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Historic Day for WTI Crude Oil Negative WTI Crude Oil Prices for the First Time in History 21 April 2020

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Historic Day for WTI Crude Oil Negative WTI Crude Oil Prices for the First Time in History 21 April 2020 Historic Day for WTI Crude Oil Negative WTI Crude Oil Prices for the first time in history 21 April 2020 ■ As we noted in our quarterly market insights publication last month, the price of oil has experienced a dramatic fall and entered a bear market, on the back of significantly weaker global demand due to the impacts of COVID-19 as well as increased supply as a result of price wars between Russia and Saudi Arabia. ■ Overnight, we saw the price of a barrel of West Texas Intermediate (WTI) fall to as low as circa US$(37.63), in unprecedented negative pricing territory that is bound to go down in history. ■ The negative pricing could be considered as a glitch in the market as traders made a dash for the exit door to avoid being caught out holding an expiring May US oil futures contract which would require the buyers to take delivery of the physical barrels of oil. ■ The problem with this is that over the past few months, as global demand has sharply declined with increasing supply, storage capacity for oil has been filled. As a consequence it has become increasingly difficult to store landlocked sources of oil, such as WTI. ■ From a producer's perspective, shutting down a well is extremely expensive. At least in the short term major producers would prefer to sell the oil, even at an operating loss, to keep the well flowing. WTI Crude Oil vs Brent Crude daily prices 80 60 40 US$19.78 / bbl 20 June WTI Crude Futures Price 0 -20 WTI Crude Brent Crude Oil Price (US$/barrel) (US$/barrel) Price Oil -40 US$(37.63) US$25.20 / bbl July WTI Crude Futures Price -60 Jan 20 Jan Source: Bloomberg Oct 19 Oct Sep 19 Sep 20 Feb Dec 19 Dec Nov 19 Nov Mar 20 Mar Source: Bloomberg ■ Without the same storage constraints as WTI, Brent Crude is trading at around US$23.87/bbl. ■ The ~10% decline in oil supply agreed by OPEC and Russia is expected to be insufficient in the short-term to stabilise the oil market, as the global economy navigates through the impacts of COVID-19 and the resulting significant reduction in oil demand. Further supply reductions will come from other countries, particularly the US and Canada. ■ Nevertheless, it is expected that the industry should be able to restructure itself over the following months to unwind negative pricing for WTI, with the likely response required on the supply rather than the demand side. We expect to see a prolonged period of low ~100m bpd ~70m bpd ~(30)% oil prices. This may Pre COVID-19 oil balance Current level of oil demand Reduced global oil demand present an opportunity for entry into selective global oil equities ~9.7m bpd ~10% ~20m bpd benefiting from an OPEC Plus production cuts OPEC Plus production cuts Remaining oil supply surplus eventual recovery Source: Bloomberg, Capital IQ, IEA, AFR; Note: above figures are estimates only This document does not constitute an offer or public offering of interests in Eden Partners, its subsidiaries or any of its associated entities 1 Contacts Eden Partners Contact Details Nicholas Boyd-Mathews Oliver Morse Matthew Hall F Fin Chartered MCSI MSAFAA BA (Hons) CA BComm (Fina GEcon) BHComm (Econ) Executive Director / Executive Director / Executive Director / Chief Investment Officer Portfolio Manager Portfolio Manager [email protected] [email protected] [email protected] Eden Partners Pty Ltd Australian Financial Services Licence (“AFSL”) No: 296466 (held within Eden Asset Management Pty Ltd) Phone: +61 8 6186 9711 Office: Level 23 Exchange Tower, 2 The Esplanade, Perth, WA 6000 Postal: PO Box Z5565, Perth St Georges Tce, WA 6831 Web: eden-asset.com Disclaimer Copyright © Eden Partners Pty Ltd (“Eden”). All rights reserved. All material presented in this document, unless specifically indicated otherwise, is under copyright to Eden. None of the material, nor its content, nor any copy of it, may be altered in any way, or transmitted to or distributed to any other party, without the prior express written permission of Eden. The information contained in this report is drawn from sources believed to be reliable, but the accuracy and completeness of the information is not guaranteed, nor in providing it does Eden assume any liability. This information is given as of the date appearing on the report and Eden assumes no obligation to update the information or advise on further developments relating to these securities. This report is intended for distribution only in those jurisdictions where Eden is registered as an advisor or a dealer in securities. Any distribution or dissemination of this report in any other jurisdiction is strictly prohibited. This document is provided for the sole use of the intended recipient and is not a financial promotion. It shall not constitute an offer or solicitation of an offer to make an investment in Eden, under Australian Financial Services Licence (“AFSL”) No: 296466, its affiliates or associated companies. It should not be copied, distributed, published, referenced or reproduced, in whole or in part, or disclosed without the express permission of Eden and is not intended for private investors. By accepting this document, the recipient agrees that neither it nor its employees or advisors shall use the information contained herein for any other purpose than for general information purposes. This document, and the information contained herein, is not for viewing, release, distribution or publication in any jurisdiction where applicable laws prohibit its release, distribution or publication. It is the responsibility of any person/s in possession of this document to inform themselves of, and to observe, all applicable laws and regulations of any relevant jurisdiction. It is not designed to contain information material to an investor’s decision to invest in any business managed by Eden or its affiliates. All opinions and estimates constitute the best judgement of Eden as of the date hereof, but are subject to change without notice. This material does not constitute legal or accounting advice; readers should contact their legal and accounting professionals for such information. Some information contained herein has been obtained from third party sources and has not been independently verified by Eden. Eden makes no express or implied warranties or representations with respect to the data (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any data contained herein. This document does not constitute an offer or public offering of interests in Eden Partners, its subsidiaries or any of its associated entities 2.
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