CERI Commodity Report Crude Oil

Transcription

1 CERI Commodity Report Crude Oil March 2012 Oil Prices and the Canadian Loonie Introduction Oil prices have experienced large fluctuations in recent years (see Figure 1). The spike in crude oil prices to more than US$140/bbl in mid-2008, followed by a steep decline in late 2008/early 2009 and subsequent rebound over the last two years have definitely shaken the world economy and pinched consumers at the fuel pump. At the same time the Canadian dollar has appreciated against the US dollar. After it hit an all-time low in 2003, the Canadian dollar was rising against the US dollar. Since January 2002, the loonie has gained more than 40 percent against the American dollar. By February 2008, the dollar had reached parity with the US currency - its highest rate since Despite a short period of time when the loonie depreciated as oil prices fell, it rose all the way back to parity, and some analysts say there is still room to grow. Figure 1: WTI Oil Prices and Exchange Rates US$ US/CDN$ US/Euro WTI (US$/bbl) Source: EIA, FRED CERI Commodity Report Crude Oil Editor-in-Chief: Dinara Millington (dmillington@ceri.ca) US$/bbl 160 About CERI The Canadian Energy Research Institute is an independent, not-for-profit research establishment created through a partnership of industry, academia, and government in Our mission is to provide relevant, independent, objective economic research in energy and related environmental issues. We strive to build bridges between scholarship and policy, combining the insights of scientific research, economic analysis, and practical experience. In doing so, we broaden the knowledge of young researchers in areas related to energy, the economy, and the environment while honing their expertise in a range of analytical techniques. For more information about CERI, please visit our website at So what's behind the Canadian dollar appreciation? Are oil prices to blame? Or maybe it s the weakness of the US dollar? This article will try to shed some light into this question. Exchange rate is arguably the most difficult macroeconomic variable to model empirically. International economists and policymakers have worked hard to explain the connection between macroeconomic fundamentals and exchange rates. Meese and Rogoff (1983), Obstfeld and Rogoff (2000), Cheung et al. (2005) have found that empirical models have rather limited success in explaining exchange rate movements. Models evaluating the relationship between commodity prices and exchange rates have performed somewhat better. Empirical studies of Gruen and Kortian (1996), Amano and van Norden (1998), Issa et al. (2008), Djoudad et al. (2001), Bayoumi et al. (2007) found the link between fluctuations in commodity prices and the real exchange rates to be relatively stable. However, not all exchange rate fluctuations can be explained by movements in commodity prices. Consider the period , during which the rise in oil price can likely help explain the rapid appreciation of currencies of commodity exporters, like Canada against the US dollar. However, over the same time, currencies of commodity importing countries or currency areas, like the euro area, have also appreciated against the US dollar (see Figure 1). If currencies of commodity exporters appreciate, because their economies benefit from rising commodity prices, then currencies of commodity importers should depreciate in response to rising commodity prices, as they face a negative terms-of -trade shock. What is more confusing is that since the end of 2011 and into 2012, as WTI was going up, the Canadian dollar did not appreciate as the economic theory might suggest. This indicates that models explaining exchange rates only with commodity prices may be missing important other drivers. Cayen, Coletti, Lalonde, and Maier (2010) found that for Canada what partially drives the appreciation of the dollar, besides the commodity prices (energy and non-energy prices), is the US debt-to-gdp ratio. Relevant Independent Objective

2 Page 2 Loonie Against Greenback In a floating exchange rate environment, such as North American and European economies, the exchange rate responds to many factors including the flow of imports and exports, the flow of capital, relative inflation rates and interest rates, at least in the short term. The Canadian dollar is constantly being measured against its US counterpart because the US represents the largest trading partner for Canada, and hence one factor affecting the exchange rate between the Canadian dollar and the US dollar is the merchandise trade balance or the value of net exports. By definition, the merchandise trade balance is the net difference between the value of merchandise being exported and imported into a particular country. For example, Canada imports products from the US. To pay for them, companies in Canada need US dollars; therefore, the Canadian companies trade Canadian dollars for US dollars. On the other hand, because Americans desire Canadian-made goods, they purchase Canadian dollars to pay for these goods. The net effect is an increase in the supply of US dollars and Canadian dollars. Canada's demand for American goods and services contributes to the demand for US dollars while American purchases, including huge amounts of oil, gas, cars and car parts, lumber and numerous other products from Canada contribute to the demand for Canadian dollars. In this case, the net difference between Canada's purchase of American goods and services and American purchases of Canadian goods and services is the merchandise trade balance between the two countries. The flow of funds between countries to pay for stocks and bonds purchases also contributes to the exchange rate between currencies. In the short- to medium-term, these capital flows are greatly influenced by yield differentials. For example, all else being equal, the higher the yield on German securities compared to American securities, the more attractive German securities are relative to American securities. An increase in German yields would tend to raise the flow of US dollars into German securities as well as decrease the outflow of Euros to American securities. Combined, this increased flow of funds into Germany would lower the value of the US dollar and increase the value of the Euro. Therefore, the Euro would appreciate against the US dollar. Hence you would need more US dollars to buy one Euro. The rate of inflation is another factor influencing currency exchange rates. Inflation occurs when the rate of money growth in an economy is higher than the rate of growth in real GDP, which had happened in the US as a result of the recession and the consequent bail-out (bail-out flooded the markets with the US dollars). Hence more money is chasing fewer goods which in turn drive up the prices of these goods. As in any market, the unending supply has pushed the price of the greenback down, as measured in other currencies. In that time period the loonie appreciated against the US currency because the US economy has been struggling to get off the ground. Washington is facing budget and trade deficits that have never been higher. Since exchange rates are an expression of one unit of a currency in terms of another, differential inflation essentially changes the relative value of this relationship. For example, if America is experiencing higher inflation than Canada, then the $CAD/$US ratio increases to represent the increased value of Canadian dollars relative to American dollars. Put another way, one Canadian dollar will now buy more American dollars. There are simply more American dollars around relative to the Canadian dollar. This fact is based on the concept of purchasing power parity. This means that over the long run, the exchange rate adjusts to reflect the difference in price levels between countries. In theory, a given item will tend to have the same price in two countries adjusted by the prevailing exchange rate. 1 Conclusion When the Canadian dollar moves in either direction, some of the effects are instantly obvious. When it increases against the US dollar, for example, Canadian exporters lose sales because their products become more expensive for US buyers. It's simply harder to compete. According to Statistics Canada, since 2002, 189,000 manufacturing jobs have disappeared in Canada. The agency places the blame squarely on the soaring loonie. But some economists say the difficulties of adjusting to a higher loonie will help exporters in the long run, because they've had to take measures to improve efficiency. The days of relying on a cheap loonie to help them sell in the US are long gone. Cheaper US dollars also provide Canadian companies with an opportunity to invest in US-made technologies that might make Canadian firms more competitive. Much of the software and machinery Canadian companies buy to run their operations are bought from the US. A more CERI Commodity Report - Crude Oil

3 Page 3 favourable exchange rate means those companies can invest more in those tools of efficiency. For some companies, including those that have been reporting weaker American sales because of the loonie's gains, there can be yet another silver lining. As the Canadian dollar rises, the cost of repaying US dollar debt falls. Many Canadian companies have debt that is denominated in US dollars. Those debt payments become cheaper when the American dollar falls. Canadian tourists to the US are finding that their money goes much further these days. In 2002, Canadians had to pay $1.57 for each US dollar they bought. In 2011, those US dollars were costing just $0.99 each. Endnote 1 Transportation costs of goods are not accounted for in this example. References Amano, R. and S. van Norden Exchange Rates and Oil Prices. Bank of Canada Working Paper Bayoumi, T., V. Klyuev and M. Muehleisen Northern star: Canada s path to economic prosperity. IMF Occasional Paper 258. Canadian Forex. What Drives Market Prices. Accessed on April 16, forex-basics/what-drives-market-prices Cayen, JP, D. Coletti, R. Lalonde, and P. Maier What Drives Exchange Rates? New Evidence from a Panel of U.S. Dollar Bilateral Exchange Rates Bank of Canada Working Paper CBC News. What s behind the soaring Canadian dollar? Accessed on April 16, background/dollar_cdn/ Cheung, Y., M. Chinn, and A. Garcia-Pascual Empirical exchange rate models of the nineties: Are any fit to survive? Journal of International Money and Finance 24(7): Djoudad, R., J. Murray, T. Chan, and J. Daw The role of chartists and fundamentalists in currency markets: The experience of Australia, Canada, and New Zealand. In: Revisiting the Case for Flexible Exchange Rates. Proceedings of a conference held at the Bank of Canada, November Gruen, D. and T. Kortian Why does the Australian Dollar move so closely with the terms of trade? Reserve Bank of Australia Research Paper No Issa, R., R. Lafrance, and J. Murray The turning black tide: Energy prices and the Canadian dollar. Canadian Journal of Economics 41(3): Meese, R. and K. Rogoff Empirical exchange rate models of the seventies: Do they fit out of sample? Journal of International Economics 14(1 2): Obstfeld, M. and K. Rogoff The six major puzzles in international macroeconomics: Is there a common cause? In: B. Bernanke and K. Rogoff (eds). NBER Macroeconomics Annual. Cambridge: MIT Press. Relevant Independent Objective

4 Page 4 US$/bbl Spot Crude Prices Differential WTI Brent US$/bbl US$/bbl WTI - Edmonton Light Price Differentials Differential WTI Edmonton Light Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 Spot Prices WTI Brent Edm.Light H.Hardisty Year-to-Date Quarter-to-Date April 4, SOURCE: EIA. SOURCE: EIA. US$/bbl WTI - Hardisty Heavy Price Differentials Differential WTI Hardisty Heavy US$/bbl NYMEX Crude Forward Curve 12 months Mar Jan Feb Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar SOURCE: NRCan, EIA. SOURCE: EIA, CERI. CERI Commodity Report - Crude Oil

5 SOURCE: EIA, CERI. SOURCE: NRCan. Page 5 NYMEX Petroleum Products CDN/US$ Exchange Rate US$/gal 4.00 CDN/US$ 1.55 RBOB Gasoline Heating Oil Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 NYMEX Prices Unleaded Gasoline Heating Oil Year-to-Date Quarter-to-Date April 4, Oil Demand Global in Selected Oil Demand Countries US Products Demand March March 2012 Y-on-Y change MMbpd % % 20% 90 10% 80 50% 70 0% % 48% -10% -20% 30-30% % 46% 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12-40% -50% Total Gasoline Jet Fuel Distillate Residual Propane Other OECD Demand non-oecd Demand non-oecd Share of Global Demand SOURCE: IEA Oil Market Report. SOURCE: EIA Weekly Petroleum Status Report. Relevant Independent Objective

6 SOURCE: IEA Oil Market Report, CERI. SOURCE: IEA Oil Market Report. SOURCE: IEA Oil Market Report. SOURCE: IEA Oil Market Report. Page 6 Global Oil Supply MMbpd Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 non-opec Supply OPEC Supply non-opec Share of Global Supply Canadian Oil Production by product Mbpd 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1, Q11 1Q12 2Q12 3Q12 4Q12 AB L/M/H AB Bitumen SK Other NGLs Synthetic 61.0% 60.5% 60.0% 59.5% 59.0% 58.5% 58.0% 57.5% 57.0% Mbpd 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Mbpd 3,000 2,500 2,000 1,500 1, US Oil Production by region 4Q11 1Q12 2Q12 3Q12 Alaska California Texas Federal GOM Other Lower 48 NGLs Other OECD Commercial Stocks by region Feb-09 Feb-10 Feb-11 Feb-12 OECD North America OECD Europe OECD Pacific CERI Commodity Report - Crude Oil

7 Page 7 MMb US Commercial Stocks February 24 - March 30, 2012 Crude Gasoline Distillate Products Total MMb Canadian Stocks on Land 4Q10 1Q11 2Q11 3Q11 4Q11 SOURCE: EIA Weekly Petroleum Status Report. SOURCE: IEA Oil Market Report. Relevant Independent Objective

8 Page 8 World Supply and Demand Balance (MMbpd) Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 World Demand OECD non-oecd World Supply Non-OPEC OPEC NGLs OPEC Crude Supply - Demand OECD Stocks (MMbbls) Days Cover OPEC Crude Oil Production (MMbpd) Sustainable Production Over (+)/Under (-) Target Capacity Jan-12 Feb-12 Mar-12 Jan-12 Feb-12 Mar-12 Saudi Arabia Iran UAE Kuwait Qatar Nigeria Libya Algeria Ecuador OPEC Iraq Total OPEC WTI Price Projections ($US/barrel) Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 High Price Case Reference Case Low Price Case CERI Commodity Report - Crude Oil

9 Page 9 Data Appendix Relevant Independent Objective

10 Page 10 A1: Historic Light Sweet Crude Futures Prices ($US per barrel) NYMEX Light Sweet Crude Last 3 Day Avg. When 12-Month Spread Close Average Near Mo. Strip Avg. (1-2 Mo.) Q Q Q Q Q Yr-on-Yr Chg. 10.8% 11.4% 12.3% 9.3% Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr Yr-on-Yr Chg. 1.5% 4.3% 5.7% 4.7% A2: Historic Crude Product Futures Prices ( US per gallon) NYMEX Unleaded Gasoline NYMEX Heating Oil Last 3 Day Avg. When 12-Month Spread Last 3 Day Avg. When 12-Month Spread Close Average Near Mo. Strip Avg. (1-2 Mo.) Close Average Near Mo. Strip Avg. (1-2 Mo.) Q Q Q Q Q Yr-on-Yr Chg. 12.2% 13.9% 14.3% 14.1% 11.6% 13.3% 16.1% 14.6% Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr Yr-on-Yr Chg. 9.1% 10.5% 11.5% 10.1% 2.5% 4.0% 6.0% 5.4% Notes (Tables A1 and A2): Prices are listed by contract month. Close: final contract close on the last day of trading. Last 3 Day Average Close: simple average contract close on last three days of trading. Average When Near Month: simple average closing price on trading days when contract was near month. 12-Month Strip Average: simple average of daily near 12-month contract closing prices in a given contract month. Spread: difference between one-month and two-month forward prices in a given period. Source: New York Mercantile Exchange (NYMEX). CERI Commodity Report - Crude Oil

11 Page 11 A3: World Crude Oil Contract Prices (FOB, $US per barrel) Saudi U.A.E. Oman U.K. Norway Russia Venez. Kuwait Ecuador Mexico Nigeria Indon. Arab Lgt Dubai Oman Brent Ekofisk Urals 1 T.J. Light Blend Oriente Isthmus Bonny Lgt Minas Q Q Q Q Q Yr-on-Yr Chg. 27.7% 26.3% 26.9% 25.7% 27.2% 28.3% 29.6% 29.9% 32.4% 32.0% 28.1% 29.6% Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Yr-on-Yr Chg. 12.9% 11.8% 6.3% 11.8% 3.4% 13.2% 13.4% 13.5% 18.7% 15.6% 11.6% 17.4% Notes: 1. Urals is Delivered price at Mediterranean. Contract prices are based on prices at the end of each month. Source: OPEC Monthly Oil Market Report. A4: North American Posted Crude Prices (FOB, $US per barrel) United States Canada ANS 1 Lost Hills Kern R. WTI WTS GCS Okla. Sw. Kans. Sw. Mich. So. Wyo. Sw. ELS 2 HH Q Q Q Q Q Yr-on-Yr Chg. 44.9% 33.3% 35.4% 13.1% 14.0% 14.3% 13.1% 14.8% 14.5% 16.2% 21.0% 24.4% Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Yr-on-Yr Chg. 18.5% 18.0% 19.0% 12.4% 13.1% 13.4% 12.4% 12.6% 13.6% 17.8% 13.0% 25.1% Notes: 1. ANS is Delivered price on US West Coast. 2. Edmonton Light Sweet. 3. Hardisty Heavy. Posted prices are based on price at the end of each month. Sources: Oil & Gas Journal; Natural Resources Canada. Relevant Independent Objective

12 Page 12 A5: Crude Oil Quality Differentials (FOB, $US per barrel) Light vs. Heavy Sweet vs. Sour Arab Lt Arab Hv Diff. Isthmus Maya Diff. ELS 1 HH 2 Diff. GCS WTS Diff Q Q Q Q Q Yr-on-Yr Chg. 27.7% 29.2% 32.0% 38.3% 19.8% 23.1% 14.3% 14.0% Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Yr-on-Yr Chg. 12.9% 11.4% 15.6% 16.5% 11.8% 23.9% 13.4% 13.1% Notes: 1. Edmonton Light Sweet. 2. Hardisty Heavy. Based on contract prices at the end of each month. Sources: OPEC Monthly Oil Market Report: Oil & Gas Journal; Natural Resources Canada. A6: Crude Oil spot Prices and Differentials (FOB, $US per barrel) Spot Prices Differentials WTI Brent Dubai Urals Basket 1 WTI-Brent WTI-Dubai WTI-Urals WTI-Basket Q Q Q Q Q Yr-on-Yr Chg. 9.0% 12.4% 15.5% 14.4% 10.3% Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Yr-on-Yr Chg. 3.1% 9.3% 12.7% 10.5% 6.5% Notes: 1. OPEC-Reference Basket is average price of seven crude streams: Algeria Saharan Blend, Dubai Fateh, Indonesia Minas, Mexico Isthmus, Nigeria Bonny Light, Saudi Arabia Light and Venezuela Tia Juana Light. Source: OPEC Monthly Oil Market Report. CERI Commodity Report - Crude Oil

13 Page 13 A7: World Petroleum Product Spot Prices ($US per barrel) NY Harbor, Barges Rotterdam, Barges Singapore, Cargoes Gasoline 1 No. 2 H.O. Resid. 2 Gasoline 1 Gasoil Resid. 3 Gasoline 1 Gasoil Resid Q Q Q Q Q Yr-on-Yr Chg. 14.4% 12.1% 22.7% 13.1% 12.5% 20.5% 15.3% 11.2% 22.3% Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Yr-on-Yr Chg. 10.6% 5.9% 17.2% 12.3% 5.7% 14.8% 12.9% 4.4% 15.8% Notes: 1. Regular unleaded gasoline. 2. High Sulfur (3.0%) Residual Fuel Oil. 3. High Sulfur (3.5%) Residual Fuel Oil. Spot prices are based on average daily prices over a specific timeframe. Source: IEA Oil Market Report. A8: Product Spot Prices in Selected American Cities ( US per gallon) NY Harbor US Gulf Los Angeles Gasoline 1 No. 2 H.O. Distill. Gasoline 1 Jet Fuel Distill. Gasoline 1 Distill Q Q Q Q Q Yr-on-Yr Chg. 15.2% 12.6% 11.5% 15.3% 11.3% 11.9% 14.9% 11.6% Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Yr-on-Yr Chg. 11.6% 6.0% 5.5% 10.8% 4.2% 6.1% 7.3% 4.7% Notes: 1. Reformulated regular unleaded gasoline. Spot prices are based on average daily prices over a specific timeframe. Source: EIA Weekly Petroleum Status Report. Relevant Independent Objective

14 Page 14 B1: World Petroleum Supply and Demand Balance (million barrels per day) OECD Non-OECD OPEC World N. A. Europe Asia-Pac Total 1 Asia Non-Asia FSU Total 1 P. Gulf Non-Gulf Total 2 Total 3 Demand Q Q Q Q Q Q Q Q Q Supply Q Q Q Q Q Q Q Q Q Balance Q Q Q Q Q Q Q Q Q Notes: 1. Totals for OECD and non-oecd supply include net refining gains; specific regions/groupings within each do not. 2. OPEC demand is an estimate based on historical annual data. 3. Balance for World equals global stockbuilds (+) and stockdraws (-) for crude oil and petroleum products and miscellaneous gains and losses. Regional surpluses (+) and deficits (-) are balanced through net-imports and stock changes in the short-term, and net-imports in the longer term. Supply includes crude oil, condensates, NGLs, oil from non-conventional sources and processing gains. Demand is for petroleum products. Source: IEA Oil Market Report. CERI Commodity Report - Crude Oil

15 Page 15 B2: World Petroleum Production (million barrels per day) OECD Non-OECD OPEC World N. A. Europe Asia-Pac Total Asia Non-Asia FSU Total P. Gulf Non-Gulf Total Total Q Q Q Q Q Yr-on-Yr Chg. 6.0% -8.0% 3.8% 3.0% -1.8% -3.1% 0.5% -1.1% 6.7% -2.1% 4.5% 2.2% Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Yr-on-Yr Chg. 3.2% -7.6% 3.9% 1.1% -2.4% -4.6% 0.3% -1.8% 6.8% 8.0% 7.4% 2.7% R/P Ratio Notes: 1. Production includes crude oil, condensates and NGLs. 2. Reserve-Production ratio is based on latest month production and British Petroleum reserve estimates. Sources: IEA Oil Market Report and BP Statistical Review of World Energy. B3: OECD Commercial Petroleum Stocks (million barrels) North America Europe Asia-Pacific OECD Crude Product Total Crude Product Total Crude Product Total Crude Product 1 Total , ,431 2, , ,422 2, , ,410 2,604 4Q , ,422 2,664 1Q , ,375 2,631 2Q , ,397 2,676 3Q , ,427 2,665 4Q , ,410 2,604 Yr-on-Yr Chg. -1.5% -1.2% -1.1% -11.5% -0.9% -4.8% -1.4% 1.1% -0.1% -4.8% -0.9% -2.3% Feb , ,405 2,660 Mar , ,375 2,631 Apr , ,377 2,659 May , ,396 2,687 Jun , ,397 2,676 Jul , ,436 2,698 Aug , ,443 2,700 Sep , ,427 2,665 Oct , ,406 2,643 Nov , ,417 2,657 Dec , ,410 2,604 Jan , ,429 2,643 Feb , ,396 2,630 Yr-on-Yr Chg. -2.3% 2.9% 2.0% -8.5% -3.8% -5.2% 1.1% -3.9% -1.5% -3.8% -0.6% -1.1% Notes: 1. Product includes only finished petroleum products. 2. Total stocks include NGLs, refinery feedstocks, additives/oxygenates and other hydrocarbons. All stocks are closing levels for respective reporting period. Source: IEA Oil Market Report. Relevant Independent Objective

16 Page 16 B4: OPEC Crude Oil Production and Targets (million barrels per day) Persian Gulf Non-Persian Gulf OPEC-11 OPEC-11 Arabia Iran UAE Kuwait Qatar Venez. Nigeria Libya Algeria Angola Ecuador Total 1 Target Iraq Q Q Q Q Q Yr-on-Yr Chg. 12.7% -8.5% 5.2% 15.3% -1.2% -3.1% -3.7% 10.6% -8.7% 6.2% -4.0% 4.5% 1.5% Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Yr-on-Yr Chg. 12.3% -7.0% 5.2% 12.2% -1.2% -2.0% 2.0% 193.3% -9.5% 3.1% -5.9% 7.7% 8.4% Quotas Over/Under % -1.2% 19.4% 22.5% 11.0% 22.6% 22.8% -10.2% -5.0% 10.5% 11.6% 15.1% Notes: 1. Does not include NGLs; OPEC production targets apply to crude oil only. 2. Iraq does not have an official OPEC target. 3. OPEC-10 production targets. 4. As of latest month. Source: IEA Oil Market Report. B5: OECD Refinery Activity Crude Input (MMbpd) - Utilization (percent) - Refining Margins ($US/barrel) North America Europe Asia-Pacific OECD Input Util. Margin 1 Input Util. Margin 2 Input Util. Margin 3 Input Util Q Q Q Q Q Yr-on-Yr Chg. 3.4% 47.0% -1.7% -74.9% -2.9% -56.6% 0.5% Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Yr-on-Yr Chg. 6.5% -65.8% -1.2% 344% -3.0% -28.0% 2.1% Notes: 1. Based on dated Brent being processed in average US Gulf cracking refinery. 2. Based on dated Brent in average Rotterdam cracking refinery. 3. Based on spot Dubai in average Singapore hydroskimming refinery. Source: IEA Oil Market Report. CERI Commodity Report - Crude Oil

17 Page 17 C1: US Petroleum Supply and Demand Balance (million barrels per day) United States 1 East Mid-West Supply Demand Net-Imp. Stk. Chg. Supply Demand Balance Supply Demand Balance Q Q Q Q Q Yr-on-Yr Chg. 4.7% -3.3% -7.8% -7.3% -6.0% 13.9% -0.1% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Yr-on-Yr Chg. 6.1% -2.9% -14.9% 0.0% -9.5% 10.6% 5.4% % of Total % 100.0% 1.3% 28.4% 23.5% 26.8% South-Central North-West West Supply Demand Balance Supply Demand Balance Supply Demand Balance Q Q Q Q Q Yr-on-Yr Chg. 3.3% -4.5% 7.5% 1.2% -3.7% -2.5% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Yr-on-Yr Chg. 3.8% -6.7% 6.1% -0.5% 8.3% 3.5% % of Total % 26.4% 8.0% 3.4% 14.0% 14.9% Notes: 1. Does not balance because of unaccounted for crude oil. Regional surpluses (+) and deficits (-) are balanced through net-imports/transfers and stock changes in the short-term, and net-imports/transfers in the longer term. 2. As of most recent month. Supply includes crude oil, condensates, NGLs, oil from nonconventional sources and processing gains. Demand is for petroleum products. Source: EIA Petroleum Supply Monthly. Relevant Independent Objective

18 Page 18 C2: US Petroleum Demand by Product (million barrels per day) Finished Petroleum Products NGLs Petroleum Gasoline Jet Fuel Distil. Resid. Total 1 Total Total Q Q Q Q Q Yr-on-Yr Chg. -4.4% -1.0% 1.1% -29.6% -2.8% -3.9% -3.3% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Yr-on-Yr Chg. 2.5% 1.1% -0.6% -35.5% 0.6% -19.5% -2.9% Notes: 1. Total includes other finished petroleum products. 2. Total petroleum demand includes refinery feedstocks, additives/oxygenates and other hydrocarbons. Source: EIA Petroleum Supply Monthly. C3: US Petroleum Stocks (million barrels) Petroleum Stocks 1 Crude Oil Finished Products East Mid-West S-Cent N-West West U.S. Total 2 Gasoline Jet Fuel Distil. Resid. Total , ,776 1, , ,794 1, , ,770 1, Q , ,794 1, Q , ,770 1, Q , ,808 1, Q , ,781 1, Q , ,770 1, Yr-on-Yr Chg. 1.2% 2.3% -2.3% -2.1% -2.8% -1.3% -2.3% -11.2% 5.6% -13.1% -10.9% -9.6% Jan , ,803 1, Feb , ,773 1, Mar , ,770 1, Apr , ,776 1, May , ,805 1, Jun , ,808 1, Jul , ,820 1, Aug , ,801 1, Sep , ,781 1, Oct , ,770 1, Nov , ,772 1, Dec , ,770 1, Jan , ,770 1, Yr-on-Yr Chg. -1.7% 2.1% -2.8% -3.7% -0.9% -1.9% -3.7% -18.9% 10.0% -11.9% -5.6% -10.5% Notes: 1. Petroleum stocks include crude oil, finished products, NGLs, refinery feedstocks, additives/oxygenates and other hydrocarbons. 2. Includes Strategic Petroleum Reserves. 3. Total includes other finished petroleum products. All stocks are closing levels for respective reporting period. Source: EIA Petroleum Supply Monthly. CERI Commodity Report - Crude Oil