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European Refining Summit Gasoline: losing its lustre Francesco Di Salvo, September 29, 2016
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Oil
Private & Confidential 2
Agenda:
• Overview of trends in the global gasoline complex
• Repositioning of global arbitrages
• Outlook of West African demand
• Gasoline vs Diesel: what way forward?
AGENDA
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Oil
Private & Confidential 3
0
5
10
15
20
25
30
35
($/b
)
Eurobob gasoline crack vs Dated Brent
European gasoline cracks: a reversal of fortunes
Data: Platts
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Oil
Private & Confidential 4
400
420
440
460
480
500
520
Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17
$/m
t
EBOB Forward curve, July 2016
Contango main feature of the market
Data: Platts
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Oil
Private & Confidential 5
0
20
40
60
80
100
120
Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16
(S/m
t)
Eurobob gasoline discount to front-month swap
Physical market weakness persists, inducing storage, after a strong Q2
Data: Platts
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Oil
Private & Confidential 6
0
2
4
6
8
10
12
Jul-16 Jul-15 Five-year average
Mill
ion
bar
rels
ARA Gasoline stocks
High stocks dictate bearishness
Data: PJK International
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Oil
Private & Confidential 7
0
50
100
150
200
250
300
May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16
($/m
t)
Gasoline/Naphtha Spread
European blending margins eroded
Data: Platts
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Oil
Private & Confidential 8
Naphtha follows gasoline amid lack of outlets
-15
-10
-5
0
5
10
15
20
S/m
t
CIF NWE Naphtha Cargo differential to Mo-1 swap
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Oil
Private & Confidential 9
Components under pressure
1.1
1.15
1.2
1.25
1.3
1.35
1.4
1.45
1.5
1.55
Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16
MTBE/EBOB gasoline factor
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Oil
Private & Confidential 10
Global arbitrages suffer
UKC-WAF
UKC-USAC
Med-AG
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Oil
Private & Confidential 11
190
200
210
220
230
240
250
260
270
Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16
Mill
ion
bar
rels
US Stocks levels
weekly
5-year average
US stocks above five-year average…
Data: EIA
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Oil
Private & Confidential 12
0
2000
4000
6000
8000
10000
12000
01
-Jan
-16
08
-Jan
-16
15
-Jan
-16
22
-Jan
-16
29
-Jan
-16
05
-Fe
b-1
6
12
-Fe
b-1
6
Feb
19
, 20
16
Feb
26
, 20
16
Mar
04
, 20
16
11
-Mar
-16
Mar
18
, 20
16
Mar
ch 2
5 2
01
6
Ap
r 0
1, 2
01
6
Ap
r 0
8, 2
01
6
Ap
r 1
5, 2
01
6
Ap
r 2
2, 2
01
6
Ap
r 2
9, 2
01
6
May
06
, 20
16
13
-May
-16
May
20
, 20
16
May
27
, 20
16
Jun
03
, 20
16
Jun
10
, 20
16
Jun
17
, 20
16
Jun
25
, 20
16
Jul 0
1, 2
01
6
Jul 0
8, 2
01
6
Jul 1
5, 2
01
6
Jul 2
2, 2
01
6
Jul 2
9, 2
01
6
1,0
00
b/d
US Demand
weekly
5-year average
…despite high demand levels
Data: EIA
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Oil
Private & Confidential 13
0
100
200
300
400
500
600
700
800
900
1000
Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16
1,0
00
b/d
US gasoline imports
Weekly
5-year average
US imports of European barrels become more marginal
Data: EIA
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Oil
Private & Confidential 14
Eastern arbitrages suffer
-8
-6
-4
-2
0
2
4
6
8
Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16
$/b
East/West Spread
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Oil
Private & Confidential 15
Middle East refinery expansions
Yanbu
Jazan
Rabigh
Duqm
Sohar
Fujairah Ras Laffan
11
Ras Tanura
Jubail
Al Zour
Ruwais 1
2
3
4
5
6 7
11
8
9
10
Refinery
Yanbu
Rabigh
Jazan
Al Zour
Jubail
Ras Tanura
Ras Laffan
Fujairah
Sohar
Duqm
Ruwais
Aramco/Sinopec
Aramco/Sinopec
QP/Total
Aramco
KNPC
Aramco/Total
Aramco
IPIC
QRPIC
IPIC/OOC
ADNOC
400 kb/d
Upgraded (Phase 2)
+146 kb/d
400 kb/d
615 kb/d
400kdb
Upgrade
200 kb/d
+86 kb/d
230 kb/d
+417kbd
2014
2016
2016
2018
2019
2013
Relaunch
2016
2015
Owner Capacity/ Expansion Completion
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Oil
Private & Confidential 16
-100
-80
-60
-40
-20
0
20
40
Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16
(S/m
t)
WAF-grade vs 10 ppm premium unleaded barges
West African grade gasoline lacks traction
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Oil
Private & Confidential 17
• Abandonment of import allocations with marketers able to buy in the free
market
• Price cap at N145/litre
• Nigeria moves to “price modulation” but policy hailed as first step
towards liberalisation
• De facto subsidy removal, but governmental direction persists
• Lack of foreign exchange affects financing and imports
• Emphasis on Direct-Sale/Direct Purchase programmes
Nigeria embarks on road to deregulation
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Oil
Private & Confidential 18
Relative fall of diesel cracks vs gasoline
0
5
10
15
20
25
30
Aug-2012 Jan-2013 Jun-2013 Nov-2013 Apr-2014 Sep-2014 Feb-2015 Jul-2015 Dec-2015 May-2016
$/b
arre
l
Diesel Gasoline
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Oil
Private & Confidential 19
European diesel car sales – 50%
0
10
20
30
40
50
60
70
80
Irelan
d
Luxe
mb
ou
rg
Po
rtugal
Spain
Gre
ece
Be
lgium
France
Swe
de
n
Au
stria
Italy
UK
Ge
rma
ny
No
rwa
y
Switze
rland
Finlan
d
De
nm
ark
Ne
the
rlan
ds
% c
ar s
ale
s d
iese
l
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Oil
Private & Confidential 20
Change in diesel market car share
-12
-10
-8
-6
-4
-2
0
2
4
6
8
Gre
ece
No
rway
Be
lgium
Spain
Luxem
bo
urg
France
Ne
therlan
ds
Swe
de
n
Po
rtugal
Finlan
d
Ge
rman
y
Ireland
UK
Au
stria
Italy
Switzerlan
d
Den
mark
% c
han
ge in
die
sel c
ar s
ale
s
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Questions & Answers
Private & Confidential 21