CERI Commodity Report Crude Oil

Transcription

1 CERI Commodity Report Crude Oil January-February 2012 Bakken Oil: Life in Oil Country It s just one fracking thing after another Figure 1: Bakken Shale Oil Play Over 400 million years ago, a large oil deposit formed deep under what is now the border between North Dakota and Saskatchewan, as seen in Figure 1. The first oil well was tapped on land owned by a farmer named Henry Bakken in the 1950s. Today, the Bakken formation is thought to be the largest oil deposit in the Lower- 48. According to the US Geological Survey, its 15,000 square miles extending over two US states and two Canadian provinces hold some 4.3 billion barrels of oil ready to be tapped for drilling. Since its last estimate, the Geological Survey has been re-evaluating the resource, on a suspicion that there are 100 billion barrels of resource trapped within the Three Forks formation underlying the Bakken. Source: Oil & Gas Journal CERI Commodity Report Crude Oil Editor-in-Chief: Dinara Millington (dmillington@ceri.ca) 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. While oil companies have been drilling in the Bakken for 60 years, a few factors have converged recently, which helped the output level to increase 10 times in the last decade. The twin technologies of hydraulic fracturing ( fracking ) and horizontal drilling, which were earlier pioneered and implemented in shale gas plays, have made it possible to extract oil from previously inaccessible "tight" rock formations. The high price tag of those technologies means they are economically feasible now that the price of a barrel of crude oil hovers around $100 per barrel. Oil companies are now rushing to drill wells while the economics of shale oil development are favorable. For more information about CERI, please visit our website at Relevant Independent Objective

2 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Page 2 Figure 2: North Dakota Production and Rig Count Source: EIA, Baker Hughes The growth in production in this region over the last few years has been unprecedented (see Figure 2). From just 2,000 BPD in 2000, the output in December 2011 exceeded half a million BPD (a 56 percent increase from December 2010), and is expected to reach 1 million BPD by It is estimated that in the next two years the Bakken production will account for 10 percent of total US oil output. From December 2010 to December 2011, the rig count increased by 27 percent to 186 rigs. This year, according to Baker Hughes, 197 rigs were drilled in the second week of January and the majority was horizontal and directional drilling. The North Dakota Department of Mineral Resources estimates that a typical oil well in North Dakota will produce for 28 years. During those 28 years, the average Bakken well will: ('000 b/d) Rig Count (Right Axis) Production (Left Axis) (# of rigs) 200 produce more than 575,000 barrels of oil, generate over US$20 million net profit, pay approximately US$4,250,000 in taxes: US$1,930,000 gross production taxes, US$2,000,000 extraction tax, and US$320,000 sales tax, pay royalties of US$6,900,000 to mineral owners, pay salaries and wages of US$1,550,000, pay operating expenses of US$1,900,000, and cost US$6,600,000 to drill and complete. Benefits While the rest of the US economy is struggling to recover, North Dakota s economy is being driven higher by royalties and fees from oil and gas leases, well-paid jobs in exploration and production, and all the services needed to cater to an influx of workers from out of state (everything from food and lodging to entertainment). The state has benefited enormously from taxes on the industry. The generated tax revenues amounted to approximately US$839 million in 2011 and are expected to generate more than US$2 billion over the next two years. While other states have been forced to make drastic budget cuts in education, public assistance and health care, North Dakota recently approved a budget that increases spending by 12 percent over its upcoming two-year budget cycle. The residents in North Dakota have also felt the benefits. The state has seen the fastest income growth of any state over the past five years, and almost all the gains are due to the boom sparked by drilling into the Bakken shale. The state s median real income has risen over $4,250 per household (9 percent) since 2005, according to US Census data, compared with a decline of almost $2,300 (4 percent) for the country as a whole. In 2010, the state ranked 19th nationwide in terms of median income, up from 40th in No other state has seen such a dramatic improvement in its ranking over the last 20 years. The Bakken boom has brought many job-seekers in search of a paying job. The average worker in the oil and gas sector here earns more than US$90,000 a year. Hence, the oil and gas workforce has increased from 5,000 in 2005 to more than 30,000 in According to the US Bureau of Labor and Statistics, the state has the lowest unemployment rate of 3 percent as compared to the US national estimate of 8.5 percent. Constraints Despite the success, this growth does not come without its impacts on everything else from housing availability, congested roads to pipeline infrastructure constraints and environmental concerns that could potentially threaten the production growth. One of the bigger struggles in the region is the shortage of housing. It is so difficult to find housing that some workers are getting creative. For example, in the town of Tioga, one group of truckers were sleeping in their vehicles and showering in the bathroom of a city park. For the lucky few who can get lodging here, the rents parallel those in major cities, easily topping US$1,200 per month for a new two-bedroom unit. The housing crunch has left local communities facing a dilemma. Build too little, and they ll wind up with a city overrun by RV parks and unsafe living conditions. Build too much, and they could see a repeat of the situation that arose in the 1980s when the last boom went bust.

3 Page 3 This time, Williston and other cities have promised to avoid repeating that mistake, taking a more measured approach to housing and requiring larger guarantees from developers. They re also approaching the situation cautiously because they believe the population will begin to decline dramatically sometime in the next 10 to 20 years, as the drilling phase of the boom is replaced by a slower phase, in which oil steadily pumps from the ground without the need of much manpower. One solution for filling the void is the man camp, a type of temporary lodging for oil workers that can be trucked in and out of the region. Last year, the Olympic village that hosted athletes at the Vancouver games was shipped here to house these workers. The other major impact of the industry is the damage to the county road system, a grid that in many places is comprised of two-lane gravel and dirt roads. Initially designed for farm-to-market travel, they were not built for the big trucks that use them to access rigs and wells. Drilling a new well requires more than 2,000 truck trips, and the heavy rigs are destroying the roadways. In addition to that, there are thousands of tanker-trucks going down the highway transporting oil because there is not enough pipeline capacity to ship Bakken crude to markets. Since the rejection of the Keystone XL (KXL) pipeline, TransCanada cannot deliver the allocated portion of the KXL capacity to Bakken producers who are increasing their shipments via trucks and rail due to a lack of available pipeline capacity. While there are plans to build more pipelines, they cannot come online fast enough to keep up with production. In late 2011, Enbridge was approved to build the Canadian portion of its Bakken pipeline from Saskatchewan, connecting to Enbridge s mainline that goes into the Great Lakes and down to Oklahoma and Texas. Once the approval is received for associated pipes and storage terminals, there will be 310,000 barrels of storage and 150,000 BPD of take-away capacity available by But given how fast the Bakken output is growing, these additions would only scratch the surface. Besides the local bottlenecks, the US in general is experiencing pipeline bottlenecks in the broader crude oil market, in particular at one of the main trading hubs Cushing. Given that crude from the Bakken mainly flows to Cushing, the producers are finding themselves backed down the line and forced to sell at a discount to other US benchmark prices, further eroding profit margins. From the environmental perspective, probably the most disconcerting sign of failure to keep up with growth is the rise in the number of flare stacks among the producing fields. The EIA estimates that producers are flaring close to 40 percent of all natural gas produced, or million cubic feet per day (MMcf/d), which could be enough to heat 2,300 houses for one year. By contrast, less than one percent of US gas production was flared or vented in While the state of North Dakota is undergoing a review of its industry regulations that could dictate stronger environmental protection, current state policies almost encourage the practice, allowing producers to flare gas without paying royalties. Under the law, producers can flare for one year without paying royalties and are also eligible for extensions if they can demonstrate economic hardship. In essence, valuable resources are wasted and the state government loses money. The rationale is simple: with current North American gas prices at 10-year lows, it is cheaper to flare gas. Nevertheless, US$3 billion is planned to be spent on new gas-gathering and distribution systems by local governments in hopes of bringing the total gas flared down to 10 percent. However, some experts suggest that even with new gas-gathering systems, Bakken producers will continue flaring significant amounts of gas, losing potential revenue in the rush to develop higher-valued crude. One aspect of the drilling that has raised an environmental concern elsewhere fracking is not getting widely attacked here. This is somewhat due to the fact that the process takes place nearly two miles below ground, deeper than in other parts of the country, which defenders say reduces the risk of contamination. As well as the fact that drilling has been broadly accepted in the traditional mining and energy-producing state of North Dakota, the issue is far more pronounced in the more populated areas and diversified economies of the northeast, which overlay formations like the Marcellus and Utica shales. Conclusion North Dakota's boom has contributed to the first increase in US oil output since the mid 1980s. Rising domestic production could significantly lessen the country's dependence on foreign imports, including Canada. The issue of energy security would ease, even if the economy will still be exposed to price shocks since international oil and products markets are integrated. Relevant Independent Objective

4 Page 4 However, while shale oil like Bakken has been presented as an opportunity for the US to increase domestic supplies and reduce its reliance on foreign crudes, there has not been much planning done on what to do with all this oil when it comes out of the ground. The bigger political problem is the challenge that more plentiful oil and gas supplies would pose to the clean energy agenda strongly promoted by environmental lobbying groups, clean technology companies, as well as parts of the Obama administration and the congressional Democratic Party. They fear rising oil production would relieve upward pressure on prices and remove the threat of energy insecurity. In turn it would undermine economic incentives and the political momentum to undertake the expensive investments needed to switch to a cleaner energy system. References Baker Hughes North American Rig Count. investor.shareholder.com/bhi/rig_counts/rc_index.cfm, accessed on March 13, Canadian Energy Research Institute, Special Edition on Keystone XL Pipeline. Geopolitics of Energy. Volume 33, Issue 11&12. November-December Governing. August North Dakota's Oil Boom is a Blessing and a Curse. energy-env/north-dakotas-oil-boom-blessing-curse.html#, accessed on March 14, North Dakota Department of Mineral Resources, Presentation. presentations/minotcoc pdf, accessed on March 12, Reuters. November North Dakota's oil boom poses political dilemma. article/2011/11/02/column-us-oil-debateidusl5e7m21i , accessed on March 14, US Census Data United States Energy Information Administration EIA), Review of Emerging U.S. Shale Gas and Shale Oil Plays. pdf/usshaleplays.pdf, accessed on March 13, US EIA, Petroleum & Other Liquids, Data. accessed on March 14, US EIA, Natural Gas Gross Withdrawals and Production. NG_PROD_SUM_DCU_SND_M.htm, accessed on March 15, 2012.

5 Page 5 US$/bbl Spot Crude Prices Differential WTI Brent US$/bbl US$/bbl WTI - Edmonton Light Price Differentials Differential WTI Edmonton Light Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Feb-11 Apr-11 Jun-11 Aug-11 Oct-11 Dec-11 Feb-12 Spot Prices WTI Brent Edm.Light H.Hardisty Year-to-Date Quarter-to-Date March 6, SOURCE: EIA. SOURCE: EIA. US$/bbl WTI - Hardisty Heavy Price Differentials Differential WTI Hardisty Heavy US$/bbl NYMEX Crude Forward Curve 12 months Feb Dec Jan Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan SOURCE: NRCan, EIA. SOURCE: EIA, CERI.

6 SOURCE: EIA, CERI. SOURCE: NRCan. Page 6 NYMEX Petroleum Products CDN/US$ Exchange Rate US$/gal 4.00 CDN/US$ 1.55 RBOB Gasoline Heating Oil Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Feb-11 Apr-11 Jun-11 Aug-11 Oct-11 Dec-11 Feb-12 NYMEX Prices Unleaded Gasoline Heating Oil Year-to-Date Quarter-to-Date March 6, Oil Demand Global in Selected Oil Demand Countries US Products Demand February February 2012 Y-on-Y change MMbpd % % 5% 90 0% % 49% 48% 47% 46% 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12-5% -10% -15% -20% -25% -30% -35% -40% 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

7 SOURCE: IEA Oil Market Report, CERI. SOURCE: IEA Oil Market Report. SOURCE: IEA Oil Market Report. SOURCE: IEA Oil Market Report. Page 7 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 4Q11 1Q12 2Q12 3Q12 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 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 3Q11 4Q11 1Q12 2Q12 3Q12 Alaska California Texas Federal GOM Other Lower 48 NGLs Other OECD Commercial Stocks by region Dec-08 Dec-09 Dec-10 Dec-11 OECD North America OECD Europe OECD Pacific

8 Page 8 MMb US Commercial Stocks January 27- February 24, 2012 Crude Gasoline Distillate Products Total MMb Canadian Stocks on Land 3Q10 4Q10 1Q11 2Q11 3Q11 SOURCE: EIA Weekly Petroleum Status Report. SOURCE: IEA Oil Market Report. Relevant Independent Objective

9 Page 9 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 Nov-11 Dec-11 Jan-12 Nov-11 Dec-11 Jan-12 Saudi Arabia Iran UAE Kuwait Qatar Nigeria Libya Algeria Ecuador OPEC Iraq Total OPEC WTI Price Projections ($US/barrel) Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 High Price Case Reference Case Low Price Case

10 Page 10 Data Appendix Relevant Independent Objective

11 Page 11 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% Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Yr-on-Yr Chg. 13.1% 17.0% 13.5% 7.9% 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% Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Yr-on-Yr Chg. 11.4% 12.5% 17.9% 16.0% 9.0% 11.0% 15.0% 12.7% 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).

12 Page 12 A3: World Crude Oil Contract Prices (FOB, $US per barrel) Saudi U.A.E. Oman U.K. Norway Russia Venez. Colombia Ecuador Mexico Nigeria Indon. Arab Lgt Dubai Oman Brent Ekofisk Urals 1 T.J. Light C.Limon 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% 26.4% 32.4% 32.0% 28.1% 29.6% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Yr-on-Yr Chg. 19.1% 18.8% 19.8% 14.2% 15.5% 18.4% 21.2% 16.9% 24.9% 23.6% 15.1% 20.1% 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% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Yr-on-Yr Chg. 27.4% 19.6% 21.1% 19.3% 13.0% 13.4% 12.3% 12.4% 13.5% 16.9% 15.9% 22.7% 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

13 Page 13 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% 38.8% 19.8% 23.1% 14.3% 14.0% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Yr-on-Yr Chg. 19.1% 22.8% 23.6% 29.7% 13.6% 20.3% 13.4% 13.0% 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. 10.5% 26.4% 26.2% 27.4% 28.6% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Yr-on-Yr Chg. 12.2% 14.5% 18.7% 17.3% 20.4% 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.

14 Page 14 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. 46.2% 46.5% 45.1% 46.1% 44.8% 48.1% 50.9% 44.5% 47.9% Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Yr-on-Yr Chg. 18.3% 32.1% 36.9% 19.8% 35.2% 35.9% 21.1% 32.6% 39.6% 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. 18.2% 26.6% 25.9% 19.6% 26.5% 26.5% 21.1% 27.2% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Yr-on-Yr Chg. 15.3% 17.3% 16.6% 16.2% 17.9% 16.6% 19.3% 18.1% 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

15 Page 15 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.

16 Page 16 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. 3.7% -9.0% -5.2% 0.6% -3.9% -0.7% 0.6% -1.0% 9.2% -10.6% 3.5% 1.2% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Yr-on-Yr Chg. 4.5% -9.6% 3.8% 1.4% -2.8% -2.4% 0.7% -1.0% 6.7% -5.5% 3.3% 1.3% 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, , ,403 2,611 4Q , ,422 2,664 1Q , ,375 2,631 2Q , ,397 2,676 3Q , ,427 2,665 4Q , ,403 2,611 Yr-on-Yr Chg. -0.4% -0.7% 0.0% -10.8% -2.6% -5.4% -1.3% 0.4% -0.3% -4.1% -1.3% -2.0% Dec , ,422 2,664 Jan , ,461 2,725 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 , ,405 2,642 Nov , ,414 2,652 Dec , ,403 2,611 Yr-on-Yr Chg. -0.4% -0.7% 0.0% -10.8% -2.6% -5.4% -1.3% 0.4% -0.3% -4.1% -1.3% -2.0% 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

17 Page 17 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. 13.0% -4.4% 9.0% 14.8% 1.2% 6.8% -6.8% -64.7% 1.6% 6.8% 4.3% 2.4% 10.3% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Yr-on-Yr Chg. 11.9% -5.7% 5.7% 10.8% 0.0% 12.2% -8.9% -38.0% 1.6% 3.0% 0.0% 2.8% -0.4% Quotas Over/Under % 3.3% 16.2% 15.3% 12.3% 24.6% 22.2% -33.3% 7.5% 13.8% 11.6% 13.7% 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. 1.7% 47.0% -1.8% -74.9% -2.7% -56.6% -0.3% Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Yr-on-Yr Chg. -1.2% 54.4% -3.3% -111% -3.4% -32.5% -2.4% 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.

18 Page 18 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% Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Yr-on-Yr Chg. 2.6% -6.0% -7.6% -8.9% -13.8% 12.0% -0.6% % 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% Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Yr-on-Yr Chg. 0.8% -4.9% 5.9% -1.2% -5.0% -2.3% % 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

19 Page 19 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% Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Yr-on-Yr Chg. -3.9% -0.9% -5.4% -29.6% -3.5% -17.5% -6.0% 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% Dec , ,794 1, 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, 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% 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.