 My name is Guy Caruso. I'm part of Cerro Lattice Laws Energy team here at CSIS. And we're really pleased that you could all make it today because you're in for a real treat to listen to one of the world's leading oil market analysts and experts on not only oil, but also the financial side because Antoine has in addition to being the head of the energy markets division within IEA, he's had extensive experience both on the financial community side in in New York and taught at Columbia and worked for a while at the energy intelligence group that which is responsible publishing things like petroleum intelligence weekly. So Antoine's had enormous experience his second time at the IEA and I know for a fact that's the second time is better than the first was for me. So he's only missing one corner of the triangle for a trifecta because he left to go to the IEA from EIA and so now he's been at the IEA but I don't think you'll be going to the CIA will you? Because that's if you do then you join a club and then I'll give you the password and a secret handshake that Antoine is comes to us at a really critical time in the oil market as we some of us heard from Adam Saminsky yesterday about the complications of trying to predict where the oil market's going to be in the next 12 to 18 months. Well, I think it's even tougher to the task you have now Antoine to think about the five-year outlook because there's so many uncertainties when it comes to the oil price path over the next several years and what that means for things like unconventional oil and certainly gas as well. What it means for the inventory situation which because of the oversupply we've witnessed in the last 18 months is now well over, we're well overstocked as a as an oil market, world oil market right now. So we're looking forward to hearing your thoughts on those things and we always enjoy your coming to spend some time with us Antoine. I appreciate your being here. Antoine. Be here this morning and share our views which are still fairly fresh so haven't been proven completely wrong yet. The report only came out two weeks ago and thanks very much for the kind words always feel having experienced plays both ways in oil sometimes it can be a disadvantage because you can be a victim of accepted wisdom or patterns that you take for granted but sometimes it prevents you from being alert to changes in the market and there's many changes in the market these days. And so the report that I'm presenting is an annual effort to look at the next five to six years and the last one the last time I was here actually was not too long ago. I think in June or July when the previous edition the 2014 report came out and it came out just about a week after ISIS took over Mosul in Iraq and then just a couple of weeks later the price started declining So we thought that we should probably not wait until the next June to publish the 2015 edition of the medium-term report and we so decided to do it earlier which was challenging in terms of the workload and the stress on the very small team that we do because we also do the oil market reports on a monthly basis. But this is our kind of best effort to try to comprehensively understand the impact not so much of ISIS because that's kind of a move not to the back one but receded compared to the impact of the low price and our main effort here has been to try to understand what the resetting of price expectations and the drop in prices meant for supply for demand for OPEC supply for non OPEC supply and also for trade refining every aspect of the supply chain and product supply. So what we felt is well first of all we maybe a couple of words about our price and GDP assumptions in the report there's two inputs that go into our modeling effort the price So it's a 60% drop since June and then a 10% or so rebound more recently We think there's more room to go down. We don't think the downturn has run its course yet but we don't have a mandate to forecast prices that they actually we have a mandate not to forecast prices in a way We've taken some liberties with the mandate. We've been a bit more explicit about our price Expectations or price where we thought the price would go in the last few months and I think the our audience has Repounded very favorably to that to that trend. I think it's helpful to try to be more explicit about price direction This is in a way the best way to express our views about the market and what many of our readers care about the most but we For the medium term we can't really forecast our price So we have to use price assumptions and we use the futures curve or price derived from the futures curve We adjust we adjust the brand curve for the difference between the brand price and the average important price of crude for IE members So it's a it's a lower price the curve suggests a rebound You know, it's a contango curve But the the long term or the medium term expectations are still considerably considerably lower than what we had used as an assumption for our previous report And in terms of a GDP we use the IMF forecast the MF forecast has been revised repeatedly over the last few years the expectation of a recovery in the economy has been kind of Tone down and push back a little bit over the years since since the financial crisis And it's quite remarkable to us that since the price started falling and typically a lower price is considered a boon to the economy something you know that is stimulus for social for the medic household spending and business investment and so on but Cantor intuitively since the the beginning of the price collapse the IMF has revised its numbers twice and both times to the downside So since July when the the wheel came out the word economic outlook came out The the expectation for 2015 growth has been revised from 4% to 3.5% so it's quite Illustrative of how different this price downturn is in our view the demand response is going to be very different It's very different the supply response looks very different Just in a nutshell, let me jump to the conclusion then I go back to to what's behind it But we are forecasting essentially the market to to rebalance to start rebalancing Sometime around media this year. There's been many announcements of investment cuts spending cuts by companies There's some sign of us demand response by it's fairly tentative difficult to Interpret we don't think there's gonna be much of a demand response We think there's gonna be a very strong we think supply has become much more price responsive demand much less price responsive than in the past But the the net result is that we think the market we start rebalancing around July mid-mid-year and then gradually Demand it open though it will be weaker than historic trends will be stronger than it's been last year Will increase and we'll be stronger than what we expect supply capacity growth will be So that means that the the strategy of OPEC to let the market rebalance to to regain market share In our view will work not spectacularly OPEC would not regain the kind of market share had in the last few years But it will regain more market share than it has today and market share we creep up at least of supply in terms of its share of global capacity We don't think that it's gonna change much. We think that'd be pretty much flat but we see a little bit of an increase in the nominal OPEC spec capacity over the next few years We call this market business as unusual because we think this is a very unique Set of circumstances. This is not the this price collapse since June was not Completely unexpected. It's not unprecedented. It's very different very unique in many ways. It's not Unexpected because our previous medium-term reports for three years now had been forecasting a significant increase in the Level of OPEC spec capacity Which is a way to say there's gonna be oversupply if OPEC doesn't rein in the capacity and that's Essentially what's happened OPEC has maintained production above the the call And we've seen a significant increase in inventories in the last few months Which has done what pressure on prices. We couldn't forecast the exact timing of the price drop nor the speed of it but It's certainly consistent with our expectations of the last few months of the last few years really and it's not Unprecedented because the market has experienced traumatic swings of a similar magnitude About every 10 years in the last 30 years. There was a very steep drop in 1985 another one in 1997-98 at the time of the Asian financial crisis and then again in 2008 with the global financial crisis So it's not the first time but it's very different this time for Couple of reasons a few reasons having to do both with the supply side and the demand side the biggest the most obvious changes are on the supply side because this is the first time that we have a downturn in prices and Light ectole is a major share of the of the supply mix Light ectole, you know was not around in a big way in 2008 the last time the price collapsed Now it's a it's a significant share of US production It's a big share of global production But it's an even bigger share of expected supply growth and of the supply growth the last few years and light ectole Is different because it has shorter lead times shorter payback times very steep depletion rates So it requires more constant more gradual investment than conventional production and presumably it's a lot more responsive to a price drop At least that's our assumption Obviously, it hasn't been fully tested and we're going to watch in the next few months to see how it plays out We also think that light ectole is going to be more responsive in a price rebound because for the same reason investors will be faster to respond to to Feed in spending and respond to the price rebound, which we think will happen in the next few years and we think that the Payoff of those investments would be much faster than is typically the case for conventional production So that in our view will put a bit of a ceiling on the price recovery Perhaps a floor on the price drop with the city think there's room for for price declines in the next few months But the the speed of the the light ectole response in our view We put a bit of a floor so this will minimize the scope for Overshoot and undershoot in the price reaction and this will make in our view The this recovery quite different from previous ones at least for next few years now There's questions about what that means for further out in the next decade But for next few years we see the market as likely to be a little bit more smooth and balanced than in previous previous price swings but there's also a very new developments on the demand side and we think that Demand will be much less responsive to prices than it has been the case in in the past and that for a number of reasons Both the city goal and structural for the OECD economies the recovery the economic recovery has been very weak the Effects of the financial crisis continue to linger particularly in Europe in Asia and Japan But even in the US recovery is stronger than the rest of the OECD, but not all that strong historically And what's very new this time is that there's deflation concerns This had never happened before the world hasn't had much experience with deflation since World War two and In truth, we don't really know what low prices do in a deflation environment The only experience we have is Japan in the late 90s and last decade for sustained period of time And there we've seen at the same time significant declines in the end the denominator doll prices and significant declines in domestic oil consumption That doesn't mean necessarily that there's a direct correlation between the two. There's many other factors that play there It's difficult to segregate those those those factors and really isolate the impact of low price on deflation and Japanese economic growth during those years But there's concerns that low price will feed into deflation expectations and we effectively instead of stimulating the economy We'd actually hold back investment for for businesses and even for households other Factors there's changes in currency exchange rates That mutes the impact of the price drop for many consumer countries where the currency has depreciated against a dollar and that has offset the decline in Dollar denominated prices many importing economies are taking advantage of the price drop to desubsidize Oil to cat back its mantle. They're very costly and ineffective subsidy programs again that kind of shields Consumers from the full effect of the price drops and and then there's a shift in gears in the Chinese economy Move to a lower oil intensity nature of the global economy few switching on the scale that Just a couple of years ago probably was Would have seen and thought the mobile Not just renewables in the in the power generation sector, but also gas in transport Which just two years ago would have seen a long-term prospect That now is becoming a reality on a significant scale. So an environment environmental policies So all these factors in our view will mute the the response of demand to the low price so unusual circumstances Exceptional circumstances in a way which in our view will lead to an exceptional type of response and the market will rebalance But it will not go back to where it was before it would not go back to square one It would be a transform market of a significantly different market with a new role for OPEC a new role for US production as a kind of swing producer for the time being and A very different type of demand growth than we've seen in the past So on the supply side, I think I have too many slides. So I hope it's okay if I go slide very fast on some of them but we with we think that a Global capacity we continue to grow Not insignificantly, but quite Rather more slowly than has been the case recently. So last year Was an exceptionally strong year for supply The average for 2018 2014 was about one for one four million miles per day Of low capacity growth. So we think in in the next few years to 2020 next six years The average is going to be closer to 900 or a bit below 860 in our view and that's going to be kind of Split between OPEC and OPEC Proportionately to their share of supply about two-thirds for for non-opaque one-third for OPEC and in in non-opaque what's what's remarkable in our view is that where the growth We think it's going to be about 3.4 million bass per day for the period by 2020 so reaching 60 million bass per day by 2020 So it's it's a it's a much lower growth than the record. We've seen a 1.9 in 2014 But what's remarkable is that the geographic makeup of this growth is pretty much the same as before The the price drop in our view doesn't really change the story in terms of where the growth is coming from It's still really Led by the OECD Americas by the US by Canada Color-coded marine blue I think on this graph So we see slow growth from Canada and the US but still very strong growth and That's still where we see most of the increment coming from We have cut back the the forecast for US supply for the front end of the forecast period but we have increased it for the back end of this forecast period and What we see is that by the by the end of decade? Light I told us light I told we actually come out stronger in terms of its share of global supply There's been many comments in the press that the that OPEX move to let the market rebalance was targeting light I told as a high cost production that it wanted to to really Push back in fact, we think that light I thought will respond initially But then Investment will recover and at the end of the period it's going to account for a larger share of the global supply mix than Then we thought before the price drop It might also be a more efficient sector There's some consolidation in the light out of industry There might be some economies of scale some efficiency improvements achieved by some some restructuring of the sector So the three main sources continue to be US and the Brazil US by far margin It's not shown because it's too big here to fit on this on the start Then Brazil and Canada and then the rest is very small very small components Russia in our view is going to contract So Russia is coming out Staying out as the the country most adversely affected by this price reset partly because they are the the Price drop Compounds the impact of sanctions and the two together with also the depreciation of the rubble at the margin Really, it's kind of a perfect storm really affecting heating Russia pretty hard in our view and now You know if we try to assess where the price drop has done to our expectations of supply growth we think that It's probably a cat in in supply growth expectations about 2.8 million bus per day And most of that is really coming from Russia Where we think that we thought before that Russia would Russian production would increase over the next few years now We now think is going to contract significantly so it's a It's a drop versus previous expectations of more than 700,000 pounds per day for Russia Next is is US still the largest source of incremental election, but but our expectations have been reduced markedly Canada as well and then The the other cats come from Nanopec Africa from the North Sea particularly Norway Colombia significant and then small small small small pieces from Nanopec Middle East mostly because of unrest and violence Syria Yemen a little bit from China a little bit from the from the Caspian and the supply The supply impact of the low price is really very different depending on the countries So it's not it doesn't play it doesn't work out the same for every producer country. There's a very significant differences Again in the US. It's a it's a strong response initially But then at the back end we think that there will be a reversal for Russia. It's a more sustained consistently adverse effect all across the forecast period and Now at the same time what one think we came out about Forecasting and analysis is that there's kind of a double-edged impact of low price on production for the most part. It's a negative It's it means low investment. It means Our projects are less profitable. There's less money to invest to to to floating around to put into Projects so companies are gonna be cutting expenditures be much more selective prioritize investment much more rigorously and that's gonna be playing adversely on on supply growth That's why we have a reduction of 2.8 compared to our previous expectations But at the same time we have also we also recognize that low prices can be a stimulus to supply because for some countries It can't really be an incentive to make up in in volume. What's lost in in price? And we see that in particular in Iraq where there's already evidence of it Iraq has been doing amazingly well ever since things got worse there with the ISIS campaign in June and the collapse in prices since then The country really has defined expectations and remarkably KRG and Baghdad which for years We're locked in a seemingly intractable dispute over the Split of export revenues and that had been holding back production from the north The two sides have come to an agreement and production has been able to to to rise exports have risen and have really defined expectations so in our view there's some countries where The governments are highly dependent on a very high price to meet budget needs and to fund social spending Some of those countries have high buffers like Saudi Arabia other GCC countries there they will be able to weather the storm but where there's no buffer there's an extreme pressure to get production up and That could create some upward surprise on supply a need to Make the the country more hospitable to investment Iraq certainly is the case But the same could happen in Venezuela there We see some signs that the country is becoming desperately aware of the need to make them The market more hospitable to investment to clean up the investment climate to become more transparent more predictable and We're negative on Venezuela, but recognized as there's an upside risk to supply there as well So North America really is is where most of the non opaque supply growth comes from US production we think we're near 14 million bars per day Canada Canadian production We've almost reached 5 million bars per day by the end of the decade the beginning of next decade It's going to be mostly a conventional production both in the US and in Canada by the time the by the beginning of the decade In in the US it's a complicated exercise So we rely a lot on third-party research Which is a maybe a problem for us because we don't really have the demand power or the resources to Put in all the resources that really the new developments require but What strikes us is that it's a it's a complex. It's a mixed and very nuanced Situation where you have lower prices, but you also have and you have debt issues liquidity issues But at the same time there's very significant Drops in cost production costs a very significant improvements in productivity well productivity efficiency of supply but at the same time we think that by the by 2020 the production we have We have started to exhaust the production from the sweet spots There's going to be decline rates the sweet spots are the first ones that are targeted by Investors investment and those will eventually deplete So we think that despite improvements in productivity and efficiency the break even cost in in the US It actually rise over the forecast period Brazil It's that's in our view it can be the second largest sources source of incremental supply We we saw very good performance in the second half of 2014 even as the news from the country about petrobras And so on got more concerning So those those problems legal issues investigations Downgrading of the petrobras debt those are all problems that can hold back investment and hold back supply growth By the same time we see a payoff from investment That's that's already sunk and that's starting to make a big impact on supply So there's different stories You know we see a worse outlook for campus basin at the center's basin We see TC growth there and on balance we still see significant growth from the country a lot less in 2017 Then we had expected but over the forecast period is still a very significant source of growth Russia there that's the where the most the biggest hit is is is being felt and Again, it's a combination of the sanctions and the and the low price the sanctions in and of themselves when they came out in April Seen to us Unlikely to affect supply in a big way at least until 2020 maybe a little bit more further out And that the oil price itself might not have had as big an impact as it has But the combination of the low price and the sanctions mean that the the country cannot easily go to capital markets to make up for the shortfall in revenue and that at some time it has trouble accessing technology and Bringing companies in so the combination of those factors really are going to hit both in the short term and in the longer term We think Greenfield startups will be delayed significantly The government will be affected more than the companies because of the way all this taxed and the tax regime The tax burden is much higher at higher price and low price So the main challenge will be for the government, but on balance we see much lower performance and actually contraction in the in the next few years and In North Sea we also have been Getting back our expectation of supply growth. We had expected a little bit of a growth from North Sea before the price drop we now think it's gonna be about flat or Slightly down about flat in the UK down in Norway For Mexico the need to reform is just as urgent In a low price environment as in a high price environment if not even more so but there's a problem with implementing the reform so we think there's gonna be some slowdowns the Programs for unconventional plays has been the head back indefinitely We have a partly probably because the players that Mexico would like to attract there are the ones that are most closely watching their budget plans But there's also issues with assessing the value of the players on offer so Some delays but the the rationale for opening the country and the Attraction of being in the country for companies remain just the same So we see growth there but further out at the back end of the forecast period and less than we previously expected before the price drop and In the Caspian, it's a story of declines in Azerbaijan and delayed growth in Kazakhstan So it's a bit of an offset Kazakhstan we're basically because of not really because of price drop but just because of a problem at cash again and So we think that the growth will be delayed by a couple of years But we eventually kick in in Azerbaijan. We're seeing declines And China we think is going to be about flats with some gains from enhance all recovery But not much growth kind of a flat performance Biofuels as a small growth the buy the main market for biofuels a kind of mature saturated the US Brazil and Europe. We don't see much growth in demand there but in other countries demand is really driven by policy mandates not by economics and A lot of countries especially in Southeast Asia have been increasing their biofuel mandates and that's That in our view is going to support some production growth in the next few years So nothing dramatic but a continued creep up in biofuel capacity despite the price drop and despite the fact that on paper Biofuels look less attractive today in a low-cost environment than they did before Now looking at OPEC We see significant impacts on OPEC Capacity prospects as well from the low price and our expectations have been significantly reduced We only see about 200,000 miles per day of capacity growth over the next six years compared to 350,000 miles per day before the the price collapse we have revisited some Some of our assumptions of our analysis or forecasts for reasons not entirely related to the price drop But on balance a lot of this reduction is price driven But what's remarkable there is that it's almost entirely driven by by Iraq in terms of capacity as I mentioned before We think that OPEC will begin some market share in supply not much in capacity in the next six years So it will partially regain market share But really the remarkable trait is the very large share of Iraq in this in this growth That's where 90% of the growth or more capacity is likely to come and given the problems facing Iraq It's it's a highly risked Forecast there's a very high risk that the performance will be less than this base case Forecast there's also some risk that it will be higher Iraq surprising in December reaching four million bus per day of production at one point We think the average for the month was more like 3.75. It's come down a bit since then but there's obviously Tremendous resources tremendous potential and if the country makes further progress in getting over above-ground issues red tape inefficiencies infrastructure constraints There's potential for supply to be even higher than than what we we forecast, but the the strict risk is huge The ISIS presence in the Northwest is a daunting problem. It hasn't held back supply so much so far But it's still a risk is still going to deter investment to Prevent the expectation of all workers in the in the region and there's a risk of violence spreading to other parts of Iraq Including the the south where most of the production and most of the growth is coming from The other place where we see growth is is the UAE that's in our view going to be the second largest source of incremental opaque capacity with Apazakum due to add a quarter of a million barrels by 2017 at Co the giant The echo concessions takes they are being are starting to be awarded total was given one other companies are In the running so we see some some growth there mostly from offshore Nigeria there we have reduced our expectations and We see delays in the deep water projects. We see continued problems having to do with uncertainty and the unlike the Problems passing the petroleum petroleum industry bill so there and on top of that there's also security issues with Boko Haram in the north and not affecting the side directly so far by the concern which earlier this year led to some Companies like some some of the companies in Nigeria to remove personnel from Nigeria for the first time in the entire multi-decade history in the country So we we think that the Niger actually we see some contraction in in capacity in production over the next six years Libya is is a wild card Production came back after 2011 much faster than anybody expected and then he fell back again came back again in June when the two Fighting sides agreed on on the splitting export revenues Now things are taking a turn for the worse The the front line has moved to the old facilities themselves. There's been all facilities directly affected by military hits and there's been Initially, I think accidental perhaps targeting of all facilities But then more recently deliberate intentional targeting of all facilities for the first time since the beginning of the CB1 2011 So things are looking worse there We are assuming there that it will settle down and that there will be a partial recovery in production a modest one but there's room here for for there's some downside risk to that forecast and Now what's not what's not factored into our forecast is the possibility of a return in Iranian production One of our assumptions is well typically we assume that policies existing policies remain in place unless Changes in policy have been already announced and Programmed in the case of Iran we assume in the forecast that the sanctions remain in place Of course, this is an assumption that could be tested and could be tested very soon The move by OPEC and Saudi Arabia to let the market rebalance Has often been described as a as a fight for market share as opposed to prices So we think that the fight for market share might only be at the at the early stage and if Iran came back We think that it could really Return to the market rapidly and we have revised our assessment last year. We thought That the shutdown of fields because of the sanctions had led to some long-term damage to capacity and we've taken a very hard look at this with Input and insights from people very close to the situation on the ground both from Iran and from outside and We actually think now that Iran has been has deployed considerable ingenuity Getting around the sanctions to maintain capacity at the fields to get them in fairly tipped up shape And that if if sanctions on Iran exports were to be lifted we think Iran could pretty much come back the market on a dime and In our view the biggest constraint to an increase in Iranian supply will not be Constraints or damage to Iranian long-term capacity. It will be the market's capacity to absorb this new production So we could see in the event of of a little sanctions a new leg in the in the downturn in prices and renewed downward pressure on the market and a new Sequence of rebalancing around the around the the producing world So a few words on demand Again, it's a very mixed response depending on the countries The impact is not the same everywhere. Obviously the most adversely affected countries are going to be the producing countries and not surprisingly Russia and the FSU is where we see most of the heat on demand growth We think Russia's gonna be and we take our cue in part from IMF forecast that Russia will face a Recession this year maybe next year And it will affect not just Russia itself but also the many countries in the region that depend on Russia for their own economic growth through External trade through direct investment through remittances. So it's gonna affect Caspian Regions Eastern Europe. So we feel there's gonna be significant downturn in in demand in the FSU in the Middle East As I mentioned The even though all revenues are going to be considerably down Compared to where they were before the price drop Within the Middle East we see diverse responses for countries like Saudi Arabia or Kuwait or GCC countries in general There there's high reserves high cash reserves high buffers that will allow the countries to maintain social spending to maintain infrastructure spending If not even to increase it as a way to mute Social pressures But in other countries not gonna be a case and here most of the downturn we see coming from Iran and again That's based on the idea that the sanctions remain in place But we we think that with the downturn in prices the running economy with struggle and this will affect Iranian consumption other places where Demand is hit in the Middle East are the countries where war or violence particularly Syria Yemen and and Iraq In in Africa some downturn again for the same reason because all importing all exporting countries will see less revenues Let America same story with Venezuela in India and the US those back the trend We see the biggest positive impact from low prices in the US because it's a dollar economy, so the dollar Denominate the all price drop is directly felt by consumers all taxes retail taxes are very low again letting consumers enjoy the Pretty much the full benefits of the price drop and the economy is showing some signs of a revival or the recovery speaking of momentum And India we think that there's room for growth as well. There's more confidence in the economy with the Modi government And the last year there was some downward Pressure on demand because of the de-subsidization diesel, but that's not run its course the diesel subsidies have been Eliminated and we think that there's room for a little bit of a rebound there So this is a graph that illustrates the differences in all prices Depending on which currencies they are there expressed in and if you look at Russia, it's basically been a flat flat change Prices in Russia have not really changed expressed in rubles in contrast with other countries in Europe we've seen declines in China as well, but not as in the case of Europe not as steep as in as in as in the US So on balance we think it's going to be growth of 1.2 percent per annum over the next six years Which is a lot more than this year 2014 last year but Is less than the trend the historic trend prior to the recession When between 2001 and 2007 the growth trend was more like 1.9 percent But despite this this Shift to a slow pace of growth compared to historic trends We think that demand will increase faster than than global capacity and by the end of the forecast We are projecting that demand will have increased by 1 million dollars a day more than capacity So that means that the market will tighten not dramatically, but we tighten at the margin and and that we support the recovery in prices the the the The story there in terms of the geographic distribution of growth is not changed by the price drop It's still the same story which is a move eastward of demand Growth in Asia Pacific that's where the biggest increment is coming from We think that Asian growth in demand we slow compared to the previous six years and there are six years before that But if we remain very very significant Compared to other regions, so that's really where remains the biggest engine of growth If you'd like growth in the Middle East would be less than we had expected Given the slowdown that we expected in Iran FSU is gonna be about flat so it's still gonna be a Rebalancing of demand to move eastward of the market east of Suresh especially east to Asia and the OCD share has already Dropped below 50% as of last year in our view and that will continue the non-OCD regions will continue to to grow Even as OCD demand will contract on on balance and the wedge between the two will increase Perhaps a little bit less fast than we had expected just six months ago But we still think that the non-OCD Group of countries will account for significantly larger share of supply by 2020 than they did in the in the past So in Middle East it's We have reduced our expectations pretty much everywhere and But it's still 2.6 percent Over the on average over the period. So there's effects from the low price effects from war unrest turmoil Again the countries with with high buffers will be sheltered those with the low buffers Will be the hardest hit there's some drops in subsidies in in the Middle East Some countries are starting to do to cut subsidies or to implement other ways to reduce demand efficiency programs So that's taking a bit of a toll on on on demand and China continues to shift gears the economy rebalances economy slows down It's moving to a less all-intensive stage of development more focus on consumer spending less on highly all-intensive exports And at a big shift to Environmental protection getting back on the missions coming back on on on the energy intensity altogether So we see diesel as less dominant less coal Reduce a reduction in coal demand Translates into a reduction in diesel demand because so much diesel has been used in the past to to transport coal A lot of the power generation is shifting closer to coal mines again reducing the need for transport and for diesel So and the natural gas is making significant inwards into the Chinese transport sector Policy driven again So we think that this can be a significant slowdown expectations that China will continue to grow at the pace of the Prior to the recession have been completely revisited and that's been one of a in our view one of the big factors behind the price drop The price drop was not entirely Supply driven the surge in LTO production was perhaps the leading factor But disappointing demand growth was an equally important factor and that had a lot to do with with the rebalancing of China and the reorientation of the Chinese economy towards a much less all-intensive form of development India is where we see more growth there again because of the Growing confidence in the economy and and the fact that the subsidization is already pretty much implemented But generally speaking I think that there's been a complete reset of expectations of non-OCD demand growth You know if we look back at the period of the oil price rally of 2001 to 2008 the expectation expectations were generally that non-OCD economies were converging with OCD economies and this would inevitably translate into spectacular demand growth and we had seen spectacular demand growth in China in 2003 2004 many analysts at the time extrapolated from those trends and Applied them to the future and to the rest of the non-OCD countries I think we've now completely revisited those those assumptions and it's becoming clear that the non-OCD countries We follow their own path of energy development will not replicate necessarily the path of OCD countries before them or even of China in the last decade And and this is partly because the the fuel mix has evolved so so drastically In the in the last few years with so much growth in renewables Cost reductions in in renewable energy increases in technology Improvements in technology making it possible to to transition out of oil. So we think it's a completely new stage of development there Non-OCD Asia we see some OCD Asia we see contraction in Japan. So this is a Continued switching out of all more gas more nuclear in nuclear in Japan in Korea weak macroeconomic growth and strong efficiency improvements across those countries and Europe remains very weak contraction of 0.7 percent in our view per annum the economy remains weak the recovery remains very sluggish deflation concerns are widespread and there too we see efficiency gains Raining in consumption over the period The US is is kind of an exception. There's bit of a divergence in within the OCD between the US and the rest of the OCD and there it's supported by a more vibrant economy and With a little bit of a caveat which is that efficiency improvements in in transport are trimming gasoline and jet demand growth And perhaps some some inroads of gas in the transport sector as well So this is a look at how the price changes have affected our forecast of gasoline Demand growth for the US the the blue trend was our previous expectation of a steep decline after partial rebound in 2013 2014 we thought that there would be a Efficiency improvements would really create a reversal and a return to contraction Now we still see contraction in US gasoline demand But much slower a much much flatter outlook and that's in our view an effect of the of the lower price We did a little bit of a look at marine bunkers in our forecast because of the steep changes sweeping through this industry for a long time it had been Immune from the the trends to towards lower emissions Particularly sulfur but now environmental regulation is catching up with the marine transport sector this year there's as of January 1st the emission control areas have been expanded than So for limits is is low there, but by 2020 or perhaps 2025 There's widespread sweeping reductions in in sulfur targets, which will affect the the Market as a whole and this creates all kinds of so this is the the change in ECA As of January 15, but by 2020 it's a cat from 3.5% sulfur for The rest of the world to 0.5% so that's that's potentially a very disruptive or very transformative shift in in bunker demand Bunker demand is a small share of the market, but it's not insignificant. It's the last Last large user of residual fuel oil and That that support for residual fuel oil looks like it's about to disappear So in order to deal with with the reduction in sulfur targets really ship owners have three major options they can either switch to diesel or Putting squabbles to remove the sulfur from their emissions from reside or they can switch to LNG and Right now nobody's moving the refining industry is not really moving to upgrade its diesel capacity and ship owners have not really moved in a large way to install squabbles or to Switch to LNG the LNG ship or the book is not Effectively larger, but they still a few years before 2020 Here we've projected that most of the Adaptation effort would target diesel that most of the ship owners would respond by shifting to diesel because it's the most It seems to be the most cost-effective the cheapest way to respond for for existing ships and that would result in a Displacement of demand of about two million bars from a receipt to diesel. So it's a very large very large shift it's It would be it would cause Marine diesel demand to increase to 3.1 million bars per day and a receipt demand to drop to 1 million So it's a it's a major rebalancing of the makeup of the demand barrel a Major challenge for the refining industry Most likely it's not going to play out exactly this way because this kind of this shift is too sudden and too too Drastic to be easily accommodated, but we are expecting some some Troublance and market as a result of those changes Just a few words on trade. We think crude trade has peaked a couple of years ago It's diminishing it's diminishing mostly because more and more crude is being refined close to the well head in North America The refining industry is sourcing more and more of his crude regionally with light I told and Canadian production in the Middle East crude exporters are keeping more and more that could at home to refine for To meet domestic demand and also for export as products So there's a significant drop in the total amount of crude being traded I would add that it's not just the volume of trade being traded It's also a change in the form of crude trade with less and less crude being Trade being financed through the letter of credit system more and more crude being both a long-term contract Basis or as a on prepayment through prepayments of exports with large financing deals mostly by China With Russia with Venezuela with other exporters So it's a it's a major shift in the way crude is being traded in the world both in terms of quality and quantity and significantly a lot of this Crude trade is moving east not surprisingly and that's a trend that we've observed for a long time There's nothing new there, but it's continuing and it's continuing irrespective of price swings the story hasn't changed dramatically The the light I told surge in in North America has resulted in a drop in not just in a drop in in North American imports of crude But also in a drop in European crude imports, which is often lost in the discussion Because European refineries find it increasingly difficult to compete with North American refineries as well as new refineries elsewhere like in Saudi Arabia in the Middle East or or China so we see a Sharp drop in European crude imports a sharp drop in in North American crude imports and Big increase in Asian crude imports could producers now compete in the same market increasingly in the Asian market in Asian buyers are really Acquiring a lot more bargaining power a lot more buying power, especially China again. This is significantly affecting crude trade So This is basically same information presented differently Chinese export Imports are going dramatically and In our view that will lead to an end to the Asian premium. I think it's already disappeared from market. That's gonna be more of that Russian exports are shifting to Asia a lot less less crude is being exported West more East and Now in the refining industry Expansion plans have been scaled back since last year Especially in China partly not so much driven by the price drop but driven by low expectations of domestic demand growth So many projects have been put on hold or postponed There's a lot of projects that are coming online now. Those projects have been financed a long time ago They have been planned maybe 10 years ago during the price rally and when refining capacity was tight So that they are coming online on stream And we we think that by 2020 refining capacity we have increased by 6.4 million bars per day And this will be led by non-city Asia and and the Middle East This will be a growth rate pretty much in line with the expected growth in demand Almost barrel-to-barrel But we think that the level of excess refining capacity will increase considerably Because more and more of the demand is going to be met by Products that will bypass the refining cycle altogether Particularly natural gas liquids coming out as a by-product of us shape production or also in the Middle East of Iranian production and At the same time a creep up in biofuels and gas liquids and culture liquid So we we see the level of excess refining capacity really increasing putting pressure on refining margins We had been strong last year recovering from capacity reductions over the last few years, but that that rebound in our view will be short-lived and Margins we come under renewed pressure and This will probably lead to more shutdowns of capacity in particularly in Europe, which looks particularly vulnerable and perhaps some postponements or cancellation of some projects that we have factored in in our forecast So non-OCD really account for 90% of this growth in capacity the other 10% is basically the US and most of the non-OCD expansions are fault-loaded again, it's Extensions that have been decided 10 years ago in a very different price and market environment much less at the back end of the curve because of the postponement and scaling back of projects of new projects and Some pressure on margins. So that's I think that's In a nutshell the main findings of our report. We have looked at the product supply we run some modeling exercises looking at where supply will be coming from and where it would be needed and For NAFTA and gasoline we see excess production pretty much around the world except in Asia Which will be still importing and importing more despite the other growth in capacity there and in Africa We see continued import dependence and growing import dependence for gasoline, but the Middle East The Americas the FSU Europe all these countries will continue to be long gasoline increasingly long gasoline due to the increase in light products fed by light title in the US and upgrading in the refining capacity in in the FSU Diesel is a different story and partly because of the bunker changes. We see that potential tightness Potentially major increase in diesel at the very back end of the curve if the IMO regulations come in force in the in 2020 and that would create a Very sharp increase in European dependence on diesel imports Which would lead to almost two million bars per day. So a dramatic increase in European dependence Africa remain short diesel South America remains short diesel Asia remains short diesel the big exporters will be OCD Americas the Middle East and the FSU for the forecast period now If we look beyond the forecast period things change a bit as Middle East demand is expected to increase and absorb some of this excess production in the region and Shulal is a is challenge and that market is shrinking with the changes in IMO regulations There's some growth in power generation in the Middle East, but very limited So that's the basic findings of the report again This is our best exercise best effort to try to understand comprehensively how the Reset of price implications will affect supply and demand balances and other aspects of the supply chain Now many of these assumptions are untested by definition because the market is so different so new so many factors are Unfolding for the first time light actor is a new development. So we've never seen that light actor respond to low prices So we see how this plays out and we you know, we keep a close eye to the market, but this is Our best attempt to try to map how things might play out With the in view of the very dramatic Changes in circumstances of the last few months Thanks. Thank you very much shant one. I was quite Comprehensive and that brings a few things to my mind one is a I guess an advertisement for CS IS that is on the refining side there's so many Changes that you have teed up there that we're we're going to have a series on refinery issues here in the coming months. So that I think is quite The the need for that who's came out evidently the second one is a comment and that is your last several points on the changing trade patterns both geographically and the less crude more refined products and the Almost all growth and non OEC Certainly has important implications for your colleagues at the IEA who do emergency Planning and thinking about this and I'm as you were saying all those. I'm thinking, you know, maybe we should have Your counterpart who does that come and speak to us in the future So we'll send that message back. So but get to the questions before we open up. I don't want to put you on a spot But I came away thinking, you know Sounds like what this five-year outlook is saying is OPEC probably did the right thing in November and in not trying to fight this and by trying to manage the market and redrop because you can see market share improving a bit as you pointed out the supply elasticities now are Stronger they and they were in previous market downturns that we had and Particularly 86 and 98 So it is a different world and I I don't know if you would first of all I don't you don't have to be quoted as saying OPEC did the right thing. I know it's sensitive as an IEA but would you agree that this five-year outlook does seem to be Somewhat positive for OPEC regaining market share especially given the Uncertainties in Venezuela and Nigeria and Libya Yeah, I think It's tempting to say that at the same time OPEC in a way is a bit of an abstraction these days because it's so different and it's so diverse and and that leave for I mean we've seen the announcements just a couple days ago by the OPEC president from Nigeria saying that there would be a Maybe an emergency meeting before the next scheduled meeting So there's clearly precious tensions within some of the OPEC countries the most directly adversely affected by the price drop And those who have both cash reserves Venezuela, Nigeria Look particularly vulnerable Iran looks hard heat. Algeria has cash reserves, but The production outlook doesn't look too good and the pressures are mounting there as well. So it's it's not Particularly rosy story across the board for all OPEC members But if we look at the the aggregate of OPEC production, and especially if we look at the Gulf countries It looks like the decision to let the market be balanced is very sound and very rational. It's difficult to argue with it Yeah, I probably should have substituted OPEC for Saudi Arabia or Saudi Arabia for OPEC and maybe it would have been When Adam was here yesterday he Showed the latest EIA short-term outlook and what their price Confidence interval to using the black-choles model that you're very familiar with in the futures market and that had a similar Assumption that prices would recover in a second half of 016 by the latest say in the range you were 60 70 but it did show up in terms of confidence interval and what the market was Telling us from forward sales Futures contracts that the downside risk was it seemed to be Larger than the upside risk and he used the jaws that were $30 on the low side and 100 on the high side even though the reference case was $70 so Where would you if you were advising clients in your former role as a financial? Would you think there's more downside risk than upside risk in a neck in this this outlook? price Fundamentals assuming no disruption on fundamentals. It looks like there's a lot that's at risk at least for the next six month enough projections and obviously as many moving parts in this and many things would change but Our balancer suggests that stocks will continue to build in the next six months. So I think the market the price has recovered partly because investors have been responding to the to the week count No, there's clearly a big response to the week count every week the week can't come up Friday. You see the response on Monday But it's difficult to translate Changes in the big count it changes in production. There's not the direct clear cut relationship in two because not all weeks are equal And the ones retired most first are likely to be this productive and so But you know other than the these signals and these change of expectations that those signals have generated among some investors It looks like really the fundamental pressures continue to build for the next six month and we think that the potential for stock deals Is very great and it is likely to test storage capacity. We don't really know what global storage capacity is It's not surveyed. It's not even surveyed in the OECD only the US surveys capacity We know what the last high in OECD storage was back in August 1999 And if we allocate the stock deals between the OECD and non OECD It looks like we are on track to test to revisit those highs perhaps to to to exceed those highs in the next six months or before July Most likely storage capacity has significantly increased since 1999 There's been increases in the US in response to the share revolution. There's been Expansions of storage capacity or refurbishment of all not more capacity or upgrades in places like the Caribbean's or Increase in Fajera increases in Singapore. So there's probably more storage capacity, but we've already seen the increase in floating storage So that's a sign that capacity is being is being tested and regionally in some region It might be tested sooner than in others So all that in our view leads to probably that were pressure on prices now the risk of disruption is very high, of course Disruptions are no longer an abstraction no longer a footnote. We've had many of them in the last four years We've seen all kinds of disruptions But many politically driven by events in the Middle East and North Africa and and that would be a very low price in countries where social spending Depends on a very high or price. So the low price is is it's not a recipe for social stability Again, it's difficult to translate Just that we count might not necessarily translate into a sharp drop in production immediately Social stability instability might not immediately translate into supply reductions We've seen Libya being able to produce in the middle of the in the midst of a civil war We've seen Iraq Increasing exports in the middle of ISIS assault and price collapse So we could see you know unrest in in producer countries and yet production is still going on but I think we have to take into account the possibility of Adverse effect on supply from from social instability Okay That's a get plenty of time for questions gentlemen and back Yeah, what the impact of the price drop in the slow recovery through 2020 might have on the Enhanced oil recovery as opposed to just a new new investment. I think probably depends again country by country in China we think Enhanced our recovery will allow the country to maintain production at pretty flat levels but in other places it's going to be too expensive and it's going to be Have a burst effect on supply a big a big component a big a big piece of our forecast Which maybe doesn't come across strongly enough is not just postponements of projects, but The the effect of maintenance Because for producers a way to cut the cost is not just to defer projects but also to squeeze the most out of existing producing fields and there's going to be an incentive to postpone maintenance to To squeeze the most out to Maximize production rates and that would be at the at the cost of high depletion rates Later on at the back end of forecast and beyond that so over the forecast period We see an increase in depletion rates of the indication in decline rates from about 35 percent currently to about 7 percent by 2020 and It's going to be a little bit heat on the enhanced all recovery and that's going to be part of that fiction I Forgot to mention it. Please identify yourself and your affiliation and Sarah is going to demonstrate that now Thanks very much, Antoine. My name is Sarah Lattice. I work here in the energy national security program at CSI Thanks, the wonderful presentation is always a couple things you mentioned a few times And just sort of brought up again the idea of reforms Especially the subsidies and sort of you know places where they're either highly revenue dependent or in places where it's become more important for them to Attract capital investment to be able to increase production Can you talk a little bit about because we don't hear a lot about that these days? Can you talk a little bit about where you think those reforms are potentially? Significant as opposed to things that get announced and and not really carried out And this is not your first outlook, right? So we've gone through periods before where this stuff gets announced and as long as the price recovers in a reasonable amount of time It really doesn't take hold the reason why I'm interested in it is we had a conference here not too long ago on on the oil market situation and Jim Burkhart from IHS was really talking about the next five to ten years is a period where we understand a bit more about the Sort of oil peak demand theory and how fast or quickly that peak might be coming And I think some of these, you know, non OECD subsidy reform efforts could be really important to Understanding, you know creating new markets for oil if that's going to happen at all So I just wanted to know if you had more to say on that So yeah, I mean it's a big question and we we actually follow this issue not just in my division, but in part of the Global energy economics division we have a special focus on subsidy reform and part about policy advocacy component I think the short answer is Subsidy reform is becoming popular is becoming a buzzword pretty much everywhere including Surprisingly even in the Middle East But we're not expecting to see dramatic changes in the Middle East because of the social stability concerns and the potential for De-subsidization to really get people upset and angry so where we see most of the Those efforts really having teeth is is Southeast Asia And South Asia so countries where the import bill was in the run-up in places had been excessively burdensome for the government Where subsidies have been Very costly, but very ineffective as well so there the I think the momentum for reform was already there before the price collapse because of the impact of the Financial burden that those subsidies represented for the government And now they're being facilitated by the other price drop which makes it easier for the government to Remove subsidies because it doesn't necessarily translate to a big change in the actual price that consumer space The subsidy reform is one component another component is the switch the increase in the biofuel mandate pretty much in the same country It's typically the same map the map of countries increasing the biofuel mandate and those getting subsidies tend to be the same for the same reasons So that's we think that's really starting to take effect and to have an impact Yes, sir Hi, I'm Eugene turn from the Carnegie endowment for international peace wondering about volatility in oil prices So financial analysts some of them say that oil will settle at $62 about between $70 about or might go down in the short term So as low as $20. How do? short-term volatility of how does short-term volatility affect your outlook in supply and demand How did it affect the outlook for the longer term I guess for the short term and a short term and longer term both sides well You know, there's there's been talk about Prices dropping to 20 and we don't forecast. We don't actually have price targets. So we We limit our size to price direction So I would agree that there's room for downward movements on prices initially that the rebound was bit of a head fake I Wouldn't commit myself to a target But I don't think anybody in the industry would think that 20 if we cut there would be a sustainable price So it's not so much about where the price will drop for short period of time It's about longer term price expectations, and I don't think those have been you know, downgraded to that extent so in we know we might see some swings in prices before before the recovery we Gains momentum it becomes more sustained, but the The investment decisions are not gonna be based on in my view on the on the $20 price expectation. It's gonna be based on something higher And we'll get some I guess one early sense of that when EIA comes out with its annual energy outlook in April You know they now will have had time to kind of think about The implications of this recent drop and what it means for the long longer term so and then After that the IEA comes out with the we owe and probably what November so it'll be interesting to see you know how the Institutions like IEA and EIA and some of the companies do Do now rethink maybe the long term given what's happened Of course the price drop is just one side of the coin right the other side is the dropping cost Which is just a steep and also cyclical I mean There's been a very sharp reduction in costs and fees charged by service companies and so on but I don't think we should Expect those those drops to be sustained They're cyclical as well and they're gonna be rebounding once demand for those services rebounds It's clear that some cancellations in our view of projects announced by companies for instance in West Africa Probably should not be taken at place value. It's probably part of an effort to renegotiate contracts to renegotiate terms just because a company there's Service providers that project is off the table go back go back To your high quarters. We can't take the contract doesn't mean necessarily stop the book It's I think those projects we stay on the book, but we come back on much more favorable terms for the company Yes Frank Frank Perastro also CSIS Antoine, thank you very much You alluded to the fact that so with new crude producers right and demand going down that that crude trade is shifting It's becoming more intra regional and that the crude routes and the volumes are shifting as you start looking at refined product with new refinery investments a professionalization of all the refineries you're also going to start seeing Product demand and trade shift as well, right? So for Europe when you start looking at things like energy to security Do you get concerned where inefficient refineries disappear and then they're reliant on product from the Middle East or product from Asia and whether that enhances or or impedes energy security Yeah, you're absolutely right. I mean the flip side of the diminishing crude trade is the expansion of the product trade so they just as the could could map Strengths and and moves east the product trade expands and becomes much more global and the products become much more global and As you note in Europe the dependency on import is increasing sharply and European demand has has dropped very dramatically over the last 10 years but European refined product output has dropped even faster and Both with shut down the refineries and low utilization rates that existing or remaining refineries so imports have been increasing surprisingly and and I Think can be seen both ways in a way the globalization of the market means that there's more arbitrage opportunities more options for products to find to find markets more perhaps flexibility in the system Any market can depend on the much greater number of sources of products now and we see Indian exports go in all directions and Exposed from any major refining hops going in all directions depending on market opportunities at the same time depending on longer whole supply means a higher risk of disruption and Means that the disruption would take longer to be addressed Would be more difficult to address we see even here in the US when there's a disruption in refining output in California It takes time for the market to respond because it's always unclear how long the disruption will last whether it will still be There when the supply the products get to the market So it raises all kinds of issues. I think that the short answer is it creates a need for much higher stocks as a buffer for disruption risks and this is not something that's been as yet comprehensively addressed by European governments or by Europe as a whole certainly something which would be on the agenda and Right, right and the nature of the product and the quick trade changes also with increasingly more and more intermediate products Blending components or a feedstock not cool, but intermediate feedstocks which complicates the understanding and analysis of the market We'll start with you in front front here While you're bringing the mic a point about when you brought up California is also the Stricter environmental standards make it difficult to have the right products come from outside. Yeah Yeah, thank you for your presentation and to one M. Courtney Vaughn with Gulf Lady and were Energy consultants the firm we do business mostly in West Africa with the changes in prices downward demand changes Source of you know the energy change in that the mix, etc What do you see happening with the infrastructure that carries it? especially the various energy sources oil gas right West Africa US etc in terms of the the debt institutions that Would provide debt financing, you know into this mix and see my there is probably a mixed match if you are retiring certain sort of Say oil facility if you're you're getting less out of it by way of supply and You know when one look at our debt is structured, etc I I feel that probably you could shed some light on what you see happening with those institutions So the relationship between debt and Yeah, there is a relationship many countries borrow abroad and you know if you're retiring before debt is retired etc in terms of your Capability to sell right Given market forces, I would imagine that some countries could go back into serious debt situation With some of the international institutions. What do you hear or see? I see several questions in what you're saying I'm not sure how to relate them together, but that issue is certainly something we have to pay attention to Both sovereign debt and corporate debt corporate debt degree for a lot of companies that are highly leveraged and are now facing less Revenues, so we're something we need to incorporate into our analysis to a much greater degree than we have in the past In the past we could ignore to a large degree the financial health of companies This was something that was on the radar screen but not center Now it's much more central and we have I think to make an adjustment to our analysis to really pay a lot more attention to the debt that said You know if individual companies a company Goes bankrupt. It doesn't necessarily mean that its assets would not produce or that its projects would not be taken out by somebody else in fact, we might see you know Some degree of restructuring in the industry with some companies becoming Insolvent and going down But we might see an improvement in efficiency as new companies new new new actors purchase those assets and Run them more efficiently or not. There's many question marks around this, but certainly the valid question Sovereign debt is also an issue in the case of Venezuela. You know what would happen in Venezuela defaulted on that or if Russia did and so on so forth infrastructure developments Some of them, you know, especially meet stream pipelines terminals There's certainly a readjustment there and we haven't looked at it in as much depth as perhaps we should but just because of resource constraints but clearly some pipeline projects will be delayed because they might be more difficult to finance in a in a low price environment and and perhaps in a lower demand environment and Some some storage in the storage industry. We've seen some movement recently. We've seen like many Assets offered for sale, for instance in the Amsterdam enter up while the time area so But again in terms of what this means for supply and demand in the long run It might be just noise at the surface. It might not really necessarily affect the long-term forecast Time for one more hour to inspect in the back Are you gonna beg Antoine to come back to EIA coming back to EIA right after this We're going over there together No, seriously, I know what he meant I never beg Antoine's always welcome at EIA but the And the tougher questions will ask when you come over to EIA because we're polite people but the but implicit in your in your presentation, I think is That you know us product demand although you've revised it upward is still going down and in you have a projection of pretty significant growth in us crude oil production and I think you also said very EIA like Unlike your longer-term products that your medium-term outlook reflects current laws and policies so my question is is Is is it implicit in what you've presented that there's like a huge increase in us net product exports There's an increase Perhaps not huge we do So the for the US the assumption is a bit more nuanced maybe because we do assume Policy as usual existing policies, but in the case of the US. I think we do a Factor in a trend towards a more flexible Implementation of existing another example of American exceptionalism. Thank you We do have a modest increase in incandescent exports in the US We're not assuming an overhaul of the export down that we assume that within the existing station There's going to be room for a little bit more of concept exports Well, thank you very much Antoine, please join me in thanking Antoine