Market Report Series

Oil 2017

SIEW 2017 launch - 28 March 2017

© IEA 2017

Oil demand continues to grow but at a slower pace

China & India account for 46% of world demand growth to 2022.

Global oil product demand passes 100mb/d in 2019.

0.0

0.5

1.0

1.5

2.0

2014 2015 2016 2017 2018 2019 2020 2021 2022

mb/

d

China India Rest of the world

Global oil demand growth 2014-2022

© IEA 2017

Petrochemicals and transport make up the majority of the growth

Both areas particularly supported by ongoing and accelerating economic growth

0

500

1 000

1 500

2 000

2 500

2014 2015 2016 2017 2018 2019 2020 2021 2022

kb/d

Other

products

Gasoil/FO

Gasoline

LPG/naphtha

Global oil

demand

growth

© IEA 2017

Emerging markets dominate growth while OECD demand wanes

Non-OECD accounts for all of the forecast demand growth, averaging +1.4 mb/d 2016-22

OECD severely lags, pulled down by sharp declines in road transport

0

10

20

30

40

50

60

70

2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022

mb/d

OECD vs NonOECD Total products

OECD NonOECD

0

2

4

6

8

10

12

14

16

2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022

mb/d

OECD vs NonOECD Motor Gasoline

© IEA 2017

Global upstream investments to see modest rebound

Global oil and gas upstream capital spending 2010-2017

0

100

200

300

400

500

600

700

800

900

2010

2011

2012

2013

2014

2015

2016

2017

US

D (

2015

) bi

llion

-25%

-26%

After falling by 25% in 2015 and 26% in 2016, to USD 433 billion, global upstream investments look on

track to post gains in the range of 3-7% in 2017

© IEA 2017

Global oil supply rebounds then slows markedly

Following record slide in global upstream spending over 2015/16, only modest recovery seen in 2017

Unless significant new projects sanctioned quickly, growth all but stalls by 2020.

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

2014 2015 2016 2017 2018 2019 2020 2021 2022

mb/

d

Global oil supply capacity growth

Non-OPEC OPEC

© IEA 2017

Low-cost Middle East drives solid OPEC capacity growth

OPEC builds 1.95 mb/d of new capacity by 2022 in anticipation of higher demand.

Iraq leads gains, capacity shrinks in Africa and Latin America.

Iraq

Iran UAE Libya

Saudi Kuwait

Ecuador

Qatar Gabon Angola NigeriaAlgeria Venezuela

-0.2

-0.1

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

mb/

d

OPEC crude capacity change 2016-2022

© IEA 2017

Iraq leads OPEC growth

OPEC builds 1.95 mb/d of new capacity by 2022 in anticipation of higher demand.

Iraq leads gains, capacity shrinks in Africa and Latin America.

2.2

2.6

3.0

3.4

3.8

4.2

4.6

5.0

5.4

2010 2012 2014 2016 2018 2020 2022

mb/

d

Actual Production Capacity

© IEA 2017

Non-OPEC production returns to growth

After dropping by 0.8 mb/d in 2016, non-OPEC oil output is set to return to growth in 2017.

By 2022, non-OPEC liquids production is seen 3.3 mb/d higher – led by higher output in the Americas

- 400- 200

0 200 400 600 800

1 0001 2001 4001 6001 800

kb/d

© IEA 2017

US LTO production rebounds – but highly price sensitive

LTO set to expand by 1.4 mb/d by 2022 in our base case. At $80/bbl, output could expand by 3.0 mb/d

over the same period

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

2010 2012 2014 2016 2018 2020 2022

mb/

d

US LTO production

Base case

$80/bbl

$50/bbl

© IEA 2017

Middle East, China and India drive refining growth

After a rare fall in global refining capacity in 2016, global capacity sets out for a 7 mb/d addition,

dominated by Middle East, China and Africa

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2016 2017 2018 2019 2020 2021 2022

mb/

d

North America

Latin America

Europe

FSU

Africa

India

China

Asia

Middle East

World total

Global refinery capacity additions

© IEA 2017

Major shift of crude oil flows to Asia

By 2022 there will be no net crude oil exporting country in Asia. 3 mb/d growth in refinery runs results

in 3.6mb/d net import growth.

© IEA 2017

Crude flows West to East in even bigger volumes

With massive growth in Asian market, East of Suez crude deficit widens as Middle East exports are not

sufficient to meet demand. Exports growth from Brazil and Canada each is higher than from the Middle East.

East of Suez crude oil balance

- 4

- 2

0

2

4

6

8

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022

mb/

d

© IEA 2017

Oil storage capacity to grow in Asia, North America

Global storage capacity to grow by 226 mb over the next few years

Only 40% of capacity growth to occur in the OECD. Non-OECD Asia and North America in the lead

0

50

100

150

200

250

300

350

400

450

Construction Expansion Planned

mb

Planned storage capacity growth by region

Asia Oceania North America EuropeMiddle East Other

0

10

20

30

40

50

60

70

80

China US Korea Malaysia Indonesia

mb

Top 5 countries building new storage capacity

Construction Expansion Planned

© IEA 2017

World oil market grows tighter from 2020

Call on OPEC rises and spare capacity shrinks without further upstream investment. Less than 2% in

2022 versus 3.7% in 2008 when prices rose sharply.

Call on OPEC crude and stock change

28

30

32

34

36

38

40

2014 2015 2016 2017 2018 2019 2020 2021 2022

mb/

d

Call on OPEC + stock change OPEC Crude Capacity

© IEA 2017

Conclusions

• Demand continues to grow steadily -- up 7.3 mb/d by 2022 -- driven by

China and India, which will account for almost half of growth over the period

• Global production capacity will also grow -- up 5.6 mb/d -- led by the United

States, Brazil and Canada

• Asian demand growth draws extra Middle East oil but also needs supply from

other areas. Trade routes will shift and lengthen.

• Global investment remains weak in 2017 after two-year record plunge and

OPEC spare capacity contracts to less than 2% in 2022 -- a 14-year low

• Risk of greater volatility & security of supply concerns: could lead to higher

prices by 2020

© IEA 2017