Disclosures which since June last year have been USD65/b for 2018e (FY average) and USD70/b for 2019e. Market estimates have risen sharply consensus now stands at USD63/b for 2018 probably not leaving room for sentiment to improve much more for now and USD64/b for 2019. As much as US tight oil supply has surprised to the upside in recent months, this has been offset by similar upgrades to global demand, and OPEC supply restraint looks as strong as ever. US supply surging.US drilling activity is now gathering pace, reflecting a typical four-month time lag vs the rise in crude. However, well completion activity never slacked off total well completions in January were 20% higher than six months ago, vs a total wells drilled only 6% higher. US tight oil supply looks like it was 1.3mbd higher y/y in January. We now expect it to grow by 1.3mbd on average in 2018e (up from 1.1mbd previously), with total US supply up by 1.6mbd for the year. .as is global demand: the scale of US supply growth would risk overwhelming the market in 2018 were it not for the fact that global demand has also been strong. Global demand growth averaged 1.7%pa in 2015-17, well above the 1.4% longer term average. Estimates for 2018 demand growth are currently in the range 1.4-1.6mbd (1.4%-1.6%), driven by the strength of Global economic growth. OPEC keeping up the discipline: OPEC supply ex Libya and Nigeria is currently below the agreed baseline, helped by collapsing output from Venezuela. There are increasing signs of an OPEC bias towards tightening for longer, rather than risk a lurch back into an oversupplied market. Not much inventory excess left: The surplus inventory relative to five year historic norms has fallen to a range of only 2-3% in both the US and the OECD. We continue to expect the last of the excess to be worked off sometime around 3Q this year. OPEC exit strategy is the next question: we think continued demand growth would just about allow OPEC to unwind its cuts in 2019 without unbalancing the market, but the timing and strategy of this move is likely to be critical for sentiment. Longer term, we expect a decline in conventional non-OPEC supply to start to become apparent in 2019, and to worsen thereafter. In our view this points to the need for sustained long term growth in US tight oil supply if a looming supply gap is to be avoided. We believe prices somewhere at least around current levels will be needed to stimulate this sustained growth, which is a key rationale behind our price assumptions. 20 February 2018 Oil things considered EQUITIES OIL, GAS when it is between 5% and 20% above the current share price, the stock may be classified as a Buy or a Hold; when it is between 5% below and 5% above the current share price, the stock will be classified as a Hold; when it is between 5% and 20% below the current share price, the stock may be classified as a Hold or a Reduce; and when it is more than 20% below the current share price, the stock will be classified as a Reduce. Our ratings are re-calibrated against these bands at the time of any material change (initiation or resumption of coverage, change in target price or estimates). Upside/Downside is the percentage difference between the target price and the share price. Prior to this date, HSBCs rating structure was applied on the following basis: For each stock we set a required rate of return calculated from the cost of equity for that stocks domestic or, as appropriate, regional market established by our strategy team. The target price for a stock represented the value the analyst expected the stock to reach over our performance horizon. The performance horizon was 12 months. For a stock to be classified as Overweight, the potential return, which equals the percentage difference between the current share price and the target price, including the forecast dividend yield when indicated, had to exceed the required return by at least 5 percentage points over the succeeding 12 months (or 10 percentage points for a stock classified as Volatile*). For a stock to be classified as Underweight, the stock was expected to underperform its required return by at least 5 percentage points over the succeeding 12 months (or 10 percentage points for a stock classified as Volatile*). Stocks between these bands were classified as Neutral. *A stock was classified as volatile if its historical volatility had exceeded 40%, if the stock had been listed for less than 12 months (unless it was in an industry or sector where volatility is low) or if the analyst expected significant volatility. However, stocks which we did not consider volatile may in fact also have behaved in such a way. Historical volatility was defined as the past months average of the daily 365-day moving average volatilities. In order to avoid misleadingly frequent changes in rating, however, volatility had to move 2.5 percentage points past the 40% ben