Oil and Natural Gas market Effect of SECA Regulations on Fuel Prices/Markets

Thina Margrethe Saltvedt, Chief Analyst Macro/Oil (Ph. D.) January 2014 @ThinaSaltvedt

A tight global oil market while the US market is awash with natural gas
US: WTI oil and Henry Hub Gas prices
17.5 USD per mmBtu 15.0 Natural Gas Henry Hub, l s 12.5 100 10.0 75 7.5 50 5.0 25 !"# l$% t s&eet 'ru(e, r s

Europe: Brent Crude and NBP gas prices

USD per barrel 150

USD per barrel 150 175 GBp per " erm

Brent *ru(e, 1+p,s

125

150

125

125

100

Natural Gas, Nat$,nal Balan'$n% -,$nt, %reen

100

75

75 50 50 25

2.5

25

0.0 90

0 92 94 96 98 00 02 04 06 08 10 12 14

0 97 98 99 00 01 02 0) 04 05 06 07 08 09 10 11 12 1)

0
Source: Reuters EcoWin

Source: Reuters EcoWin

Source: Reuters Ecowin and Nordea Markets 2

From 2015, shipping will add to gasoil/diesel demand

Source: PIRA, Nordea Markets

Commodities Research

Expected price effects: Fuel Oil 1% and 3.5% price spread is expected to narrow, while Fuel Oil 1% and Gasoil 0.1% expected to widen
45 40 )5 )0 25 20 15
260

1%-3.5% Fuel oil spread ("Hi-Lo")

USD/tonne

400 )80 )60 )40 )20 )00 280

".1% #asoil $%F $ar&oes - 1% Fuel oil F'( $ar&oes spread (s!aps) USD/tonne

Risk

10
240

5 0 1

)an *"15
) 5 7 9

Months or!ard
11 1) 15 17 19 21 2) 25 27 29 )1 )) )5
6m ran%e 14.01.2014

220 200 1

)an *"15
) 5 7 9

or!ard Months Months or!ard

11 1) 15 17 19 21 2) 25 27 29 )1 )) )5

6m ran%e

14.01.2014

Source: Nordea Markets

Shale revolution and increasing LNG capacity imply major changes in the European gas market. Oil market remains fairly tight.
US gas exports
300
-atural #as .ri/e ,rends 18 USD/++(,U 16
USD per barrel

Japan LNG

250 200

IEA New Policy IEA 2 degree Nordea

IEA Current PIRA

14 12 10 8 6 4

NBP

150 100 50

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

2022

2024

2026

2028

2030

2032

0 2008 2009 2010 2011 2012 201) 2014 2015 2016 2017 2018 2019 2020 Henry Hub /US0 NB- /U10 2apan 3NG $mp,rt

New wave of LNG capacity being completed

5 Source: Bloomberg, IEA, PIRA, Nordea Markets

2034

Henry Hub

Long term US natural gas prices fallen markedly lately triggers the use of Natural Gas as the fuel for future investements

2012 2013

2014

6 Source: Bloomberg and Nordea MArkets

0.0 2000 60.0 50.0

In % of total

2012

2020

2030

40.0 30.0 20.0 10.0 0.0

Transportation will increase its share of total oil demand going forward

Fuel demand growth highest for road freight

Source: IEA and Nordea Markets

Gas for oil substitution in transportation still a long way to go

GTL is another road to substitution Primarily driven by LNG eksport

Source: PIRA and Nordea Markets

8

Contact details:
Thina Margrethe Saltvedt Chief Analyst Macro/Oil (Ph. D.) Commodities Research Nordea Markets Phone: +47 22 48 79 93 Mobile: +47 90 63 40 75 Thina.margrethe.saltvedt@nordea.com @ThinaSaltvedt

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