May 21, 2020

OPEC chief says oil market responding well to "Chinese refiners have lost lots of money on refined oil record OPEC+ cut exports as demand in overseas markets was hit badly by the coronavirus," said Ding Xu of China-based Sublime OPEC is encouraged by a rally in oil prices and strong Info, adding that they would rather focus on the home adherence to its latest output cut, its secretary general market. said, although sources say the group has not ruled For the past two months, a complex refinery was losing out further steps to support the market. money producing as demand crashed following The Organization of the Exporting lockdowns to curb the spread of the coronavirus. Countries, Russia and other allies, a group known as China's retail fuel prices are protected by a minimum Brent OPEC+, are cutting supply by a record 9.7 million crude price of $40 a barrel, however, and home demand barrels per day (bpd) from May 1 to offset a slump in has recovered swiftly, denting exports, said Kostantsa prices and demand caused by the coronavirus Rangelova of JBC Energy. outbreak. Expectations of lower Chinese petrol exports and optimism Oil prices have more than doubled since hitting a 21- over global demand recovery flipped 's refining margin year low below $16 in April. So far in May, OPEC+ to a small premium of 4 cents to on Tuesday has cut oil exports by about 6 million bpd, according for the first time in about two months. to two companies that track the flows, suggesting a FGE's Sandy Kwa said demand would be supported by strong start in complying with the deal. more people preferring private vehicles over public "The oil markets have responded positively to the transport to limit the virus transmission. historic agreement, as well as its robust "Over June, we should see Asia's gasoline demand implementation by participating countries," picking up by some 490,000 bpd (about 1.74 million Mohammad Barkindo, OPEC's secretary general, told tonnes) month-on-month," she said. Reuters. China's June gasoline exports could rebound to some "All in all there is a gradual but steady convergence of 500,000 bpd or even slightly higher, said JBC Energy’s the fundamentals of supply and demand." Rangelova, as China was seen buying more crude. An OPEC delegate, speaking off the record, was also upbeat. But although prices have rallied, they are still Asian, European jet fuel margins rise on supply cuts, far below the budget needs of many countries. more flights "This is a good sign for prices," the delegate said of the export cuts. "We are safe, but need more time to Asian refining margins for jet fuel turned positive for the be more sure - maybe until July or August." first time in a month and European margins rose to the OPEC+ meets virtually on June 10, when it will have a highest level in three weeks on Wednesday, bolstered by full month's data on compliance, to review the deep supply cuts and an uptick in flights in regional agreement. markets. Sources have said OPEC+ may keep the current level The jet fuel refining margin in flipped to $1.83 of supply reduction after June, rather than scaling it per barrel above on Tuesday, in positive back from July as currently agreed. territory for the first time since April 20. "There are good indications on compliance, and we Measures imposed to curb the spread of the coronavirus have seen prices improving lately," said another have caused jet fuel demand to plunge since February, OPEC delegate. "But the market is still volatile, let's leading to refining losses of as much as $7.23 a barrel on wait." May 5. "The jet fuel market in Asia has already hit a bottom, with China's May gasoline exports seen at multi- some airlines even filing for bankruptcies ... I think the months low - trade, analysts countries easing or removing their lockdowns would definitely help the market a bit," a Singapore-based trader Gasoline exports from China, Asia's top petrol said. exporter, could dive to multi-month lows in May as "But I'm not so optimistic that it can turn the market around refiners turn to domestic markets, industry sources or bring it to pre-pandemic level." and analysts said on Wednesday. Planned refinery turnarounds and run cuts at regional Consultancy FGE estimated that China's May exports refineries have helped curb excess supplies, while could fall to around 300,000 to 350,000 barrels per domestic demand in China kindled hopes for a gradual day (bpd) while one of the sources who tracks such recovery, trade sources said. deals closely said the volume could be even lower at China Aviation Oil (CAO) has been bidding for jet fuel below 800,000 tonnes (218,000 bpd). cargoes in the Singapore physical trade window this That would be less than half the total for March, when month, scooping 245,000 barrels in the last week, which exports were 1.82 million tonnes, according to the represents half of the traded volumes in an otherwise latest official data. subdued market. May 21, 2020 (continued)

Aviation data provider Cirium showed six of the top ten with U.S. crude futures up 4.3% at $33.36 a barrel by airlines ranked by number of scheduled flights operated 10:42 a.m. ET (1442 GMT), while Brent gained 3.6% to with passenger jets last week were Chinese. $35.91 a barrel. Aviation is expected to take years to recover to pre-crisis Crude stocks at the Cushing, Oklahoma, delivery hub fell levels as passengers to shy away from travel to avoid by 5.6 million barrels. quarantine. Refinery utilization rates rose by 1.5 percentage points. In Europe, refinery shutdowns, particularly in the Mediterranean, had led to a reduction in prompt jet fuel INSIGHT-'s oil exploration evaporates as cargo offers, propping up prices. COVID-19 overshadows historic reforms A number of refineries have cut their jet fuel runs in favour of diesel and gasoline production, which still have The coronavirus pandemic has done in a handful of stronger margins, traders and analysts said. months what even a 27-year civil war did not: it has European profit margins rose to minus 35 cents on brought oil drilling to a halt in Angola, 's second- Wednesday, the highest in three weeks, although imports largest oil producer. to the region in May hit the highest level in a year, The consequences could be grave for a poor country that according to Refinitiv data. relies heavily on oil revenues and is saddled with debts Also supporting the jet fuel margins was a gradual that exceed its economic output. increase in the number of airline flights in the region. The halt in oil exploration, which has not been previously "Countries across Europe are flying more and some reported, could represent a setback for one of the most airlines, such as Ryanair, have this week announced ambitious economic reform drives on the continent, flying at a 40% capacity in July," said Selene Law, aimed at cleaning up corruption and attracting foreign market editor at OPIS by IHS Markit. money. It comes as Angola seeks buyers in its push to privatise state energy assets, which is central to the U.S. crude stockpiles drop, fuel inventories rise -EIA reform process. An oil price crash last month to two-decade lows has U.S. crude oil stockpiles fell last week, helping ease prompted all international energy majors operating in concerns about overflowing oil supply, though gasoline Angola - Total, Chevron, ExxonMobil, BP and - to idle and distillate inventories both rose as refiners increased or ditch their drilling rigs, according to company sources, processing rates, the Energy Information Administration Refinitiv ship-tracking data and industry experts. said on Wednesday. France's Total, responsible for almost half of Angola's oil U.S. oil inventories have surged in 2020 as oil output, told Reuters it would not drill for more oil for now consumption dropped due to the coronavirus pandemic due to the coronavirus crisis, instead focusing on current that has caused businesses to shutter and governments production. to restrict citizens' movements. "We have suspended all our drilling activities like all other Crude inventories fell by 5 million barrels in the week to operators in Angola," it said. May 15 to 526.5 million barrels, compared with Sarah McLean, senior analyst at IHS Markit, said it was expectations in a Reuters poll for a 1.2 million-barrel rise. the first time since its records began in 1984 that Angola U.S. gasoline stocks rose by 2.8 million barrels, the EIA had not had a single rig drilling. The –based said, compared with expectations for a 2.1 million-barrel information provider had expected at least 10 rigs to be drop. Distillate stockpiles, which include diesel and operating there by the end of 2020, the highest number heating oil, rose by 3.8 million barrels, more than for any African nation this year. expected. The Angolan finance ministry and president's office did "The market has pushed up pretty bullishly over the past not respond to Reuters requests for comment, nor did few weeks, but I see product builds in this report that can state oil giant Sonangol, which works in partnership with take away a little bit of the bullish direction," said Gene the foreign oil majors. McGillian, director of market research at Tradition Energy DAMAGED, DOCKED, DORMANT in Stamford, Connecticut. Angola's prospects looked bright going into 2020. Weekly product supplied figures, a proxy for demand, Energy majors increased their exposure to Angola in the showed a dropoff in gasoline and diesel consumption. wake of reforms to investment laws by President João The more widely followed four-week average shows Lourenço, who took power after almost four decades of gasoline consumption is down 29% from the year-ago rule by Jose Eduardo dos Santos, and greater period, while distillate use is down 14%. transparency at Sonangol. "Even though the crude number was definitely supportive They planned to operate more drilling ships in Angola and suggests that things are pretty good, we got a little than anywhere on the continent to tap tantalizing new disappointment with the gasoline demand," said Phil offshore discoveries this year. Flynn, senior analyst at Price Futures Group. Then COVID-19 struck. Oil futures pared gains after the data, but were still higher As global demand fell off a cliff amid lockdowns, oil

2 May 21, 2020 (continued) companies lopped billions from planned spending. appetite for these sort of transactions anyway. Look at Angola, with its relatively high-cost offshore fields, was how long it took ," he added, citing the long among the first on the chopping block. Reduced demand struggle by Saudi Arabia to privatise their state oil firm from the virus's first victim, China - the top destination for amid flagging prices. Angolan oil - also hit the southern African country hard. Despite its problems, Angola has announced the Total, in a bad portent, had already cancelled one drill tendering of state-owned bank BCI and parts of ship after a March 7 technical problem. The vessel is Sonangol's ports and logistics businesses in recent now parked off the Canary Islands, according to Refinitiv weeks. tracking data. Gonçalo Falcão, a -based partner in UK-based law The French producer has since idled three other drill firm Mayer Brown, which advises potential buyers on ships; Skyros and Maersk Voyager were aspects of the privatisation drive, said the government sent to docks at the capital while Seadrill West would not settle for a fire sale. Gemini lies dormant at Walvis Bay in Namibia, the "It's still to be seen how many competitive bidders tracking data shows. emerge," he said, noting the state could postpone tenders Total did not comment on specific ships, but said it hoped if it deems offers too low. to restart gradually "as soon as the situation allows". "They're trying to send a message that, okay, we're U.S. major Chevron cancelled its contract with rig struggling, but we will continue going forward with our supplier Valaris, in late March, and parked the drill ship, plans because we're a reliable country and we've made a Valaris 109, in the capital. A Chevron spokesman said it huge effort to make our companies transparent and would continue "cost-managed production" at existing reduce corruption." fields. SERVICING DEBT: $9 BLN A YEAR Meanwhile, two offshore discoveries which Italy's Eni President Lourenço has been seeking to tackle a troubled described as "significant" last year are now on ice, the legacy after Angola clawed its way out of a 1975-2002 company told Reuters. civil war, one of the world's longest. The country is ranked American firm ExxonMobil and Britain's BP, the other oil as one of the world's most corrupt, in 146th place on a list majors in Angola, have also cancelled planned drilling of 183 countries, according to Transparency International. until at least 2021, according to industry sources. After he took power in 2017, he moved to remove dos Exxon and BP declined to comment. Santos's children from key roles. Dos Santos's daughter, SELLING 'THE OCTOPUS' Isabel, had been running Sonangol, while his son, Jose Any time would be bad for Angola's drilling to dry up. Filomeno - now on trial - had run the sovereign wealth Yet the crisis comes at a key juncture for its reform drive, fund. which it is counting on to help improve living standards Despite Angola earning praise for its anti-corruption drive, for the population of over 32 million. According to the the economy - which draws a third of state revenues from Oxford Poverty and Human Development Initiative's oil - was in a precarious position before the pandemic. global poverty index, about a third of Angolans live in The country received a record $3.7 billion loan from the "severe poverty". International Monetary Fund last year. It also owes The country is seeking to attract investors for a sweeping billions to China and holds the largest single bilateral debt privatisation programme of state assets including energy burden in sub-Saharan Africa, where it is the number 3 assets like parts of Sonangol, but also a swathe of other economy. interests like ports, banks and telecoms firms. Its debt-to-GDP ratio has climbed to the highest in around The programme, launched last August, had already got two decades, above 100%, and servicing its borrowings off to a rocky start. eat up $9 billion a year. Angola has yet to sell any major assets of Sonangol, "The Angolan state owns a major universe of companies - which its petroleum minister described as a sprawling telecom companies, water companies, electricity," said "octopus". Several assets scheduled for sale last year Falcão of Mayer Brown. "I wouldn't say they are have meanwhile yet to be tendered, while the only desperate, but keen to make revenue, and they think a announced purchases have been of a slaughterhouse good investment opportunity six months ago would still be firm and farm complex which netted $35 million from a good investment today." local buyers in April. Angola was aiming to shed smaller assets before Venezuela's military to escort Iranian fuel tankers - privatising 30% of the whole via an IPO defense minister in 2022. That timeline, always ambitious, now seems unlikely, according to Nick Branson, senior Africa analyst Venezuela's military will escort Iranian tankers bringing at Verisk Maplecroft. fuel to the gasoline-starved country as soon as they enter "The idea of a Sonangol IPO just seems hopelessly its exclusive economic zone, Defense Minister Vladimir optimistic," he said. Padrino said on Wednesday. "There are so many moving parts and such a lack of His comments came after Venezuelan opposition leader

3 May 21, 2020 (continued)

Juan Guaido said the shipment should "alarm" Latin Earlier this week, a U.S. government forecast projected America. Both OPEC members are U.S. adversaries that crude production from seven major shale formations, whose oil industries are under U.S. sanctions. Trump including the Permian, would fall to a two-year low in administration officials say Washington is considering a June. Producers have throttled back production since response to the shipment. March as prices crashed due to oversupply and a sharp The tankers - Fortune, Forest, Petunia, Faxon and Clavel drop in demand. - are carrying around 1.5 million barrels of fuel, and Environmental groups including WildEarth Guardians had passed the Suez Canal in the first two weeks of May, filed a formal protest of the sale to the BLM, arguing the Refinitiv Eikon data show. They are expected to arrive in coronavirus outbreak reduced opportunities for public Venezuela between late May and early June. comment on the auction. "When they enter our exclusive economic zone, they will BLM has not yet responded to that protest, according to be escorted by Bolivarian National Armed Forces boats Rebecca Fischer of WildEarth Guardians, which protests and planes to welcome them in and thank the Iranian most BLM oil and gas lease sales. people for their solidarity and cooperation," Padrino said Groups protested other sales this year too, saying low oil on state television, adding that the government was in prices are weakening demand and resulting in poor touch with Iran's defense minister. returns for public coffers. The government declined to Guaido said the fact President Nicolas Maduro's socialist postpone those sales. government is importing fuel shows its mismanagement of the country's oil industry. Venezuela's refining network EPA draft would lift US biofuel blending mandates has 1.3 million barrels per day (bpd) of capacity, but has slightly in 2021 – sources collapsed after years of underinvestment. "We are very concerned for the safety of Venezuelans, The U.S. Environmental Protection Agency has proposed and of Latin America as well, due to this attempted lifting the amount of biofuels that refiners must blend into Iranian presence on Venezuelan soil," said Guaido, who their fuel next year to 20.17 billion gallons, from 20.09 leads the opposition-held National Assembly and is billion this year, according to two sources familiar with the recognized as the rightful president by dozens of details of an agency draft proposal. countries, including the United States. The 2021 volumes would include 15 billion gallons of Maduro calls Guaido a U.S. puppet seeking to oust him conventional biofuels like ethanol and 5.17 billion gallons in a coup, and blames U.S. sanctions for Venezuela's of advanced biofuels, according to the sources. The economic woes. advanced biofuels mandate would include 670 million Guaido said his team believed Venezuelan officials paid gallons of cellulosic biofuel, up from 590 million gallons in Iran with "blood gold" from informal mines in Venezuela's 2020, they said. southern jungles, which have fueled massacres as gangs EPA's proposal would also place the 2022 mandate for battle for territory. biodiesel at 2.76 billion gallons, from 2.43 billion in 2021, sources said. The agency sets biodiesel mandates two Trump administration abruptly postpones New years ahead. An EPA spokesperson declined to Mexico oil and gas auction comment. The draft proposal is currently being reviewed by the White House. The EPA is charged with setting The Trump administration abruptly postponed an auction biofuel and biodiesel blending requirements for the of oil and gas leases in New Mexico that had been refining industry as part of the Renewable Fuel Standard, scheduled to begin on Wednesday morning without a regulation aimed to help farmers and reduce U.S. providing a reason for the move. dependence on oil. Under the RFS, refiners must blend Bureau of Land Management (BLM) spokeswoman billions of gallons of biofuels into the nation's fuel pool or Allison Sandoval confirmed the delay, which was first buy credits from those that do. Refiners say the announced on a government website. She said the obligations are too costly, while farmers benefit from an agency "will provide further information at a future date." expanded market for their crops. Small refineries can be The parcels that were scheduled for sale are in New exempted from biofuel blending if they prove that Mexico's southeast corner, overlaying part of the complying would cause them financial strain. The waivers sprawling Permian Basin, the world's biggest oil field. It have been a lightning rod for controversy, as the Trump would have been the first government oil and gas auction administration has made wide use of the exemptions, since U.S. crude oil futures briefly plunged below zero for angering biofuel advocates, who say they hurt ethanol the first time in history a month ago due to fallout from demand. the coronavirus pandemic. BLM had been scheduled to offer 94 parcels on more COLUMN-U.S. ethanol running out of recovery time to than 45,000 acres (18,211 hectares) in New Mexico and avoid more lost corn demand -Braun Texas via an online auction on Wednesday and Thursday. Even before the coronavirus outbreak, most analysts

4 May 21, 2020 (continued) believed U.S. corn supplies would swell to 30-year highs While USDA’s latest assumption for 2019-20 corn use for in 2021. ethanol is still within the bounds of reality, some simple But those prior stock expectations are now much too low math demonstrates the delicacy of this balance even considering the sharp loss in corn demand by way of under optimistic forward scenarios. ethanol, and inventory stands to bulge even further if There were just over 15 weeks left in the 2019-20 corn ethanol output does not recover in a timely fashion. marketing year as of Friday, and ethanol production in the In the week ended May 15, U.S. fuel ethanol production latest week was about 37% below the pre-virus levels, or averaged 663,000 barrels per day, the eighth what for this example, will be considered “normal” or consecutive week of significantly reduced output due to “expected” levels. the virus-fueled drop in oil demand. That is according to If that departure from normal were to improve by 3 figures published on Wednesday by the U.S. Energy percentage points each week from now through August, Information Administration (EIA). “normal” output levels would return by mid-August. And Output was up 7% on the previous week, which was the under that scenario, production in the final 15 weeks most productive one since that ended April 3. would average about 11% below expected levels, U.S. ethanol stocks fell for the fourth week in a row requiring USDA to remove another 50 million bushels through May 15, dropping 2% on the prior week to 23.6 from corn use for ethanol. million barrels. That is off 15% from the all-time high four But now suppose that weekly production recovers versus weeks earlier. normal by only 2 percentage points per week from now But implied ethanol usage in the latest week was off 9% through August. That would mean output increases to from the previous week at about 744,000 bpd. That is still about 6% below normal levels in the last week of August. the second-best demand week since the coronavirus Output in the final 15 weeks of 2019-20 would average crisis began. about 20% below expected levels, causing the loss of an That is supported by corresponding U.S. gasoline additional 200 million bushels. demand, which was down 8% on the week through May 15, its first decline in six weeks. That figure of 6.8 million Continental Resources pushes North Dakota for relief bpd is up 34% from the low set six weeks earlier. on oil production CORN CUSHIONS The U.S. Department of Agriculture last week placed Continental Resources, one of the largest U.S. shale oil corn use for ethanol production in the 2019-20 marketing producers, on Wednesday urged North Dakota energy year ended Aug. 31 at 4.95 billion bushels, down 475 regulators to intervene in the oil market through steps million from its March estimate. The March projection such as limiting output or restricting flaring of unwanted could be considered “pre-virus.” . Through May 15, it can be estimated that the latest eight Continental, the state's largest producer, argued at a weeks of reduced ethanol output has caused a loss in hearing that operators are hurting even though state corn demand of about 350 million bushels, which leaves production has fallen more than half a million barrels per about 125 million bushels of cushion left per USDA’s day (bpd) since prices crashed in March. latest peg. U.S. oil prices have plunged to around $32 a barrel, That cushion would imply that between May 16 and Aug. about half the level of January. The price collapse has 31, ethanol production cannot average more than 8% prompted producers to urge regulatory action from states below the rates that would have been expected without to help the ailing industry. interruptions. Anything more than that suggests that "North Dakota can be a leader as far as action is more corn demand has been lost than USDA last concerned," said Blu Hulsey, a Continental vice predicted. president, who added the state does not need "to take A week ago, a departure of 10% would have been large action to make a difference." acceptable, implying that time is quickly running out. Production has exceeded "reasonable market demand," Corn use for ethanol production accounts for nearly 40% he said. of annual domestic corn demand, so the losses are However, Dean Foreman, chief economist for trade group highly impactful, and any further reductions to use in American Petroleum Institute, asked regulators to resist 2019-20 will simply increase the starting stocks for 2020- the urge to intervene. 21. USDA already sees 2020-21 carryout up 58% on the The North Dakota Petroleum Council also opposed year. regulatory measures. However, the agency has already built in some losses for "When there is one action by the government, there are next year’s corn use for ethanol, so there is some three or four unanticipated actions," said President Ron additional cushion there. USDA pegs that number at 5.2 Ness. billion bushels in 2020-21, down 250 million from its North Dakota is the third U.S. state to evaluate helping February outlook. the oil industry. Crude oil production in the state has SCENARIOS fallen by 510,000 bpd since prices crashed, according to

5 May 21, 2020 (continued) the latest state report. move by the company to shore up cash to cope with a Texas earlier this month dismissed a motion to implement dramatic plunge in oil prices that began in March. output limits, while Oklahoma approved an emergency U.S. oil prices experienced historic drops throughout order in April calling some oil production in the state March and April, brought on by the demand destruction waste, a move that allows some producers to shut wells caused by coronavirus-related lockdowns and a price war without losing leases. between producing nations. Oklahoma is considering two separate applications for As oil and gas explorers slam the brakes on drilling to intervention to stabilize markets. survive low prices, companies like that In April, North Dakota weighed financial help for the provide drilling equipment and services have taken a state's oil industry, including paying operators to restart major beating. wells. Commissioners at the time pushed back on limiting Halliburton and larger rivals nd Baker production, calling it "a bridge too far." Hughes Co posted losses for the first quarter, owing to heavy writedowns on assets on the back of low oil prices. Russian oil output dips towards OPEC+ quota limit – Each of the three service providers have also slashed sources their spending plans for the year, with Halliburton's 50% reduction among the deepest in the industry. Russia's oil and gas condensate production fell to 9.42 Halliburton has already lowered salaries for the million barrels per day (bpd) during May 1 to 19 as a company's executives and cut roughly 1,000 jobs from its global deal on reducing output took effect, two sources headquarters in as part of a plan to reduce $1 familiar with the data told Reuters. billion of costs. The deal on curbing crude output reached between the The company set a dividend of $0.045 per share payable Organization of Petroleum Exporting Countries, Russia on June 24, down from $0.18 per share paid on March and other producers, a group known as OPEC+, took 25. effect on May 1. Schlumberger, the world's largest services provider, Gas condensate, a type of light oil not included in the slashed its dividend by 75% last month. OPEC+ pact, accounts for 700,000-800,000 bpd of Members of Halliburton's board also agreed to reduce Russia's combined liquids production, so output of just oil their annual retainer by 20% on Wednesday. was about 8.72 million bpd. That is close to its OPEC+ Halliburton's shares rose about 3% in premarket trading quota of 8.5 million bpd of oil. as U.S. crude oil prices climbed to $32.18 a barrel. Still, Russia oil and condensates output was 11.35 million bpd both Halliburton's shares and U.S. crude are at about half in April and was averaging 9.43 million bpd earlier in May. of what they began the year at. The energy ministry did not reply to a Reuters request for a comment. COLUMN-Physical oil market tightens as output cuts, The energy ministry told companies to cut production by economic recovery take hold: Kemp 20% each, with no exceptions for big projects led by foreign firms. Regions with the highest oil output face the Physical crude markets are signalling a rapid shift from toughest burden because of the concentration of assets an enormous over-supply at the height of the coronavirus there. lockdowns in April towards an expected under-supply in Khanty-Mansiysk, one of Russia's top producing the second half of the year. provinces with output roughly the same as the U.S. state Dated Brent's six-week calendar spread has shrunk to a of Texas, cut producing by 15% to 4 million bpd. To contango of less than 70 cents per barrel from more than protect jobs and revenues, it has asked other regions to $6 per barrel in the first week of April. shoulder some of its cuts. Calendar spreads correlate closely with the expected But the energy ministry of Krasnoyarsk, another of production-consumption balance and are usually a more Russia's main oil provinces and home to the Vankor accurate indicator than spot prices alone. production area developed by Russia's top oil company Dated Brent is based on the cost of buying and selling , has said it was unlikely to help. physical cargoes from the Brent, Forties, Oseberg, It told Reuters in a email that the region had been Ekofisk and Troll field-systems in the North Sea. producing below levels it had originally planned to achieve Unlike futures contracts, trading is very near-term and before the OPEC+ cuts, due to depleting fields, and did dominated by producers, refiners, physical merchants not want to make extra reductions for other regions. and large financial institutions, with few hedge funds and no retail investors. Halliburton slashes dividend by 75% in latest move to Because dated Brent is a complex of seaborne crudes, it save cash avoids the storage constraints that have distorted inland WTI prices recently. Oilfield services provider Halliburton Co slashed its The shrinking calendar spread is therefore a strong signal quarterly dividend by 75% on Wednesday, the latest the physical market has become much better balanced

6 May 21, 2020

over the last six weeks. a nation-wide lockdown to prevent spread of coronavirus. The Organization of the Petroleum Exporting Countries Lower demand and storage constraints forced some and its allies have cut crude exports sharply while refiners to declare force majeure on oil purchases from refineries’ consumption has started to rise as lockdowns the Middle East, defer cargoes and keep some oil in ease. floating storage. Fears about running out of crude storage at tank farms on State refiners also sold cargoes to the federal land and in vessels off the coast have disappeared. government for strategic reserve stockpiles and to avoid Dated Brent's six-week calendar spread is now in the 20th paying demurrage cost. percentile for all trading days in the last decade up from UAE retained the No.3 spot. the 1st percentile early last month. In April India also raised imports of Mediterranean grades In a longer term perspective, the crude market remains such as CPC Blend, which saw steep price drops. weak but no longer exceptionally so. Current spreads are Nigeria, which also offered steep discounts, was the consistent with high but stable or falling inventories, a fourth biggest oil supplier and knocked Venezuela to fifth. sharp turn around from surging stocks a month ago. Lower intake of Venezuelan oil lowered Latin America's Like the production-consumption balance, spreads tend to share of India's imports to 15.43% in April from 18.8% in be cyclical, and are likely to tighten further, provided the March. economy continues to recover and oil producers remain Higher Mediterranean and African supplies cut the Middle disciplined. East's share to 56.6% from 58.9% in March. African grades accounted for about 13.9% versus 9.7% in March, Saudi pips as top oil supplier to India in April - while Mediterranean oil's share rose to 7.6% from 5.5%. trade Norway produced more oil, less gas than expected in Saudi Arabia replaced Iraq as the top oil supplier to India April in April after a gap of three months as refiners in Asia's third largest economy were drawn by deep discounts on Norway's oil production jumped in April from the previous Saudi crudes, data obtained from sources showed. month, beating official forecasts by 1.8%, the Norwegian Refiners in India, the third largest oil importer, requested Petroleum Directorate said on Wednesday. higher volumes for April from Saudi Aramco and UAE's The country's crude oil output rose by 4.5% month-on- Abu Dhabi National Oil Co (ADNOC), which both month from March to 1.78 million barrels per day. The increased output while cutting prices last month. India's oil output year-on-year was up by 30.1%, mainly thanks to imports in April totalled 4.63 million barrels per day (bpd), the ramp-up of 's giant Johan Sverdrup oilfield. up 5% from March but down 4.1% from April 2019, the Daily natural gas output fell by 13% month-on-month, data showed. missing the official forecast by 3.7% and was down Indian refiners had to curtail crude processing last month 10.6% from a year ago. Overall monthly gas output in as demand slumped to its lowest levels since 2007 due to April totalled 9.0 billion cubic metres.

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(Inside Oil - Asia Edition is compiled by Jesse Vinay A in Bengaluru) Refinitiv 3 Times Square, New York, NY 10036 For questions or comments about this report, contact: [email protected] Please visit: Refinitiv for more information. To subscribe to Asia Oil newsletter, click here. Privacy statement

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