Refined products imports

Crude exports

Refined Products exports Source: EIA

11

Contango vs Backwardation

0

10

20

30

40

50

60

70

80

90

100

-5

-4

-3

-2

-1

0

1

2

Nov-13 Jun-14 Jan-15 Aug-15 Mar-16 Oct-16 May-17 Dec-17 Jul-18

WTI 6-months Forward Curve

6 months Spread (Oct 18 vs Apr 19) WTI Oct 18

Backwardation

Hurricane

Harvey

Production cut

Price collapse

Booming US shale production

Weak demand

WTI

$ per bbl

Spread

$ per bbl

Pipeline

disruption

Contango

12

WTI-Brent Spread

0

20

40

60

80

100

120

Aug-13 Feb-14 Aug-14 Feb-15 Aug-15 Feb-16 Aug-16 Feb-17 Aug-17 Feb-18 Aug-18

WTI-Brent Spread

WTI Nov 18 Brent Nov 18 Spread

Hurricane

Harvey

Pipeline

disruption

Export ban

lifted

$ per bbl

13

Final Remarks

The markets are changing rapidly with growing demand and production

diversity

Open global markets stimulate more trading activities

The trading strategies are adapting to various market structures