14 April 2016

HIGHLIGHTS • Crude oil prices rallied to a four-month high in mid-April as further evidence emerged of accelerating declines in US output, while market participants held out hope that upcoming producer talks would agree a deal to help manage a still massive supply overhang. At the time of writing, Brent was at $44.30/bbl and US WTI was at $41.75/bbl. • Growth in global oil demand will ease to around 1.2 mb/d in 2016, below 2015’s 1.8 mb/d expansion, as notable decelerations take hold across China, the US and much of Europe. Preliminary 1Q16 data reveal this is already occurring, with year-on-year growth down to +1.2 mb/d, after gains of +1.4 mb/d in 4Q15 and +2.3 mb/d in 3Q15. • OPEC crude oil production fell by 90 kb/d in March to 32.47 mb/d as ongoing outages in Nigeria, the UAE and Iraq more than offset a further increase from Iran and higher flows from Angola. Supply from Saudi Arabia dipped in March but held near 10.2 mb/d. • Global oil supplies sank by 0.3 mb/d in March to 96.1 mb/d, with annual gains shrinking to 0.2 mb/d, from 1.7 mb/d a month earlier and 2.7 mb/d in 2015. The outlook for non-OPEC production in 2016 is largely unchanged since last month’s Report, at 57.0 mb/d, 710 kb/d less than the 2015 average. • 1Q16 global refinery runs are estimated 79.3 mb/d, 1.2 mb/d up year on year (y-o-y), in line with global demand growth. The forecast for 2Q16 throughput is at 79.7 mb/d, up only 0.8 mb/d y-o-y, slower than forecast 1.1 mb/d demand growth. All of the net growth in the first half of 2016 comes from non-OECD refiners. • Commercial stocks in the OECD built counter-seasonally by 7.3 mb in February to end the month at 3 060 mb. Accordingly, the overhang of inventories against average levels widened to 387 mb at end-month. Preliminary information for March suggests OECD holdings rose further while volumes of crude held in floating storage increased.

The IEA is recruiting an Oil Market Analyst The International Energy Agency (IEA) is recruiting an oil market analyst to work in the Oil Industry and Markets Division (OIMD) in the IEA’s Directorate of Energy Markets and Security (EMS). The selected candidate will be part of a close-knit team that generates forecasts and analysis of the oil market under demanding deadlines. S/he will work on the IEA’s flagship Oil Market Report (OMR) and the annual Medium Term Oil Market Report (MTOMR) and will provide general support work for the functioning of the division. S/he will work under the supervision of the Head of Division. Main responsibilities include: Analysis • Monitor, analyse and forecast developments in global oil markets and industry in the short and medium term, with particular focus on oil prices, market balances and trade flows. • Develop and implement forecasting models. Research Reports • Prepare written reports under frequent and tight deadlines. • Research and draft material for the IEA's Monthly Oil Market Report and the annual MediumTerm Oil Market Report. Liaison and outreach • Present analysis and findings internally and at international, governmental and professional conferences. • Develop and maintain contacts in the oil industry, governments and oil consultancies. • Provide support, as required, to other areas of the IEA, IEA committees and member governments. Candidate’s profile: Academic Background •

A university degree in economics, engineering, international relations or other relevant disciplines.

The complete vacancy notice and application form can be found by clicking on these links: https://oecd.taleo.net/careersection/ext/jobdetail.ftl?lang=en&job=10527 (English) https://oecd.taleo.net/careersection/ext/jobdetail.ftl?lang=fr-FR&job=10527 (French)

Or under ‘current vacancies’ at http://www.oecd.org/careers/ (reference N°:10527). Applications from nationals of OECD Member countries should include a CV and be sent online bebore midnight Paris time on 04 May 2016. Please note that only candidates selected for interview will be contacted. The OECD is an equal opportunity employer and encourages applications from all qualified candidates. ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT Organisation de coopération et de développement économiques

TABLE OF CONTENTS HIGHLIGHTS ............................................................................................................................................................................................1 MARKET BALANCE DRAWS NEAR .................................................................................................................................................4 DEMAND ...................................................................................................................................................................................................5 Summary ................................................................................................................................................................................................5 Global Overview .................................................................................................................................................................................5 Global gasoil demand crumbles .......................................................................................................................................................6 OECD .....................................................................................................................................................................................................7 Non-OECD ........................................................................................................................................................................................ 11 Other Non-OECD...................................................................................................................................................................... 12 SUPPLY .................................................................................................................................................................................................... 15 Summary ............................................................................................................................................................................................. 15 OPEC crude oil supply .................................................................................................................................................................... 16 Non-OPEC overview ...................................................................................................................................................................... 20 OECD .................................................................................................................................................................................................. 21 North America............................................................................................................................................................................. 21 North Sea ...................................................................................................................................................................................... 23 North Sea projects fall victim to oil price slump ..................................................................................................................... 24 Non-OECD ........................................................................................................................................................................................ 26 Latin America ............................................................................................................................................................................... 26 Asia .................................................................................................................................................................................................. 27 Chinese production slows.............................................................................................................................................................. 27 Africa .............................................................................................................................................................................................. 28 Former Soviet Union .................................................................................................................................................................. 28 STOCKS .................................................................................................................................................................................................. 31 Summary ............................................................................................................................................................................................. 31 Global Overview .............................................................................................................................................................................. 31 OECD inventory position at end-February and revisions to preliminary data ................................................................ 31 Getting the balance right ................................................................................................................................................................ 32 Recent OECD industry stock changes ....................................................................................................................................... 33 OECD Americas .......................................................................................................................................................................... 33 OECD Europe .............................................................................................................................................................................. 34 OECD Asia Oceania ................................................................................................................................................................... 35 Recent developments in non-OECD stocks ............................................................................................................................. 36 Recent developments in floating storage ................................................................................................................................... 37 PRICES...................................................................................................................................................................................................... 39 Summary ............................................................................................................................................................................................. 39 Market overview............................................................................................................................................................................... 39 Spot crude oil prices........................................................................................................................................................................ 40 Spot product prices ......................................................................................................................................................................... 42 Freight ................................................................................................................................................................................................. 45 REFINING ............................................................................................................................................................................................... 47 Summary ............................................................................................................................................................................................. 47 Global refinery overview ................................................................................................................................................................ 47 Margins ........................................................................................................................................................................................... 48 Seasonality: not so certain any more .......................................................................................................................................... 50 OECD refinery throughput ........................................................................................................................................................... 51 Non-OECD refinery throughput ................................................................................................................................................. 52 TABLES .................................................................................................................................................................................................... 54

M ARKET O VERVIEW

I NTERNATIONAL E NERGY A GENCY - O IL M ARK ET R EPORT

MARKET BALANCE DRAWS NEAR For some months now in this Report we have anticipated steady oil demand growth and falling non-OPEC supply. This scenario is now taking shape and the oil market looks set to move close to balance in the second half of this year. Oil prices are on the rise with Brent crude oil trading currently well above $40/bbl. Part of the recent support for prices arises from expectations of the meeting of leading oil producers scheduled to take place on Doha, Qatar, on 17 April. We cannot know the outcome but if there is to be a production freeze, rather than a cut, the impact on physical oil supplies will be limited. The publication date of this Report falls just ahead of the meeting and, accordingly, we have made no changes to our supply assumptions. The latest rather downbeat global economic outlook from the International Monetary Fund might affect market sentiment but we have not made changes to our demand numbers. We remained confident that in 2016 global oil demand will grow by 1.2 mb/d. In the meantime, India could be replacing China as the main engine of global demand growth. Revised data for late 2015 and early data for 2016 shows year-onyear (y-o-y) growth of approximately 8%. For 2016 as a whole, India will see growth of around 300 kb/d – the strongest ever volume increase. Reforms to the rules allowing refiners to directly import crude oil are all part of a general trend towards liberalisation that should underpin India’s growth momentum. For now though, the main focus is on the supply side of the balance and our view held since the

beginning of 2016 of forecast of a fall in non-OPEC supply in 2016 of 700 kb/d looks to be spot-on. In March the year-on-year fall was estimated at 690 kb/d, and, in particular, there are signs that the muchanticipated slide in production of light, tight, oil in the United States is gathering pace. By early April the rig count had fallen nearly 80% from the peak seen in October 2014 and more anecdotal evidence is emerging of financial problems taking their toll on the shale pioneers. Within the group of non-OPEC producers there are few areas of growth with only a handful of countries likely to increase production this year, unless Russia, which has surprised us all with continued growth in production, does not carry out its professed support for a production freeze. Within the ranks of OPEC’s members, the pace of Iran’s return to the market is more measured than some expected but production in March was still nearly 400 kb/d higher than at the start of the year, in line with our forecast. While nuclear sanctions have been lifted, some financial sanctions remain in place and the financing of Iran’s crude oil trade is not always straightforward. Nor is access to markets, as shown for example by reports of marketing difficulties for Iran’s condensates stocks. For the time being, based on a conservative scenario for OPEC crude oil production of 32.8 mb/d in 2Q16 and 33.0 mb/d in both 3Q and 4Q, our outlook suggests that after big build-up of stocks in the first half of 2016 of 1.5 mb/d the surplus will fall to 0.2 mb/d in both 3Q and 4Q. A tighter market outlook seems to be supported in at least part of the pricing structure: the ICE Brent contango nearly vanished in early April after holding steady at a discount of $0.65/bbl during February and March. The prompt month contract is flirting with backwardation, partly on the back of summer maintenance plans in the North Sea, but also due to the general feeling of impending market tightness. Our demand and supply numbers are, of course, highly provisional: even if they turn out to be too bullish, there is no doubt as to the direction of travel for the supply/demand balance. As always, the data will change. It is inevitable that in a 96 mb/d market it will be impossible to account for every barrel that we believe has been produced, especially in times of major supply surplus such as we have today. These “missing” barrels may eventually be re-allocated to revised supply and/or demand or to physical stocks, but in the meantime we must accept that data uncertainty is a fact of life. In the June edition of this Report we will publish our detailed forecast for 2017. This will provide greater clarity as to when in the year will come the market re-balancing.

4

14 A PRIL 2016

I NTERNATIONAL E NERGY A GENCY - O IL M ARK ET R EPORT

D EMAND

DEMAND Summary • World oil demand is forecast to average 95.9 mb/d in 2016, a potential increase of 1.2 mb/d versus 2015. Reasonably robust gains in non-OECD countries lead the projected expansion while OECD deliveries will be flat. • Recent demand data came out ahead of earlier expectations, raising both 4Q15 and 1Q16 demand estimates by 0.2 mb/d. Regardless of the upgrade, 1Q16 growth at 1.2 mb/d year-on-year (y-o-y) remains well below the near five-year peak of 2.3 mb/d seen in 3Q15. Growth has eased due to lower demand in many European and North American consumers. • This month’s Report examines the sharp recent slowdown in gasoil/diesel demand, highlighting how growth has fallen from a peak of 0.6 mb/d y-o-y in 3Q15 to 0.1 mb/d in 4Q15 and is forecast to turn negative in 1Q16. The end of gasoil demand growth is not yet upon us, as modest gains are forecast towards the end of the year as the underlying industrial situation improves worldwide. Also, the return to more normal seasonal temperatures in 4Q16 may stimulate gasoil demand. • Strong gains in India remain one of the most persistent demand supports showing that if an economy remains fundamentally robust lower-oil prices can stimulate additional demand. Despite trimming 100 kb/d from our January Indian demand estimate, deliveries still grew by 335 kb/d versus last year. Global Oil Demand (2014-2016) (million barrels per day)

1Q14 2Q14 3Q14 4Q14 2014 Africa Americas

1Q15 2Q15 3Q15 4Q15 2015

1Q16 2Q16 3Q16 4Q16 2016

4.0

4.0

3.9

4.0

4.0

4.1

4.1

4.0

4.2

4.1

4.3

4.3

4.2

4.3

4.3

30.5

30.5

31.3

31.5

31.0

30.9

30.9

31.6

31.2

31.1

30.6

31.0

31.7

31.5

31.2

Asia/Pacific

31.4

30.5

30.0

31.6

30.8

32.2

31.6

31.6

32.6

32.0

33.1

32.4

32.4

33.5

32.9

Europe

13.7

14.1

14.6

14.2

14.1

14.1

14.3

14.8

14.4

14.4

14.2

14.4

14.6

14.2

14.4

FSU

4.6

4.9

5.1

5.0

4.9

4.6

4.9

5.0

5.0

4.9

4.8

4.9

5.0

4.9

4.9

Middle East

7.7

8.2

8.4

7.8

8.0

7.6

8.3

8.6

8.1

8.2

7.9

8.3

8.7

8.3

8.3 95.9

91.9

92.1

93.3

94.1

92.9

93.6

94.1

95.6

95.5

94.7

94.8

95.2

96.6

96.8

Annual Chg (%)

World

1.3

0.7

0.8

1.3

1.0

1.8

2.2

2.5

1.5

2.0

1.3

1.2

1.0

1.4

1.2

Annual Chg (mb/d)

1.2

0.7

0.8

1.2

0.9

1.6

2.0

2.3

1.4

1.8

1.2

1.1

1.0

1.3

1.2

Changes from last OMR (mb/d)

0.0

0.0

0.0

0.0

0.0

0.1

0.1

0.1

0.2

0.1

0.2

0.2

0.0

0.0

0.1

Global Overview Strong gains in India, Thailand and Korea could not offset the sluggish performances elsewhere that saw growth fall back from a five-year peak of 2.3 mb/d y-o-y in 3Q15 to 1.4 mb/d in 4Q15 and 1.2 mb/d in 1Q16. In OECD countries, distillate demand growth in particular faded (see Global gasoil demand crumbles) pulled down by slower industrial activity and the generally mild recent winter temperatures. That is not to say that non-OECD economies were completely shielded from the global slowdown, as economically hamstrung Brazil and Russia also saw sharp 4Q15 declines. Global oil deliveries will average 95.9 mb/d in 2016, a gain of 1.2 mb/d on the year – with projected 2016 growth unchanged in over six months of Reports – as the forecast non-OECD expansion remains relatively supportive while OECD deliveries essentially flatten. Lower oil prices provided a boost to global demand in mid-2015 but this is not expected to carry into 2016 while poorer economic prospects in many countries have seen the demand outlook pared back. It was the more consumer-focused fuels, such as gasoline and jet/kerosene, that grew the most strongly in 2015 and growth in these markets is

14 A PRIL 2016

5

D EMAND

I NTERNATIONAL E NERGY A GENCY - O IL M ARK ET R EPORT

expected to ease in 2016. Rising by approximately 1.0 mb/d on a y-o-y basis in 3Q15, global gasoline demand growth should halve in 2H16. Peak jet/kerosene demand growth, of approximately 0.3 mb/d in 3Q15, subsides to around half this level in 2016 as a whole. The severity of the slower growth environment is slightly eased compared to last month’s Report, with approximately 0.2 mb/d of oil demand added to both 4Q15 and 1Q16 global delivery estimates, taking the totals to 95.5 mb/d and 94.8 mb/d respectively. These upgrades were chiefly attributable to additional Russian and Chinese deliveries.

Global gasoil demand crumbles That famous maxim ‘when the US sneezes, the rest of the world catches a cold’ can be applied to middle distillate markets in recent months, although like all adages it perhaps oversimplifies the true situation. Both China and Japan had long seen weaker gasoil/diesel demand before US growth eased in mid-2015. By 4Q15 the US, China and Japan were all experiencing sharp y-o-y Gasoil Demand Growth, y-o-y kb/d gasoil demand falls and the same occurred in Europe in 600 1Q16. A consequence of the deliberate effort to switch the focus of the Chinese economy away from heavy manufacturing towards a more consumer-focused structure triggered China’s gasoil growth slowdown post-2013. Japanese gasoil demand, meanwhile, eased in association with the persistent industrial contractions that emerged in 2H14. More of a surprise was the sharp reversal in US gasoil demand in 4Q15, as creaking manufacturing activity (see Americas) pulled down gasoil demand, along with unseasonably mild winter temperatures. mb/d 4

Global y-on-y Absolute Growth Total Products Growth Rate 4%

3 3% 2

2%

400 200 0 -200 -400 -600 -800 1Q14 China

3Q14 Japan

1Q15 US

3Q15

1Q16

Europe

Prior to 1Q16, the European gasoil consumer demonstrated stolid resistance, a resolve that cracked in 1Q16 (down 75 kb/d) as key consumers France and Germany endured sharp declines, falling compared to the year earlier by 50 kb/d and 20 kb/d, respectively.

This changing demand-dynamic is in stark contrast to the recent experiences of the overall oil market, and the 0 0% investment flows into the refining industry. Prior to 2014, gasoil accounted for roughly one out of every two -1 -1% extra barrels of oil consumed in the period 2009-13. The 1Q2010 3Q2011 1Q2013 3Q2014 two years that followed saw gasoil account for a more Gasoline Diesel Others Total (RHS) muted one barrel in six. In our forecast, we expect stronger global gasoil demand growth to resurface in 4Q16, albeit only tentatively, with gasoil demand growth projected to inch up towards 0.4 mb/d by 4Q16. Two major 4Q16 supports will be the US and India. 1

6

1%

14 A PRIL 2016

I NTERNATIONAL E NERGY A GENCY - O IL M ARK ET R EPORT

D EMAND

OECD Blighted by recent sharp reversals in the OECD Americas and OECD Asia Oceania, the overall OECD oil demand trend has flipped from strongly rising (+1.5%, 3Q15), to flat-to-falling (-0.1% in 4Q15 and -0.6% in 1Q16). The latest preliminary numbers depict OECD oil deliveries down by 0.7% y-o-y in February, to 47.2 mb/d, after declines of 0.8% in January and a gain of 0.4% in December. OECD Demand based on Adjusted Preliminary Submissions - February 2016 (million barrels per day)

Gasoline Jet/Kerosene Diesel Other Gasoil RFO mb/d % pa mb/d % pa mb/d % pa mb/d % pa mb/d % pa

Other Total Products mb/d % pa mb/d % pa

10.75

3.9

1.79

4.1

4.64

-10.5

0.62

-5.7

0.47

1.1

6.06

0.09

24.33

US50

9.03

4.4

1.52

4.6

3.72

-12.3

0.27

-7.2

0.24

22.1

4.65

1.86

19.43

0.2

Canada

0.80

-0.7

0.14

-0.1

0.34

-4.8

0.28

-5.4

0.04

-42.6

0.73

-8.78

2.31

-5.6

Mexico

OECD Am ericas*

-0.4

0.78

4.4

0.08

5.8

0.37

-1.1

0.05

0.0

0.09

6.1

0.59

-1.40

1.96

1.5

OECD Europe

1.83

0.7

1.24

2.9

4.64

1.5

1.75

-9.0

0.90

-2.4

3.59

3.90

13.94

0.4

Germany

0.41

2.6

0.16

-1.7

0.74

3.2

0.47

-8.7

0.12

-10.0

0.59

7.85

2.48

0.6

United Kingdom

0.30

-6.5

0.33

-3.4

0.52

-3.9

0.14

-4.9

0.02

-9.8

0.32

17.20

1.64

-1.0

France

0.15

5.6

0.14

-0.1

0.69

1.7

0.26

-19.3

0.04

-17.6

0.37

-7.10

1.65

-4.6

Italy

0.20

1.3

0.08

17.3

0.45

1.2

0.10

-2.5

0.07

-11.1

0.38

3.52

1.28

1.6

Spain

0.10

1.6

0.10

4.8

0.45

2.4

0.22

1.3

0.15

1.5

0.28

3.28

1.31

2.4

1.55

-1.0

1.22

-1.6

1.32

-3.3

0.60

-0.7

0.71

-10.1

3.53

-3.14

8.94

-3.0

Japan

0.88

-2.7

0.79

-5.1

0.45

-2.7

0.44

-6.0

0.35

-27.4

1.78

-11.36

4.69

-9.1

Korea

0.21

-2.3

0.24

3.4

0.34

-6.7

0.13

22.1

0.31

20.1

1.48

9.24

2.71

7.0

Australia OECD Total

0.33 14.13

3.3 2.9

0.14 4.24

7.3 2.0

0.44 10.61

-0.2 -4.7

0.00 122.0 -6.7 2.96

0.03 2.08

15.1 -4.5

0.18 13.19

-6.60 0.20

1.12 47.21

1.0 -0.7

OECD Asia & Oceania

* Including US territories

Americas The demand strength seen in the US from December 2014 to August 2015 buttressed the rising overall OECD American trend. This has now clearly waned and indeed has turned negative. Although initially pulled down by sharp declines in industrial oil use, particularly propane, gasoil and ‘other products’, the latest official monthly series for January 2016 showed the contagion spreading to gasoline. One month of data is far too early to call an end to gasoline’s strength, but the slowdown is still noteworthy. mb/d 20.5

US50: Total Products Demand

mb/d 25.5

20.0

25.0

19.5

24.5

19.0

24.0

18.5

23.5

18.0

23.0

17.5 JAN

APR JUL Range 11-15 2016

OCT JAN 2015 5-year avg

22.5 JAN

OECD Americas: Total Products Demand

APR JUL Range 11-15 2016

OCT JAN 2015 5-year avg

Having fallen by an estimated 50 kb/d y-o-y in January, to 8.7 mb/d, US gasoline demand growth is forecast to re-emerge over the remainder of 1Q16, as January’s dip was partially attributable to the extreme strength seen one year earlier, while lower pump prices remain relatively supportive of additional demand. We estimate that for the whole of 1Q16, based upon weekly data from the Energy Information Administration, US gasoline deliveries were 9.0 mb/d, 140 kb/d up on the year earlier. This 1Q16 gain is near half the average 2015 expansion, and we believe that the most price-sensitive US drivers have already reacted to much reduced pump prices, leaving little leeway for further strong gains.

14 A PRIL 2016

7

D EMAND

I NTERNATIONAL E NERGY A GENCY - O IL M ARK ET R EPORT

Recent escalations in US economic concerns further dampen US consumer confidence. The University of Michigan’s consumer sentiment index reflects this. It fell to a five-month low of 91.0 in March, with both current and future expectations down compared to the month earlier. US Gasoline Demand Growth, y-o-y

kb/d 500

kb/d 500

US Gasoil Demand Growth, y-o-y

400 250 300 200

0

100 -250 0 -100 Oct-14

Mar-15

Aug-15

Jan-16

-500 Oct-14

Mar-15

Aug-15

Jan-16

The largest recent US demand weakness was reserved for the gasoil/diesel market (see Global gasoil demand crumbles). Deliveries fell by 420 kb/d y-o-y in January, their fourth consecutive decline, pulled down by a combination of mild winter temperatures and weakening industrial activity, particularly in PADD 3 (the Gulf of Mexico), as slowdowns in the oil and gas sector dampened gasoil use. Although further sharp declines are anticipated through to April, we foresee the US gasoil market bottoming-out around the middle of the year, as forward-looking industrial activity indicators, like the Institute of Supply Management’s Manufacturing Purchasing Managers’ Index (PMI) broke back into expansionary territory once more in March, at 51.8. Further support for US gasoil demand in 2016 should emerge in 4Q16 as the return of traditional seasonal temperatures potentially triggers a spike in demand. US Institute of Supply Management Manufacturing Index 59

kb/d 5,000

US 50 Gasoil Demand 600 400

4,000

56

200

3,000

0 2,000

53

-200

1,000

-400

50 Note: 50=contraction/expansion threshold

47 Jun12

Apr13

Feb14

Dec14

Oct15

0 Jan-14

-600 Sep-14 May-15 Gasoil

Jan-16

Sep-16

Growth (RHS)

Overall, having risen strongly in 2015 (+290 kb/d), US growth is expected to moderate in 2016, to around 110 kb/d, as the early-year weakness in gasoil/diesel coincides with notable slowdowns in consumerfocussed products, such as gasoline and jet fuel. Thus, for the year as a whole, total oil demand across the 50 states of the US averages 19.5 mb/d. Supported by strong gains in the gasoline, jet/kerosene and ‘other products’, Mexican oil demand posted its third consecutive month of y-o-y growth in February. Up by 30 kb/d on the year earlier, total Mexican deliveries averaged 2.0 mb/d in February. Reinforced by relatively resilient business confidence and the recently lower oil-price environment, Mexico appears tentatively to have exited the declining demand trend that existed before. Y-o-y growth averaged 30 kb/d in the three-months through February compared to -30 kb/d in the preceding 12-months. The latest release from the Instituto Nacional de Estadistica y Geografia cites Mexican business confidence in February 2016 at its second highest level since October, at a net-optimistic 52.57.

8

14 A PRIL 2016

I NTERNATIONAL E NERGY A GENCY - O IL M ARK ET R EPORT

mb/d 2.3

Mexico: Total Products Demand

D EMAND

Mexico: Motor Gasoline Demand

kb/d 840 820

2.2

800 2.1

780

2.0

760 740

1.9

720

1.8 JAN

APR JUL Range 11-15 2016

OCT JAN 2015 5-year avg

700 JAN

APR JUL Range 11-15 2016

OCT JAN 2015 5-year avg

Europe Sharp drops in a number of European countries – notably Belgium, Hungary, the Czech Republic, Greece, Portugal, Switzerland and Austria – pulled Europe back towards low-growth in 1Q16, as we had anticipated in recent issues of this Report. For example, the relative Belgian demand strength seen 4Q14-through-3Q15, has since largely faded. Dominating this change has been the sharp reversal in the momentum of gasoil (see Global gasoil demand crumbles), switching from an average y-o-y gain of 25 kb/d, 4Q14-3Q15, to a decline of 10 kb/d, October 2015-through-January 2016. Deteriorating gasoil has led the overall market from an average 35 kb/d gain, to a decline of 10 kb/d. Further falls are envisaged for 2016 as a whole pulling total Belgian deliveries down by around 1% in 2016 to 655 kb/d as the initial price-driven stimuli wanes in the face of a very testing macroeconomic environment. Similarly, Hungary, having risen strongly since mid-2014, saw deliveries in January fall back below year earlier levels, with weak conditions seen right across the barrel. kb/d 120

Belgian Demand Growth, y-o-y

90

Hungarian Oil Demand

kb/d 200

30

150

20

100

10

50

0

60 30 0 -30 -60 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Gasoil

Total

0 -10 Jan-14May-14Sep-14 Jan-15May-15Sep-15 Jan-16 LPG JetKero Other

Naphtha Gasoil Growth (RHS)

Gasoline FO

Preliminary Spanish oil demand numbers for February show that the generally rising y-o-y trend has recently returned. Estimated deliveries rose by 2.4% y-o-y in February, little changed from the +2.6% September 2014-August 2015 average. Indeed, fifteen of the twenty months through January 2016 (or sixteen of twenty-one if preliminary February data are included) posted higher y-o-y deliveries, with surging middle distillate demand the key support. Over the twenty-one months through February, Spanish oil demand growth averaged 15 kb/d y-o-y (1.3%), with gasoil/diesel up by on average 15 kb/d and jet/kerosene 5 kb/d. Much of this demand resurgence is a combination of price-driven rallies and the temporary response to the sharp declines that previously co-existed alongside the weak economy. A roughly flat demand picture is foreseen in 2016, as deliveries average 1.2 mb/d; the underlying macroeconomic data (with GDP growth of 2.6% forecast by the International Monetary Fund) unable to support much more of a response.

14 A PRIL 2016

9

D EMAND

I NTERNATIONAL E NERGY A GENCY - O IL M ARK ET R EPORT

Spanish Oil Demand

kb/d 1,500

Spanish Oil Demand & Economic Activity; y-o-y % changes

100 5

50 0

1,000 0

-5

500 -50 -10

-100

0 Jan-14

Jul-14

Jan-15

Jul-15

Naphtha Gasoil Growth (RHS)

LPG JetKero Other

Jan-16

-15 1Q2013 Demand

Gasoline FO

3Q2014 GDP

1Q2016 Demand forecast

Asia Oceania Roughly as forecast in last month’s Report, the 1Q16 Japanese demand estimate of 4.5 mb/d depicts a still heavily falling trend, as estimated deliveries fell by 340 kb/d compared to the year earlier pulled down by sharp drops across all of the major product categories. For example, LPG (including ethane) demand fell by 90 kb/d in 1Q16, y-o-y, while naphtha deliveries dropped by 35 kb/d, gasoil -40 kb/d, residual fuel oil -110 kb/d, gasoline -15 kb/d, jet/kerosene -10 kb/d and ‘other products’ -40 kb/d. For the year as a whole a more modest 140 kb/d decline is foreseen, to 4.1 mb/d, as the majority of the previous downside was chiefly attributable to the power-sector where oil’s share has almost completely been by-passed by alternatives, such as gas, coal and now nuclear. mb/d 6.0

Japan: Total Products Demand

5.5

Japan: Naphtha Demand

mb/d 1.0 0.9

5.0

0.8

4.5 0.7

4.0

0.6

3.5 3.0 JAN

APR JUL Range 11-15 2016

OCT JAN 2015 5-year avg

0.5 JAN

OCT JAN 2015 5-year avg

Korean Purchasing Managers' Index, HSBC (note: