OIL REVIEW Second Half 2013
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OIL REVIEW Second Half 2013 NATIXIS WHOLESALE BANKING / INVESTMENT SOLUTIONS / SPECIALISED FINANCIAL SERVICES
Natixis Commodities Research
Author Profile
Dr Abhishek Deshpande leads the oil and oil products research in Nic Brown’s team at Natixis, providing
price forecasts and analysis of developments across the global oil and oil product markets. Prior to joining
Natixis, Abhishek worked for business consulting firm Oakland Innovation in Cambridge. Abhishek has a
doctorate in Chemical Engineering from Cambridge University and holds Chartered status with the Institute
of Engineers. While pursuing his degree, he spent time working for Indian Oil Corporation Limited.
Abhishek has appeared on Bloomberg TV, presented at Oil & Gas conferences and is quoted regularly by
financial media globally. He has also published articles in financial magazines such as Petroleum Economics.
Nic Brown is head of commodities research at Natixis. Nic began his career at the Bank of England,
contributing to the Bank’s Quarterly Bulletin before managing the Deutschmark portfolio in the Bank’s
reserves management team. After three years on the proprietary trading desk at BNP Paribas, Nic joined
Natixis in 2001 as a global-macro hedge fund manager. Following a further stint as a fixed-income proprietary
trader, Nic joined Patrick Artus’ Economic Research team in 2009 as Head of Commodities Research.
Nic has a prominent media profile, appearing regularly on Bloomberg TV and at numerous conferences
around the world, and is regularly quoted by the financial media.
Content
executive summary
macro-economic outlook
global demand
• US
• Europe
• China
• Japan
• India
• Middle East
non-opec supply
• North America
• Europe
• Russia and Kazakhstan
• Mexico and Brazil
the opec equation
• Desired Oil Prices - Fiscal Break-evens
• Expanding Output (Iraq, Libya, Venezuela)
• Iran
oil price outlook
The Oil Review is produced by the Commodities Research Department of Natixis.
Publication director: Patrick Artus / Authors: Nic Brown & Dr Abhishek Deshpande
Research assistant: Kryshnan Patel-Parker
Natixis 3
Executive Summary
For a number of years, we have published a flagship review of the metal markets, offering a fundamental
assessment of global supply and demand in an effort to help understand the likely price outlook for both
base and precious metals. In support of our growing business in the energy markets, we now offer an
equally detailed analysis of the global crude oil and refined product markets.
In structure, our Oil Review is similar to our Metals Review, in that it takes an unashamedly fundamental
approach to both supply and demand in assessing whether the global oil market is likely to be under- or
over-supplied over the coming one to two year horizon. From that point onwards, our analytical approach
diverges. With the global oil market still dominated by the OPEC cartel, an assessment of the likely price
outlook requires a close look at the inner workings of this organisation. What price range do they want?
Can they adjust output, either up or down, in order to achieve this target price? We have attempted to
answer these questions by looking at fiscal break-even oil prices for the key OPEC producers, as well as
the prospective daily call on both OPEC output and, within it, output required from Saudi Arabia and its
GCC allies. Within this framework, we hope to be able to offer a fundamental perspective on the principal
risks to oil prices over a one to two year horizon.
On the demand side, our analysis highlights the unexpected Over the remainder of this year, and in 2014, we expect most
strength of US demand in 2013, as well as the surprising of these trends to remain in place. There is the potential for
resilience of Chinese demand. It is not that Chinese demand is European demand for oil products to stabilize, if not increase,
stronger than the market had expected, rather that it has met during this period. After a protracted period of austerity,
expectations despite a period of Chinese economic weakness. governments have finally been allowed a little fiscal breathing
Demand surprises have not all been positive this year. Due to room, and given the abject weakness of European demand
a potential restart of its nuclear facilities, Japanese demand for over the past few years, this offers the prospect of a short-term
both crude and fuel oil has fallen quite sharply. Indian demand rebound in demand for oil and oil products.
has been negatively affected by oil product price liberalization
and currency weakness. In the Middle East, weakness in demand On the supply side, the market has encountered a number of
has spread from Iran to other countries as political instability has significant disappointments during 2013. Chief among these
become more pervasive across the region. are Iraq and Libya. Both of these countries were expected to
produce healthy increases in output this year, but in both cases
Natixis crude oil price outlook (average annual price) the spreading political instability across the Middle East and
Forecast (avg price) North Africa has severely undermined output. In Brazil too, an
Last Price 2011 2012 2013 2014 anticipated rise in output has failed to materialize despite a rapid
Energy Spot escalation in capital expenditure over the past decade.
Brent USD/bbl 113.48 112.5 111.1 107.5 108.0
WTI USD/bbl 106.80 95.0 94.6 98.8 103.8
4 Oil Review - Second Half 2013
Executive Summary
On the plus side, North American output has continued to range than to the bottom end. Eventually we would expect
expand at a rapid pace, and in both Canada and the US there OPEC/GCC members to agree on a reduced collective quota.
has been a much-needed boost to investment in infrastructure,
allowing these new supplies of crude greater access to Over time, however, the pressure on crude prices to stabilize
international oil markets. gradually become more acute. In North America, extensive
investment in new logistical infrastructure will allow new crude
From now until the end of 2014, we expect to see a considerable supplies to exert an immediate effect upon global prices. In
strengthening in crude oil output across a wide range of China, policy makers have been planning very carefully their
Macro-economic Outlook
countries. North American output can continue to expand, new sources of incremental supply, such that they too will be
particularly now that logistical bottlenecks are in the process able to reduce their dependence upon Middle East suppliers.
of being resolved. After the disappointments of 2013, Iraq Sustained high oil prices are encouraging strong investment in
and Brazil could make more substantial progress, even if the new supplies of crude, from the North Sea to the South Atlantic,
situation in Libya remains extremely difficult. Two of the oil suggesting that supply will exceed the growth in global demand
world’s perennial under-achievers, Venezuela and Kazakhstan, for some years to come. Nevertheless, with Saudi Arabia having
can finally begin to reap the rewards of investment in the been able to increase output back to recent highs, the country
Orinoco Belt and Kashagan fields. There is even scope for the remains in a strong position to defend its lower price band.
North Sea to arrest the savage decline rates that have affected
output in recent years, after a solid pick-up in investment in both For 2013, we forecast Brent prices will average $107.5/bbl, and
the UK and Norwegian oil sectors, although this might be more expect an average price of $108/bbl in 2014. Spreads between
Global Demand
of a story for 2015 and beyond. Brent and light crude should remain within a relatively tight
band over this period, bounded on the low side (around $3/bbl)
Where does this leave the balance in the global oil market? For by pipeline cost differentials (taking crude from Cushing to the
2013, although the call on OPEC has fallen by approximately US Gulf Coast versus shipping crude across the Atlantic) and on
what was expected by both OPEC and the IEA, the stress within the high side (around $7/bbl) by the equivalent journey crude-
OPEC has been alleviated somewhat by the underperformance by-rail cost differentials.
of Iraqi and Libyan output. Consequentially, Saudi Arabia and its
GCC allies have been able to produce more oil than they may Among oil products, there is scope for significant shifts in
Non-OPEC Supply
have anticipated at the start of the year. demand between diesel and gasoline. In some markets, such as
China and the US, there is the prospect of a gradual shift from
For 2014, our assessment of prospective demand and supply gasoline to diesel among passenger vehicles. In Europe and
suggests that the daily call upon OPEC is likely to fall further. India, a shift in exactly the opposite direction is possible.
Within OPEC, there is scope for an escalation of tensions
between cartel members, particularly if Iraqi and Venezuelan On the one hand, demand for gasoline is being negatively
output increases by as much as we expect. It is here that affected by tightening CAFE rules in all markets, with US
political developments in the Middle East and North Africa will requirements finally beginning to catch up with the rest of the
be of paramount importance. With the gradual withdrawal of world. On the other hand, the rise of bioethanol in the key US
The OPEC Equation
US influence in the region, political tensions between Sunni market has been halted by the 10% blend-wall which, along with
and Shia members of OPEC are increasing from their usual an absence of viable second-generation sources of bioethanol,
undercurrents to open and outright hostility. This is painfully means that US demand for gasoline is unlikely to decline as
evident in Syria, but the same process is clearly also at work in rapidly as it did in the years to 2012.
places such as Iraq.
Among oil products, diesel is most directly affected by the
In terms of the risks to oil prices over the remainder of this year economic cycle, given its importance to freight transportation
and 2014, while it is clear that rising global output is putting in all of the major economies. Here, there is the potential for a
Oil Price Outlook
increasing pressure upon OPEC’s core members, it is by no slow move away from diesel towards LNG, particularly in the
means certain that the additional supply will be enough to push US where the necessary infrastructure is gradually becoming
prices below the bottom end of OPEC’s target range of $100-110/ available to allow trucking companies to take advantage of
bbl due to current political uncertainties. LNG’s lower cost. While this is likely to become an increasingly
important factor over the medium term, its impact on demand
If, as we suspect, adherence to OPEC’s 30mn b/d collective will be very limited over our short-term horizon.
quota becomes less a question of co-operation between OPEC
members and more a question of rising political instability, the
method in which the global market remains in balance may itself
be supportive of prices closer to the high end of OPEC’s target
Natixis 5
Macro-economic outlook
After rapid growth in the decade up to 2007, the global economy has suffered a torrid period of economic
stagnation since then, in which the initial US real estate crash was followed by a series of fiscal crises
across peripheral Europe. In attempting to assess the potential strength of global demand for oil and oil
products, it is important to begin with a brief analysis of the G3 and BRIC economies; which of these
countries are finally beginning to emerge from the severe economic downturn, or are there instead further
downside risks to the global macro-economic picture?
The global energy basket has changed significantly in the Nuclear energy and renewable fuels, which were almost
last five decades, with cleaner energy gradually displacing non-existent in the early 1960s, have risen to the reasonable
conventional sources. An increasingly diversified energy proportions of 4.5% and 2% in 2012, respectively.
base and general energy efficiency gains are the primary
reasons for this change. Oil and coal, the dominant sources Yet despite these advancements, oil continues to dominate
of energy since industrialization, have had their share of the energy sector, accounting for a third of the total energy
energy production reduced to 33% and 30% respectively basket. This dominance is likely to remain unchanged for at
in 2012 from 40.4% and 38.1% in 1965, according to BP least another decade, with oil eventually being displaced as
data. Offsetting this drop has been the rise in cleaner fuels the prime energy resource by natural gas.
such as natural gas, renewable fuel and nuclear energy.
Natural gas’s share has increased by 8%pt to 24% in the last USA
five decades. The US economic recovery originated in the revival of the
US housing market. The Federal Reserve’s third round of
Global energy basket (%share) quantitative easing targeted the mortgage market, and this
Oil Natural Gas
policy has been successful in helping to support mortgage
Coal Nuclear Energy applicants as lower interest rates boosted remortgaging
Hydro electric Renewables
activity. House prices have risen by 16% from their March
50% 50% 2012 lows. Existing home sales have recovered, absorbing
the bloated inventory left over from the 2006 bust, and in
40% 40%
turn this has encouraged higher volumes of new home
30% 30% construction as inventories of unsold homes dwindled.
20% 20% Higher house prices have improved access to credit for
those households who were previously underwater on
10% 10% their mortgages. Growing positive equity has the benefit
of offering an additional source of credit to home-owners,
0% 0%
1965 1971 1977 1983 1989 1995 2001 2007 which as well as raising consumption can also be used
as start-up capital for new businesses. New household
Sources: BP formation also boosts consumption of consumer durables
such as white goods and cars.
6 Oil Review - Second Half 2013
Executive Summary
US house prices vs inventory higher US interest rates and a deterioration in economic
conditions across the rest of the world, a sharp move in the
Change in house prices (yoy, lhs)
opposite direction cannot be ruled out.
Months of unsold inventory (rhs)
20% 0
15% Europe
2
10% Europe has suffered from a protracted period of fiscal
5% 4 austerity, in which deficit countries have been forced to
0% endure the negative effects of sharply contractionary fiscal
Macro-economic Outlook
6 policy without any support from their fellow European
-5%
-10% 8 member states. This has resulted in a prolonged period
-15% of negative growth across peripheral Europe, alongside
10 stagnation in much of core-Europe too.
-20%
-25% 12
Jan-01 Aug-03 Mar-06 Oct-08 May-11 In early-2013, it was at last recognised that for fiscal austerity
to succeed it must be accompanied by the support of wider
Sources: Bloomberg, Natixis European policies designed to boost competitiveness
and economic growth. Without any such policies being
The energy industry in the US has also contributed forthcoming so far, there has at least been a softening of
significantly towards economic growth. First, the huge the harsh budgetary targets imposed on Europe’s laggards.
Global Demand
investment in energy infrastructure has helped to boost This offers the prospect of a brief respite for the Euro-zone
growth directly, adding jobs and economic activity in those economy, in which growth can squeeze into positive territory
areas most closely associated with extraction, transportation in 2014, led by Germany.
and processing of energy products. In 2013, US oil and gas
capex came to $348bn, more than 2% of 2012 GDP. Second, The longest ever recession in the Eurozone appears to have
the new supplies of oil and gas have helped to bring finally bottomed out, with growth of 0.3% in the three months
down energy prices for the US economy, improving the to June. The currency union’s strongest member, Germany,
competitive position of US industrial (and service sector) led the way with robust GDP growth of 0.7%, but most
Non-OPEC Supply
companies versus overseas competitors. Eurozone economies saw improvement. France expanded
by 0.5%. Fiscal austerity and political instability—among
Since early-May, when the Fed first mooted the idea of other factors—will continue to hamper growth. Yet while the
scaling back some of their $85bn of monthly purchases, road ahead remains long and hard, the end of recession is
interest rates have risen. 10-year swap rates pushed up a start. We may see this reflected in stronger demand for oil
from 1.80% to 2.80%, effecting an immediate tightening products as pent up demand boosts consumption over the
of monetary conditions (reflected in the sharp decline in coming year.
applications for remortgages in line with the 100bps rise in
30-year mortgage rates). This may constrain growth over Manufacturing PMIs
The OPEC Equation
the remainder of this year, particularly if Fed tapering and/
US
or stronger employment data pushes interest rates higher. Eurozone
70 China 70
US growth in 2013 has also run directly into the headwinds
of fiscal austerity. At the end of 2012, US tax rates were 60 60
increased by 2%pts, and this was followed at the end of
February by the automatic sequester. Collectively, these
factors will have subtracted something in the region of 50 50
Oil Price Outlook
1%pt from US growth this year, although they have had the
positive effect of reducing the US budget deficit, which is 40 40
expected to fall from 6.9% in 2012 to just 4% this year and
subsequently to 3.4% in 2014. We forecast US growth of 1.7%
in 2013, followed by a small improvement to 2.2% in 2014. 30 30
2007 2007 2008 2009 2010 2011 2012 2012
In an environment in which the US economy is expected Source: Bloomberg
to lead the global economy towards a recovery in growth,
one might expect the dollar to depreciate as US savings are
invested overseas. If, instead, Fed tapering coincides with
Natixis 7
Japan China
Japan’s period of prolonged economic stagnation was China has experienced a once-in-a-decade transition to a
abruptly halted last year by the arrival of Abenomics, a three- new administration. With new personalities implementing
pronged policy-mix in which structural change combines a new growth model under the 12th Five Year Plan, the
with aggressive fiscal and monetary stimulus. Markets market is still trying to work out what this means for China’s
have responded positively to the fiscal and monetary economic outlook.
stimulus, with the yen depreciating by over 30% versus the
dollar between end-September 2012 and its lowest point in China’s 12th FYP is focused heavily upon energy efficiency
2013Q2, while the Nikkei rallied by as much as 75% over the and environmental protection. In other countries, similar
same period. policies have tended to harm economic growth, even if their
effect on the environment has been positive. It remains to
This currency weakness has had significant repercussions be seen whether China’s efforts to reduce pollution, raise the
for Japan’s trade deficit, given the country’s current energy efficiency of output and lower the carbon intensity of
reliance upon energy imports. So far, however, it has had energy supplies are necessarily bad for economic growth.
surprisingly little impact upon economic activity, with Q2 Efforts to constrain the housing market, implemented in
achieving growth of just 0.9% yoy. February, are clearly negative for growth, although they
have not been enough to prevent modest house price
Japan’s current policy mix is clearly a major gamble.The BoJ’s appreciation so far this year. Policies combating excessive
balance sheet is expanding rapidly, while the government’s ostentation across the political elite are also harming the
fiscal deficit hovers around 10% of GDP. If growth does not luxury goods sector of the economy.
improve, and/or policies to raise consumption taxes are
rejected, there is a serious risk that the country’s finances Urbanization, and the investment in infrastructure necessary
may begin to spiral out of control. to support China’s growing cities, remains a key part of the
Chinese growth model. Within the policy proposals so far, it
Our base case forecast is for Japanese growth of 1.8% in may be possible to perceive a gradual down-sizing of this
2013, followed by 1.4% in 2014. Prime Minister Shinzo Abe growth strategy, as the focus shifts to more modestly sized
has targeted an inflation rate of 2%, but if this is achieved cities in the central and western provinces which are closer
without a commensurate improvement in growth, the to rural populations as well as new sources of economic
problems experienced by Europe’s peripheral economies growth. However, the bottle-necks being experienced
may start to seem insignificant compared to the potential in existing mega-cities may prompt policy-makers to
fiscal crisis looming in Japan. emphasise more heavily the minimum infrastructure
necessary to support new urban developments.
Natixis GDP forecasts - G3 (%yoy)
The new administration is keen to deregulate markets,
US allowing economic agents more freedom to operate within
Europe
Japan acceptable parameters. In this respect, some restrictions
2.50% have been lifted, eg on foreign exchange transactions and
banks’ deposit-taking and lending activity. Offset against this
2.00%
deregulation is a lower tolerance for breaches of existing
1.50% rules, eg foreign exchange transactions masquerading as
1.00% trade flows, or lending channelled via off-balance-sheet
0.50% wealth-management products into restricted sectors of the
economy at higher than acceptable interest rates.
0.00%
-0.50% During the first half of 2013, Chinese growth has clearly
-1.00% disappointed, with data consistently underperforming
2012 2013 2014 already downgraded expectations. This has pushed the
market into taking a very negative view of Chinese growth
Source: Natixis prospects for the remainder of this year, if not 2014 as well.
At a time when the new leadership is openly suggesting
that economic growth will not be allowed to slip below
“reasonable” levels of growth, the prospect of increased
economic stimulus may help to support economic activity
over the remainder of this year.
8 Oil Review - Second Half 2013
Executive Summary
We expect Chinese GDP to grow by 7.7% in 2013, followed by Taken together, our forecasts assume a gradual improvement
growth of 7.5% in 2014. Inflation is expected to remain well in the global economy; we forecast global growth of 1.9% in
under control at 2.4% in 2013 and 3.3% in 2014, implying that 2013, followed by 2.5% in 2014. Perhaps the most important
this is no barrier to economic stimulus. question is whether such a scenario is consistent with
developments in US monetary policy. By mid-2014, the Fed
Other BRICs intends to have terminated QE3, in line with an improvement
The other BRIC economies have experienced a particularly in the US labour market. When Fed Chairman Bernanke first
difficult period over the past 18 months. As global rates began to discuss “tapering,” this resulted in a significant shift
Macro-economic Outlook
of economic growth have subsided, both trade and fiscal in the stance of global monetary conditions. Not only did US
deficits have become increasingly problematic. In India, interest rates rise, but yields on longer-dated debt around
depreciation of the rupee has helped to exacerbate these the world pushed higher as spreads between US credit and
imbalances, as well as keeping domestic inflation rates lesser credits (both sovereign and corporate) widened. If
high. In Brazil, the weakness of the real has yet to give a economic conditions in the US improve more rapidly than
significant boost to the country’s competitiveness, leaving many other parts of the world, it would be reasonable to
the government struggling to find a new growth model as imagine that this same process might cause significant
credit creation ceases to be effective as a lever for growth. difficulties for those countries which are unable to cope with
While the government has begun a major drive towards materially higher interest rates. There is therefore a risk that
private sector involvement in infrastructure investment, this stronger US growth might come at the expense of higher
has yet to boost economic activity to any significant degree. growth in other parts of the world.
Global Demand
Russia’s economy continues to benefit from robust oil and
gas prices, and the country is investing in infrastructure There has been a strong correlation in recent years between
with the aim of facilitating energy exports to Asia rather global economic growth and demand for oil. As such, our
than Europe. Nevertheless, economic growth has struggled economic forecasts are an important starting point for
in the weak international environment, in particular given our forecasts for oil demand. Overlaying this simple GDP
Russia’s remaining dependence on exports to Europe. estimate, however, are a wide range of structural factors
that may affect demand for oil and oil products, either in
Natixis GDP forecasts - BRICs (%yoy) individual economies or across the global economy as a
Non-OPEC Supply
whole. As can be seen from the chart, longer-term trends
China exist which can accentuate or depress the shorter term
India
Brazil
effects of the economic cycle. In the following section we
Russia will therefore consider each of the major oil consuming
8% countries in turn in an effort to forecast how strong global
7% demand for oil will be over the remainder of 2013 and
6% throughout 2014.
5%
4% The OPEC Equation
3%
World GDP vs oil demand growth (%)
2%
1% World GDP
0% 6% Global oil Demand (rhs) 6%
2012 2013 2014
Source: Natixis
3% 3%
Oil Price Outlook
We forecast Indian economic growth will reach 5.3% in 2013
to be followed by 5.7% in 2014. The Indian rupee is expected
to recover significantly throughout 2014 (to 53.5 versus USD 0% 0%
by Q4), in particular after the forthcoming general election.
In Brazil, growth is expected to be 2.5% in 2013, followed by
a modest improvement to 3.3% in 2014. Similar to the rupee,
-3% -3%
the real is expected to recover some ground in 2014, rising 1991 1994 1997 2000 2003 2006 2009 2012
to 2 versus USD in Q4. Russian growth is expected to be
2.6% in 2013, rising to 3.7% in 2014. Source: EIA, Bloomberg
Notes: 2013-14 Natixis forecast.
Natixis 9
Global demand
We will concentrate upon a small number of the main oil consuming nations in our analysis of global
demand. Chief among these are Europe, the US and China, while we will also offer some more specific
thoughts upon important structural changes taking place in Japan, India and the Middle East. A brief
commentary on some aspects of Brazilian and Mexican demand can also be found in the chapter on
non-OPEC supply.
US Demand
CAFE requirements, miles per gallon
There is the potential for a radical shift in the use of different
fuels within the US transport sector which comprises more
United-States Australia
than 68% of current demand for US oil products. This
Japan China
applies not only to heavy trucks, but also to light trucks
South Korea Canada
and automobiles. As well as questions of cost for users Europe
of vehicles, the industry faces higher CAFE requirements, 60 60
increased bioethanol consumption and stringent emission
laws which are likely to lead to significant changes in
50 50
patterns of US fuel demand. The second highest sector
by oil demand is industrial which accounts for 26% of
40 40
total oil consumption. Demand for heating oil, which has
traditionally been a major part of US distillates demand, is
30 30
dropping steadily as householders shift to natural gas for
winter heating.
20 20
Gasoline
10 10
In its drive towards energy self-sufficiency, the US has 2005 2008 2011 2014 2017 2020 2023
already expanded the use of biofuels (especially corn-based
ethanol), to the detriment of gasoline consumption. Ethanol Source: ICCT
production peaked at the end of 2011, plateauing thereafter Note: mpg for all countries except US are normalised to CAFE test cycle
due to the withdrawal of tax incentives for ethanol producers
and the approach of the “blend-wall.” This 10% “ceiling” on The EPA recently released proposals for an extension to the
the proportion of ethanol blended into regular gasoline current fuel economy standards, for the period from 2016
looks likely to remain a near-term roadblock to higher onwards. The US last changed its fuel efficiency standards
ethanol usage, at the very least until second generation in 2009, introducing a more stringent regime between the
(eg cellulosic) bioethanol becomes commercially viable. years 2012-16, intended to raise the average fuel economy
A desired reduction in gasoline consumption nevertheless among domestic cars and light trucks to 35.5mpg, up from
remains a clear target inherent in tighter US CAFE standards the 28mpg in 2012. The new proposals would take the
from 2012 onwards, suggesting a further decline in average fuel economy for personal household vehicles up
gasoline demand. to 56.2mpg by 2025.
10 Oil Review - Second Half 2013US total fuel consumption by passenger cars and light truck
Executive Summary
as the overall fleet average is within limits. Customers
Gasoline (lhs, mn b/d)
have gravitated towards larger, luxury vehicles, and this
10 Diesel (rhs, mn b/d) 0.26
is demonstrated by the steady decline in average VMT by
“light trucks” as the proportion of these vehicles driven by
8 0.22 households as opposed to business users has risen. With
the growing proportion of light trucks as well as larger
6 0.18 commercial vehicles on US roads, lighter, smaller cars are
typically perceived as less safe than larger vehicles. There is
Macro-economic Outlook
4 0.14 therefore likely to be substantial consumer resistance to the
imposition of more fuel-efficient household vehicles, unless
2 0.1 consumer tastes begin to change, eg as a result of higher
fuel prices.
0 0.06
2005 2007 2009 2011 2013 2015 2017
US gasoline powered new vehicle sale (thousand units)
Sources: Natixis, ORNL, EIA, ICCT, USDOT
12 Passenger car (lhs) 12
Light truck (rhs)
US fuel economy currently languishes well behind not only
10 10
Japan and Europe, but also most developing countries,
helping to explain the disproportionately large demand for
Global Demand
8 8
gasoline in the US. Were the US able to raise their average
fuel economy to the same levels as other G3 nations, this 6 6
would have a significant impact upon the country’s overall
demand for oil products. At present, 47% of US oil product 4 4
demand is made up of gasoline, averaging around 8.6mn b/d
2 2
so far this year. The size of the overall US car and light truck
fleet has remained broadly constant since 2005, as higher 0 0
driving costs have largely offset the effects of an expansion 1986 1990 1994 1998 2002 2006 2010
Non-OPEC Supply
in population. Working on the assumption that the US car
fleet would remain at around current levels, both in terms Sources: Natixis, FHWA, USDOT
of size and composition (gasoline vs diesel), US demand for
gasoline could decline by 20% by 2016 to around 7mn b/d, We are therefore sceptical whether the new EPA regulations
while the proposed increase in fuel efficiency beyond that will be able to realise fully their desired efficiency gains,
date could depress it further to just 5mn b/d by 2025. and would expect the impact of these tightening CAFE
requirements to be held back by consumer resistance
Despite potential gains from improved engineering, to smaller, lighter, less powerful vehicles. That is not to
the proposed improvement in US fuel efficiency would say that the rules will be ineffective, for example since
The OPEC Equation
essentially require cars to be smaller, with less powerful 2011 automobile producers have had to abide by CAFE
engines, in addition to introducing more hybrid and fully requirements for each vehicle produced, rather than being
electric vehicles. This runs contrary to both US tastes and able to satisfy an average fuel efficiency requirement for
market dynamics. The size of the US car fleet has been their overall car fleet. But for US demand for gasoline to
broadly constant since 1990, with all of the gains in overall drop to as low as 5mn b/d by 2025, it is likely that this will
vehicle sales since then the result of an expansion in the need to be driven as much by changing consumer tastes as
volume of light truck sales. This has been driven in part by by regulatory dictat.
customer tastes: unlike Europe or Japan, the US population
Oil Price Outlook
is spread far more disparately, and this is associated Evidence from the period since 2008 suggests that US
with a road network that, across much of the country, household demand for gasoline is increasingly price-
neither rewards nor encourages users of smaller, less sensitive. In both 2008 and 2011, a fall in vehicle miles
powerful vehicles. travelled was associated with sharp increases in gasoline
prices, in particular for passenger cars, if less so for light
The expansion of light truck sales has partially been trucks. It is less clear that the level of gasoline prices has
encouraged by their less stringent fuel efficiency as yet had any material impact upon the type or quantity of
requirements (6mpg less than passenger cars) and the vehicles purchased, but it is not unreasonable to believe that
ability of car manufacturers (in recent years) to produce this may become a more significant factor if gasoline prices
some vehicles that fail to meet CAFE requirements as long remain high in the years ahead.
Natixis 11RINS explained Why have RIN prices shot up recently?
As part of the drive towards US energy independence, US corn ethanol production grew considerably between 2006
the Environmental Protection Agency (EPA) introduced and 2012, boosted by the phase-out of Methyl tertiary-butyl ether
Renewable Fuel Standards (RFS) in 2005, subsequently (MTBE) as an oxygenate and octane enhancer, the availability of
revising them in 2007. Under these standards, Renewable blender tax credits, and rising oil prices. Ethanol production and
Identification Numbers (RINS) and Renewable Volume use grew so fast that it exceeded levels called for by the RFS as
Obligations (RVOs) were introduced by the EPA to early as 2006, remaining above mandated levels until mid-2012.
increase the share of biofuel within total conventional fuel Under these circumstances, there was therefore an excess supply
consumption in the US. RVOs represent targets for biofuel of RINs that were banked for future compliance. However, in the
volumes for each refiner or importer of petroleum-based second half of 2012, ethanol production fell to an average of
gasoline or diesel fuel, while RINs allow for flexibility in 830,000b/d, or an annualized total of around 12.7 billion gallons.
how each of these fuel distributors choose to comply with After accounting for ethanol exports, which do not provide RINs
their RVOs. for RFS compliance, this lower ethanol output in the second half
of 2012 led to corn ethanol consumption falling an estimated 600
The RFS set a target for the use of 36bn gallons (857mn million gallons short of the 13.2 billion gallons expected for the
bbl) of renewable fuels by 2022. The proposed 2013 RFS 2012 RFS target. This shortfall was met, for the first time, by a
target is 16.55bn gallons. The volumes for the four RFS drawdown of banked RINs.
targets (cellulosic, biodiesel, advanced and total) are
assigned to the obligated parties, ie refiners and importers US RINs vs gasoline demand
of gasoline and diesel fuel, by way of an RVO percentage. 10 1
These percentages are calculated by dividing each RFS Finished motor gasoline demand (mn b/d)
0.9
target by the total estimated supply of nonrenewable US RIN 2013 (rhs, USD)
0.8
gasoline and diesel fuel in each year. For 2013, the four 0.7
9
proposed RVO targets are: 0.6
• cellulosic biofuels, 0.008% 0.5
• ethanol equivalent for biomass-based diesel, 1.12% 0.4
• advanced biofuels, 1.6% 8
• total renewable fuels, 9.63%
0.3
0.2
The RVOs are applied to each obligated party's actual
0.1
supply of gasoline and diesel fuel to determine its specific
7 0
renewable fuel obligation for that calendar year. Obligated Sep-2012 Dec-2012 Mar-2013 Jun-2013
parties must cover their RVOs by surrendering RINs within
Source : Bloomberg
60 days after the end of each calendar year.
The underlying reason for the increased value of RINs in 2013
When renewable fuels are blended into gasoline and diesel was the impending collision of the blend wall (maximum amount
fuel or sold to consumers in neat form (typically 100% of ethanol that can be added, ie 10% - anything more than that
biofuel), the RIN representing the renewable attribute of requires regulatory approval and faces market hurdles including
the fuel becomes separated from the physical biofuel and those from car manufacturers) with the rising renewable
can be used for compliance purposes or it can be traded. mandate that the US government increases every year in order
Separated RINs have a market value attached to them and to meet the 2022 target. Now that gasoline demand is expected
provide flexibility for obligated parties in meeting their to drop due to increased efficiencies, the blend wall is no longer
RVOs. Obligated parties have the option either to acquire keeping up with the mandate to add ethanol in conventional fuel.
RINs by purchasing physical quantities of biofuels (for On top of these two factors, tax credits for blending ethanol were
subsequent blending) or to purchase already separated revoked in January 2012, reducing the incentive to over-supply
RINs and submit them to the EPA for compliance. ethanol given its inherent price inferiority versus gasoline. This is
putting pressure on available RINs from 2012 as they have started
RINs are used for both recordkeeping and flexibility in to deplete. At the beginning of 2013, there was estimated to be
meeting the separate RFS targets. RINs are principally 2.6bn gallons, but this might drop to 1.2bn gallons by the end of
valid for the year in which they are generated. However, 2013 and further to zero in 2014.This has helped push RINs prices
up to 20% of a year's mandate can be met with RINs higher. The EPA, however, recently made a statement that it will
generated in the previous year. not increase the mandate for next year and give more time for
blenders to meet their 2013 target.
12 Oil Review - Second Half 2013Annual US vehicle-miles travelled US distillate demand by end use (000b/d)
Executive Summary
yoy % change VMT (lhs)
6% RBOB87, 3mo lag
0 Residential Commerical
Industrial Oil Company
50 Farm Electric Power
4% Railroad Vessel Bunkering
100 Military Off-highway
600 On-highway (rhs) 3000
2%
150
500 2500
0% 200
Macro-economic Outlook
Oct-05 Jan-07 Apr-08 Jul-09 Oct-10 Jan-12 400 2000
250
-2%
300 1500
300
-4% 200 1000
350
-6% 400 100 500
Sources : US FWHA, Bloomberg, Natixis 0 0
1984 1988 1992 1996 2000 2004 2008
Based on current US consumer preferences and these Source: EIA
growing signs of price-sensitivity, we should not view the
prospect of a more efficient US vehicle fleet as a precursor Trucks
Global Demand
to lower global oil prices, rather that high gasoline prices In recent years, the most positive support for US distillates
will help to facilitate a shift in US consumer preferences to demand has been the increase in road freight transportation,
smaller, less powerful vehicles. which has increased by 1% annually over the past decade.
US demand for gasoline dropped sharply in 2011 and 2012, For now, US natural gas holds a substantial price advantage
falling from over 9mn b/d to a little over 8.6mn b/d. This drop over diesel. Even with the additional costs associated with
was due to a combination of higher bioethanol blending liquefaction, storage and transportation, the price differential
and weak consumer demand. Having hit the blend-wall, (in $/DGE) remains significant. In our base case scenario,
Non-OPEC Supply
and with the US economy recovering, US gasoline demand we expect to see a steady increase in natural gas prices
is stabilizing at around 8.6mn b/d. Nevertheless, as tighter until around 2017, followed by a more rapid acceleration
CAFE rules gradually bite into new vehicles’ fuel usage, so as volumes of LNG exports expand and new sources of
we would expect to see US demand for gasoline return to domestic demand begin to reach a critical mass.
a gradual yoy decline at some point in 2014. This path of
around 1-2% annual declines in US gasoline demand should What cost advantage does this imply for users of heavy-
then become the norm over coming years unless bioethanol duty trucks? With LNG trucks costing over $50,000 more
producers achieve a commercial breakthrough with second- than their diesel counterparts, and the discount of LNG
generation ethanol production or there is a significant shift versus diesel prices currently at around $1/DGE, we can
The OPEC Equation
away from gasoline towards diesel among new vehicle expect a payback period of a little over 3 years at the current
sales. Under either of these scenarios, the path of decline fuel price differential. This price differential is nevertheless
could accelerate more rapidly. highly variable across the country, not least because of the
high costs of transporting LNG. In some parts of the US,
US distillate demand where diesel prices are as much as $2/DGE more expensive
In recent years, there has been a substantial shift in patterns than LNG, the payback period is just over 1.5 years.
of demand for diesel across the different sectors of the US
economy. While strong demand for road transportation has What became clear from our analysis into these break-
Oil Price Outlook
supported an overall increase in demand for diesel, those evens is that there is substantial scope for LNG prices to
sectors more directly susceptible to competition from fall as distributors benefit from economies of scale and as
natural gas have begun to experience a steady erosion in competition between distributors increases, and we would
demand. In assessing the outlook for US distillate demand, expect this to widen the discount between LNG prices and
it is this question of substitution from diesel to natural gas diesel prices, even if – as we expect - natural gas prices rise
which dominates the equation; where will substitution take more rapidly than diesel prices in coming years.
effect, and how quickly will it erode demand for diesel?
On top of this, the price premium of LNG trucks over their
diesel equivalents is likely to fall due to improvements in
technology and as engine manufacturers benefit from
Natixis 13growing economies of scale. Manufacturers such as Total diesel fuel displacement by LNG in class 7-8 trucks
(000b/d)
Cummins are actively developing new engines designed
to benefit from the growing demand for LNG. The pay- 25 25
Cummins
back period for a heavy-duty LNG truck is therefore likely EIA
to fall over the coming years, and hence we would expect 20 Pike Research 20
to see a growing proportion of the Class 7-8 fleet moving to
LNG trucks. 15 15
US annual class 7-8 new truck sales (000)
10 10
450 450
400 400
5 5
350 350
300 300
0 0
250 250 2010 2012 2014 2016 2018
200 200
150 150 Source: Natixis
Note: Displacement of diesel demand by Category 7-8 Trucks shifting to
100 100
natural gas as fuel. Other trucks and buses are not considered in the demand
50 50
calculations above. Heavy duty trucks contribute 1.6mn b/d out of 2.35mn b/d
0 0 diesel consumption today.
1970 1975 1980 1985 1990 1995 2000 2005 2010
Source: ORNL Passenger vehicles
Within the US, there remains a clear concern over the range
For now, the LNG trucking industry remains very much a of pollutants emitted by road vehicles, with diesel historically
chicken versus egg problem, with truck users reluctant to polluting more significantly than gasoline. To date, this has
switch to LNG until the necessary infrastructure is in place, acted as a deterrent to the use of diesel-powered passenger
while distributors find it difficult to commit to major new vehicles, but with the advances in technology that are being
infrastructure until truck volumes are higher. Nevertheless, enforced through tighter emission standards, alongside the use
some stakeholders are clearly keen to accelerate the roll-out of ULSD, the widespread use of diesel is now becoming more
process, with Clean Energy Fuels and Shell investing in new socially acceptable across the US.
fuelling stations across the country. The question is, when do
we pass the critical tipping point, beyond which truck users Although diesel has gained a small foot-hold among the light-
become increasingly keen to switch to LNG and distributors truck sector, representing around 5.6% of this market in 2011, not
compete more aggressively to roll out additional refuelling a single US manufacturer currently produces diesel-powered
stations in response to higher demand. passenger cars. This is expected to change. Foreign automobile
producers have been offering diesel-powered passenger cars
Although sales of LNG heavy duty class 7-8 trucks have gone to their US customers since 2009, and in 2011 these vehicles
up from 860 in 2010 to 2000 in 2011, in absolute terms the made up around 3% of the total US passenger car market.
numbers are still extremely low. Over the coming years, we
do expect the growth of these vehicles to be exponential US diesel powered new vehicle sale (thousand units)
as the new Cummins engine and other technologies begin
to reach the market. Nevertheless, we are probably still 200 Passenger car (lhs) 400
5-6 years away from seeing a sea change in terms of LNG Light truck (rhs)
trucking demand and hence its impact on diesel demand. 350
160
For perspective, even if we take one of the more optimistic
300
market projections of 50% yoy gains in sales of LNG trucks, 120
the net displacement of diesel by LNG per year would still 250
only be 21,000b/d by 2019. While volumes are currently very 80
low in absolute terms, a sharp rise in US truck demand for 200
LNG could potentially start cannibalising significant volumes
40
of US truck fuel by 2025, thereby having a pronounced 150
negative effect on diesel demand.
0 100
1986 1990 1994 1998 2002 2006 2010
Sources: Natixis, FHWA, USDOT
14 Oil Review - Second Half 2013Executive Summary
US new vehicles fuel consumption (000b/d)
What are the main drivers of change? First and foremost
is the question of cost. Western consumers are finding
themselves increasingly financially constrained, suggesting Diesel consumption (lhs)
30 Gasoline consumption (rhs) 600
that decisions about what kind of vehicle to drive will
increasingly be motivated by the need to minimise 25 500
expenditure on both the vehicle and its expected lifetime
fuel consumption. 20 400
15 300
Macro-economic Outlook
Diesel engines have a higher compression ratio (usually
about 1:16 compared to 1:8 for a petrol engine), necessary 10 200
to ignite the heavier diesel without the need for a spark plug.
5 100
Needing heavier-duty internal components to withstand the
higher compression ratios, diesel engines are therefore 0 0
around 10-15% more expensive for carmakers to construct 1986 1990 1994 1998 2002 2006 2010 2014
than a gasoline engine of equal power output. This drives up
the cost of the basic diesel vehicle. Sources: Natixis, ORNL, EIA, ICCT, USDOT
Diesel engines also cost more because they require added With diesel infrastructure expected to expand over the next
equipment such as a turbocharger to bring power levels few years and an anticipated push by vehicle manufacturers
Global Demand
more closely in line with a gasoline engine. In markets such towards diesel-powered cars to meet CAFE requirements,
as the US, the historic cheapness of gasoline has made it we would expect to see demand for diesel-powered vehicles
uneconomical for automobile manufacturers to invest in slowly begin to catch up towards their gasoline equivalents.
more complex and expensive diesel engines, with the result While the high premium of ULSD over gasoline could
that the differential between the cost of diesel and gasoline impede this shift in the mass market in the near term, the
models is wider in the US than it is across much of Europe. substitution process could be accelerated if US authorities
were to adjust tax rates in favour of diesel.
Substitution from gasoline to diesel is not being encouraged
Non-OPEC Supply
by US taxes, with Federal excise tax on highway diesel Heating oil
USd6/ga more than the equivalent tax on gasoline. Were Heating oil demand has declined by 5% yoy since 2002 and
US authorities to favour a shift in demand patterns towards is likely to fall further as US households continue to replace
diesel, it could be encouraged through a change in relative old and expensive oil-based central heating systems with
tax rates on gasoline versus diesel, while the use of the fuel cheaper natural gas. In the US, around 6% of US households
by US consumers would also be supported if there was still depend on heating oil, with a high concentration of
more widespread retail distribution of diesel. these households (around 80%) being located in the North
East. Heating oil consumption in New York has averaged
Given current price differentials between gasoline and diesel 70,000b/d on an annual basis. With the recent change to
The OPEC Equation
and the high premium for diesel cars over gasoline cars, the regulations reducing the maximum sulphur content for
payback period for buying more expensive diesel-powered distillates in New York State to 15ppm effective from July
passenger cars in the US is around 6.5 years. But despite 2012, we would expect substitution to take place quickly as
this relatively high cost, US consumers nevertheless seem ULSD is more expensive than heating oil, making the switch
to be more willing to buy diesel-powered cars and light to natural gas even more attractive. Other states, including
trucks today than ever before. Maine, Massachusetts, New Jersey and Vermont will phase
out heating oil between 2014-18. As the US housing market
Diesel passenger car sales in the US increased by 25.6% recovers, so this is also speeding up the process of switching
Oil Price Outlook
in 2012; a second year of double-digit growth. Despite the from heating oil to natural gas, with purchasers of new and
high growth rate, however, the absolute number of vehicles existing homes insisting on natural gas heating systems.
remains small in terms of both total car sales and total
diesel consumption, and it will take at least another five Refinery usage
years before diesel demand is affected or gasoline demand High drilling activity in the US due to the shale oil & gas
displaced to any significant degree by the sale of diesel- boom has led to a more rapid increase in distillates demand
powered automobiles. from refineries, rising from growth of 8-15% yoy prior
to 2006 to growth of 20-45% yoy in the post-2006 period.
Although there is a risk of substitution by natural gas in
this sector as well, the lack of infrastructure means that the
Natixis 15industry may have to wait until natural gas is more easily by just 7%. This rise in demand for distillates has helped to
accessible in the form of LNG nearer to the drilling sites. facilitate a rapid increase in US exports, which has been
encouraged over the past three years by the growing price-
Diesel demand outlook competitiveness of US distillates.
With the majority of US diesel demand related to the
transportation of goods, principally via heavy trucks, the Diesel exports have therefore been one of the key factors
path of demand for distillates will be linked closely to US behind the decline in US distillate stocks over the last five
economic activity. years. US distillate exports rose by 62% between 2010 and
2013, while US distillate inventories have declined by 30% to
In our base case scenario, if we assume that the US economy 120mn bbl over the same period.
will expand by 1.8% in 2013 and 2.7% in 2014, this has the
potential to increase US distillate fuel consumption to US oil product exports (000b/d)
3.8mn b/d in 2013, followed by 3.9mn b/d in 2014. Of this, we Distillates
would expect to see most of the rise split between trucking Gasoline
demand and the use of distillates for drilling and refining
activities. Despite the strengthening US economy, we would 1020 1020
expect a small drop in demand for heating oil as well as a 820 820
decline in demand from the commercial sector.
620 620
US distillate demand forecast by end use (mn b/d)
420 420
On-Highway Off-highway
Oil Company Commerical 220 220
3.5
Residential
3 20 20
Jun-11 Dec-11 Jun-12 Dec-12 Jun-13
2.5 Source: Bloomberg
2
Refineries
1.5
US refineries have increased their distillate production
1 capacity over the last 10 years, supported by strong demand
for distillates due to robust growth in both the US and global
0.5
economy between 2000 and 2007. Average annual distillates
0 production rose from 3.98mn b/d in 2005 to 4.54mn b/d in
2012 2013 2014 2015 2016 2017 2018 2019 2012, up 14%. This compares with an increase of only 3.8%
Source: Natixis for gasoline production over the same period.
While diesel-LNG and diesel-gasoline substitution effects are Gasoline yields have declined in the US as newer, more
expected to play an increasingly important role is shaping complex refineries have produced higher volumes of
patterns of demand over the coming decade, their effects distillates by cracking the longer-chain molecules generated
over the very short term horizon are likely to be limited. by distillation of the heavier blends of crude. Through fine-
We expect US demand for distillates to increase by around tuning, adding hydrocracking units and adjusting the type
2% per annum over the remainder of the decade as the US of crude used (heavier for distillates), existing refineries
economy improves. Thereafter, demand for distillates will in the US have also been able to adjust their oil product
stabilize due to the rising share of natural gas displacing yields. At the same time, some of the older, less complex
distillates demand within the US. Ultimately, diesel and refineries on the East Coast have closed down due to the
natural gas are expected to be used interchangeably in a poor profitability associated with refining imported Brent.
variety of sectors, depending on which fuel is cheaper. Those refineries had typically generated higher yields of
gasoline, hence their closure has contributed to higher
Diesel exports overall distillate yields. According to the EIA, distillate yields
Global diesel consumption growth has outpaced growth in the US increased from 24.6% in 2001 to 29.7% in 2011
in consumption of other petroleum products over the past whereas gasoline yields declined from 47% to 44.9% over
decade. According to the International Energy Agency, from the same period.
2000 through 2008, global diesel consumption increased by
23%, while consumption of other petroleum products grew
16 Oil Review - Second Half 2013Executive Summary
US refinery yields in 2013H2). This is being led by higher diesel demand, and
supported by the blend-wall which (along with an absence
Gasoline yield (%, lhs)
30% of second-generation bioethanol) has temporarily halted the
Distillates yield (%, rhs)
59% decline in US gasoline demand.
28%
57%
In the short run, the improvement in the economic outlook
26% offers the prospect of a modest rise in US demand for oil,
55%
rising in 2014 to as much as 19mn b/d based on a 100,000b/d
Macro-economic Outlook
24% rise in diesel demand versus broadly unchanged demand
53%
for other oil products. Beyond that point, we would expect
51% 22% to see the longer-term downtrend in US oil demand begin
to reassert itself, as tighter CAFE rules exert a growing
49% 20% negative effect upon US demand for gasoline.
Sep-08 Sep-09 Sep-10 Sep-11 Sep-12
Source: Bloomberg Europe
Europe has been at the forefront of energy efficiency
Change in yields and increased exports have helped increse and energy diversification amongst the G3 nations. With
refining margins in the US. Refining margins in PADDII and emissions norms stricter than those found in the US in every
PADDIII, increased by $19/bbl and $5.4/bbl since 2009 to sector within the EU, demand for oil has been declining
Global Demand
measure $23.56/bbl and $9.3/bbl, respectively in 2012. over the last few years. On top of this, the savage economic
downturn in Europe has accentuated the decline in demand
WTI - PADDII: Indicative refining margin ($/bbl) for oil products over the past five years. Declining crude oil
demand in Europe has led to a significant drop in refining
50 50 margins within Europe. As a result, refineries have either
shut down or reduced their processing rates, thereby
40 40 reducing imports of crude oil despite declining domestic
production, leading to a decline in EU crude stocks. Hence
Non-OPEC Supply
30 30 a lot of European oil product needs (eg gasoil), especially
during the peak season, are met via oil product imports.
Since early last year crude stocks have recovered due to the
20 20
EU Directive on increasing emergency crude stocks.
10 10
OECD Europe - capacity utilisation vs crude imports
0 0 Imports (mn b/d)
Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13
14 Capacity utilisation (%) 90
The OPEC Equation
Sources: Natixis, Bloomberg
Notes: Excludes certain costs 13
85
SPR 12
US strategic reserves have remained broadly constant at 80
around 695mn bbl since the release of stocks in mid-2011. 11
75
Crude demand outlook 10
Oil Price Outlook
US oil demand peaked in 2005 at around 20.8mn b/d. After
sharp declines in 2008 and 2009 in response to high oil 9 70
May-06 Oct-07 Mar-09 Aug-10 Jan-12
prices and severe economic weakness, demand recovered in
2010, only to subside once more in 2011 and 2012. Economic Sources: JODI, Natixis
recovery offers the prospect of another year of demand
growth in 2013, with year-to-date consumption up almost
1% yoy at around 18.7mn b/d (expected to reach 18.85mn
b/d for the year as a whole as seasonal demand strengthens
OECD European members: Austria, Belgium, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Luxembourg, the
Netherlands, Norway, Poland, Portugal, Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Turkey, United Kingdom
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