CERI Commodity Report Crude Oil

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1 November-December 2016 CERI Commodity Report Crude Oil Oil Market A Year in Review Dinara Millington Low crude oil prices had an ever lasting effect on not only the energy sector in Canada and worldwide, but on the Canadian national economy, especially in the provinces that rely on the oil and gas sector s performance. The impact resulted in empty office towers, laid-off energy workers, and double-digit unemployment rates in the hardest hit province of Alberta. All the economic indicators at the beginning of 2016 were weak. In the midst of climate and energy policy both federal and foreign the picture was equally troubling for a Canadian energy sector already beaten since the summer of 2014, when the collapse in oil prices began. In short, it was not a promising start to the year. A barrel of West Texas Intermediate (WTI), which began the year selling for US$36 and by February was trading at a low of US$26, had by October nearly doubled its value from eight months prior and was fetching just over US$51. And while the market had come a long way from reaching bottom in February, the real test of its resiliency won t be seen until well into This article highlights events that took place in the oil markets, globally and domestically, that shaped the year Global Trends The focus at the start of 2016 was on US$30/bbl oil and the imminent increase in Iranian oil production after sanctions were lifted. Since the sanctions fell on January 1, OPEC s third-largest producer has far outpaced the projections of analysts, reaching a production level of 3.7 million barrels a day (MMBPD) in November, and gobbled up OPEC market share (Figure 1). CERI Commodity Report Crude Oil Editorial Committee: Paul Kralovic, Dinara Millington, Megan Murphy, Allan Fogwill 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. For more information about CERI, please visit our website at or contact us at info@ceri.ca. Figure 1: Iran s Crude Oil Supply and Disposition Source: IEA, Oil Market Report China, India, Japan and South Korea are among the major Asian oil consumers that have sharply boosted their imports of Iranian crude in Those extra barrels have slowed the oil price recovery in the US and Canada, where most fracking and oil sands production remains a comparatively high-cost gamble against cheap Iranian crude. With Asia looking to be the fastest-growing market for energy and consumer goods for the foreseeable future, Iran is looking to lock down $130 billion in foreign investment to modernize its upstream energy infrastructure after years of neglect under the USled sanctions. To counterbalance continuous build of oil stocks and rising supply, in December, OPEC decided on its first proposed output cut since 2008 and the first deal including non-opec producers since 2001 which marks a major departure from the market share policy followed for the past two years. OPEC s cut of 1.2 MMBPD almost matches its deliberate production increase of 1.3 MMBPD over the October 2015 October 2016 timeframe (the month which OPEC cuts are based). If OPEC promptly and fully sticks to its production target, assessed at 32.7 MMBPD, and non-opec producers deliver the agreed cuts of 558 thousand barrels per day (MBPD) outlined on December 10, the market is likely to move into deficit in the first half of 2017 by 0.6 MBPD, as estimated by the IEA in their December Oil Market Report. The big question is if the price goes up in the short-term, will it sustain in the medium-term with more upstream producers tempted to resume production, specifically US tight oil producers? In the US, upstream activity has already picked up. Rig counts are up, increasing by 33 percent from May to October this year. 1 The tight oil well Relevant Independent Objective

2 Page 2 economics are remarkably robust. New wells in parts of the Permian, Bakken and Eagleford areas are now profitable at $40 a barrel 2 (see Figure 2). Figure 2: WTI Breakeven Prices for US Shale Oil Plays Source: OPEC, World Oil Outlook 2015 Domestic Events Before the promise of a recovery, things in Alberta went from bad, to worse, to quite literally on fire. According to CBC, the Fort McMurray wildfire was the number one story of 2016 in Canada. In May a small brush fire, one of many burning across Alberta, suddenly whipped up into a full-force blaze that burned down entire neighborhoods of Fort McMurray, the centre of the country s energy industry. The fire took weeks to extinguish, and is considered to be the most expensive natural disaster in Canadian history. Its impact on the oil sector, measured by production shutdown of almost 1 million barrels per day, work camp evacuations, upgrader shutdowns and absent personnel impacted provincial and Canadian economies before operations were restored. It will be years before the physical scars of the fire are fully erased from the face of Fort McMurray. Another disaster for the Canadian oil industry in 2016 was the July 21 leak near the town of Maidstone from the Husky Energy pipeline carrying oil and diluent through western Saskatchewan, spilling about 225,000 liters of fluid into the North Saskatchewan River, a crucial source of fresh water for communities along the waterway. The failure had cost the company $90 million in remediation by the end of September, including payouts to at least one Saskatchewan First Nation. Besides the obvious environmental damage and an inconvenience to area residents, the spill was also significant for its poor timing. It came amid a high season for heated debate between industry and environmental groups over building new energy pipelines in Canada. Public mistrust of the National Energy Board s credibility on regulating pipelines was at an all-time high and protesters in nearby North Dakota were gaining strength against the Dakota Access pipeline. All that happened while the Canadian government was only a few months away from deciding whether or not to approve new pipeline projects such as Enbridge s Line 3 and Northern Gateway, and the expansion of Kinder Morgan s Trans Mountain pipeline from Edmonton to Vancouver. In late November, the federal government did approve the expansion of the Trans Mountain pipeline and Line 3 restoration, and rejected the Northern Gateway pipeline. Both pipelines have to meet or exceed conditions that were outlined by the National Energy Board before becoming fully operational. But local communities and environmental groups are in strong opposition to this decision. Several protests across Canada were held, warning that Trudeau's announcement would spark the type of violent confrontations now underway in North Dakota, where the Standing Rock Sioux tribe have joined forces with environmental activists in an effort to block construction of the Dakota Access pipeline. Rising up from the ashes, a late-stage step towards recovery emerged in the latter part of The Canadian Association of Oil Drilling Contractors (CAODC) declared 2016 the worst year ever for Canadian oil drillers noting that drilling activity was at its lowest level in four decades since keeping track of statistics. By year s end, however, a handful of Alberta companies were already looking to hire back a few thousand drilling workers as the oil price bounce was making fields in Alberta, British Columbia and Saskatchewan suddenly appealing again to producers. The drilling forecast by the Petroleum Services Association of Canada (PSAC) estimates that drilling activity will pick up in 2017, with the drilling profile highest in Saskatchewan also marks some of the biggest deals in the Canadian energy industry. Suncor Energy Inc. reached a deal to acquire rival Canadian Oil Sands Ltd. for $4.2 billion making Suncor the largest stakeholder of Syncrude Canada s mining and upgrading project at 51 percent. Calgary s Inter Pipeline struck a deal in August to buy the Canadian gas assets of Tulsa-based Williams for $1.35 billion. The Williams Canada assets include two NGL extraction plants near Fort McMurray, a gas processing

3 Page 3 plant near Redwater and a pipeline system connecting the two. But Inter Pipeline also acquired the option of gaining presence in an Alberta petrochemical manufacturing industry. This year, the NDP government announced up to $500 million in royalty credits for new value-added petroleum manufacturing projects, including a proposed $1.85 billion propane-to-propylene pellet manufacturing center that Inter Pipeline acquired from Williams in the deal. In May, Calgary-based TransCanada bought US midstream Columbia Pipeline for a reported US$13 billion. Columbia operates more than 25,000 kilometers of natural gas pipelines from the US Northeast to the Gulf of Mexico, including massive underground storage systems and significant access to the Marcellus and Utica shales. Then in November, TransCanada announced it would also acquire all outstanding units of the Columbia Pipeline Partners for US$17 per common share, for a total cash deal worth US$915 million. This deal diversifies TransCanada s assets by commodity type and geographical location, in particular access to strategically important Marcellus production. The largest-ever Canadian takeover deal was Enbridge s acquisition of Houston-based Spectra Energy for $37 billion (US$28 billion) in an all-stock deal. The Calgary midstream company s takeover of its southern counterpart will create North America s largest energy infrastructure company with near-equal assets in oil and gas storage and transport, if approved by regulators. Endnotes 1 Baker Hughes North American Rig Count 2

4 Page 4 US$/bbl WTI Spot - WTI Edmonton Crude - Brent Prices Light Price Price Differentials (US$/bbl) Brent-WTI Differential WTI Brent US$/bbl US$/bbl WTI - Edmonton Light Price Differentials (US$/bbl) Differential WTI Edmonton Light Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan Dec-13 Dec-14 Dec-15 Dec-16 Spot Prices WTI Brent Cdn.Light* Cdn. Heavy* Year-to-Date Quarter-to-Date SOURCE: EIA. January 12, SOURCE: EIA. US$/bbl 120 WTI - Canadian WTI - Hardisty Heavy Heavy Benchmark Price (US$/bbl) Differentials US$/bbl 60 NYMEX WTI Crude Forward Curve 4 contract months Differential WTI WCS Nov 08, 2016 Dec 08, 2016 Jan 09, Dec-13 Dec-14 Dec-15 Dec-16 SOURCE: NRCan, EIA, Baytex. SOURCE: EIA, CERI.

5 SOURCE: EIA, CERI. SOURCE: NRCan. Page 5 NYMEX Petroleum Products CDN/US$ Exchange Rate US$/gal 2.00 CDN/US$ RBOB Gasoline Heating Oil Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan Dec-13 Dec-14 Dec-15 Dec-16 NYMEX Prices Unleaded Gasoline Heating Oil Year-to-Date Quarter-to-Date January 12, Oil Demand Global in Selected Oil Demand Countries US Products Demand December December 2016 Y-on-Y change MMbpd % 52.5% 52.0% 51.5% 51.0% 50.5% 50.0% 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 % 20% 15% 10% 5% 0% -5% -10% -15% -20% Total Gasoline Jet Fuel Distillate Residual Propane Other Total OECD Total Non-OECD non-oecd Demand share 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 Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 non-opec Supply OPEC Supply non-opec Share of Global Supply Canadian Oil Production by product Mbpd 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1, Q16 4Q16 1Q17 2Q17 3Q17 AB L/M/H AB Bitumen SK Other NGLs Synthetic 60.0% 59.5% 59.0% 58.5% 58.0% 57.5% 57.0% Mbpd 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 Mbpd 3,500 3,000 2,500 2,000 1,500 1, US Oil Production by region 3Q16 4Q16 1Q17 2Q17 3Q17 Alaska California Texas Federal GOM Other Lower 48 NGLs Other OECD Commercial Stocks by region Nov-13 Nov-14 Nov-15 Nov-16 OECD North America OECD Europe OECD Pacific

7 SOURCE: EIA Weekly Petroleum Status Report. SOURCE: IEA Oil Market Report. Page 7 MMb US Commercial Stocks November 25 - December 30, 2016 M-on-M Change Crude Gasoline Distillate Products Total MMb Canadian Stocks on Land 3Q15 4Q15 1Q16 2Q16 3Q16 Relevant Independent Objective

8 Page 8 World Supply and Demand Balance (MMbpd) Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 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 Spare Capacity vs Production Capacity Oct-16 Nov-16 Dec-16 Oct-16 Nov-16 Dec-16 Saudi Arabia Iran UAE Kuwait Qatar Angola Nigeria Libya Algeria Ecuador Venezuela Gabon OPEC. Excl. Iraq Iraq Total OPEC WTI Price Projections ($US/barrel) Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 High Price Case Reference Case Low Price Case

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. 7.7% 6.5% 4.5% 3.7% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Yr-on-Yr Chg. 50.3% 49.6% 31.1% 26.7% 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. 3.9% 5.4% 4.9% 4.9% 5.7% 5.0% 0.1% -0.8% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Yr-on-Yr Chg. 32.8% 32.8% 25.1% 20.9% 54.8% 54.3% 41.0% 34.2% 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).

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. 19.9% 18.6% 19.7% 13.3% 11.1% 13.2% 39.0% 23.5% 25.7% 16.8% 13.5% 16.4% Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Yr-on-Yr Chg. 54.1% 50.6% 53.9% 40.4% 37.7% 41.4% 87.8% 61.7% 51.2% 42.8% 41.3% 48.2% 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. CDN Sweet 2 HH Q Q Q Q Q Yr-on-Yr Chg. -1.9% 19.2% 21.0% 20.5% 23.6% 24.5% 20.5% 21.0% 25.9% 27.5% 16.8% 23.5% Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Yr-on-Yr Chg. 15.5% 51.0% 53.5% 47.0% 55.3% 57.8% 47.0% 49.2% 61.8% 58.7% 44.1% 53.2% Notes: 1. ANS is Delivered price on US West Coast. 2. Edmonton Light Sweet prices are discontinued as of May 1, 2014 and replaced by the Canadian Light Crude blend which is traded daily on the Net Energy Index. 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. CDN Sweet 2 HH 2 Diff. GCS WTS Diff Q Q Q Q Q Yr-on-Yr Chg. 19.9% 24.5% 16.8% 23.7% 16.8% 23.5% 24.5% 23.6% Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Yr-on-Yr Chg. 54.1% 65.7% 42.8% 59.3% 44.1% 53.2% 57.8% 55.3% Notes: 1. Edmonton Light Sweet prices are discontinued as of May 1, 2014 and replaced by the Canadian Light Crude blend which is traded daily on the Net Energy Index. 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. 17.1% 12.9% 18.6% 13.5% 19.8% Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Yr-on-Yr Chg. 39.7% 40.5% 50.7% 41.4% 53.6% 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.

13 Page 13 A7: World Petroleum Product Spot Prices ($US per barrel) US Gulf Coast, Pipeline Rotterdam, Barges Singapore, Cargoes Gasoline 1 No. 6 3% 2 Jet/Ker. Gasoline 1 Gasoil Resid. 3 Gasoline 1 Gasoil Resid Q Q Q Q Q Yr-on-Yr Chg. 17.2% 38.5% 12.8% 8.4% 12.7% 50.1% 5.9% 10.9% 36.6% Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Yr-on-Yr Chg. 32.5% 95.9% 37.7% 24.2% 41.2% 125.5% 19.9% 34.3% 83.6% Notes: 1. Regular unleaded gasoline. 2. Waterborne 3. High Sulfur ( %) 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. 14.0% 17.9% 15.9% 17.1% 13.3% 18.4% -5.6% 14.8% Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Yr-on-Yr Chg. 28.1% 49.8% 44.3% 32.6% 37.8% 46.6% -8.9% 36.5% 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 Americas Europe Asia Ocean. 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.

15 Page 15 B2: World Petroleum Production (million barrels per day) OECD Non-OECD OPEC World Americas Europe Asia Oc. Total Asia Non-Asia FSU Total P. Gulf Non-Gulf Total Total Q Q Q Q Q Yr-on-Yr Chg. -3.2% 0.8% -6.4% -2.7% 4.7% -2.5% 3.2% 2.0% 7.6% -16.0% 2.2% 0.9% Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Yr-on-Yr Chg. -2.9% 0.3% -6.4% -2.5% 4.5% -3.8% 3.3% 1.6% 6.8% -15.7% 1.9% 0.7% 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) Americas Europe Asia Oceania OECD Crude Product Total Crude Product Total Crude Product Total Crude Product 1 Total , ,337 2, , ,020 1,401 2, , ,208 1,502 3,015 3Q , ,158 1,498 2,984 4Q , ,208 1,502 3,015 1Q , , ,235 1,509 3,046 2Q , , ,208 1,529 3,052 3Q , ,176 1,555 3,059 Yr-on-Yr Chg. 0.8% 4.9% 2.9% 4.0% 1.5% 2.5% -0.3% 6.3% 1.2% 1.5% 3.8% 2.5% Oct , ,194 1,469 2,987 Nov , ,183 1,500 3,001 Dec , ,208 1,502 3,015 Jan , , ,210 1,536 3,054 Feb , , ,225 1,522 3,052 Mar , , ,235 1,509 3,046 Apr , , ,207 1,510 3,025 May , , ,215 1,525 3,050 Jun , , ,208 1,529 3,052 Jul , , ,205 1,572 3,101 Aug , , ,181 1,578 3,086 Sep , ,176 1,555 3,059 Oct , ,194 1,521 3,044 Yr-on-Yr Chg. 0.7% 5.0% 3.0% -0.5% 0.3% 0.1% -1.1% 7.7% 1.9% 0.0% 3.6% 1.9% 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-12 Arabia Iran UAE Kuwait Qatar Angola Nigeria Libya Algeria Venez. Ecuador Indonesia Total 1 Iraq Q Q Q Q Q Yr-on-Yr Chg. 3.7% 30.1% 8.3% 2.9% -3.0% -8.0% -21.7% 42.5% 1.8% -10.5% 0.0% % 1.7% 7.7% Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Yr-on-Yr Chg. 3.4% 27.8% 8.3% 0.0% -1.6% -5.7% -22.8% 63.2% 1.8% -10.5% 0.0% % 1.5% 6.7% Notes: 1. Does not include NGLs; OPEC production targets apply to crude oil only. 2. Iraq does not have an official OPEC target. Source: IEA Oil Market Report. B5: OECD Refinery Activity Crude Input (MMbpd) - Utilization (percent) - Refining Margins ($US/barrel) Americas Europe Asia Oceania OECD Input Util. Margin 1 Input Util. Margin 2 Input Util. Margin 3 Input Util Q Q Q Q Q Yr-on-Yr Chg. -1.5% -27.0% -0.9% -60.2% -0.2% % -1.1% Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Yr-on-Yr Chg. -2.8% 25.3% 1.9% -15% 3.9% 30.6% -0.1% 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.

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. -2.7% 1.2% 8.7% 18.0% -3.4% -0.5% 2.5% Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Yr-on-Yr Chg. -2.2% 1.4% 14.6% 22.0% -3.1% -3.0% 2.2% % of Total % 100.0% 3.4% 27.2% 24.7% 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. -4.5% 2.4% -6.7% 7.1% 0.0% 3.7% Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Yr-on-Yr Chg. -3.3% 5.5% -2.2% 8.3% -0.2% -0.2% % of Total % 27.2% 7.4% 3.8% 8.9% 15.1% 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. 1.8% 5.9% -3.5% 18.3% 0.8% 4.8% 1.2% Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Yr-on-Yr Chg. -1.7% 1.3% 0.8% 62.7% -0.1% 4.6% 1.4% 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 , ,760 1, , ,856 1, , ,015 1, Q , ,001 1, Q , ,015 1, Q , ,052 1, Q , ,077 1, Q , ,048 1, Yr-on-Yr Chg. 5.7% 5.6% 1.7% -0.1% -2.4% 2.3% 0.7% -13.6% 10.8% 7.7% -6.1% 3.8% Oct , ,009 1, Nov , ,022 1, Dec , ,015 1, Jan , ,041 1, Feb , ,045 1, Mar , ,052 1, Apr , ,063 1, May , ,079 1, Jun , ,077 1, Jul , ,062 1, Aug , ,063 1, Sep , ,048 1, Oct , ,050 1, Yr-on-Yr Chg. 7.9% 3.9% 1.6% 3.8% -5.5% 2.0% 0.2% -6.3% 17.1% 7.4% -9.0% 3.8% 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.

19 Page 19 C4: US Petroleum Net Imports by Source (million barrels per day) Region of Origin OPEC Canada Mexico Lat. Am. Europe Africa M.E. Total 1 Venez. S. Arabia Nigeria Total 2 P. Gulf Q Q Q Q Q Yr-on-Yr Chg. 0.0% -2053% -3.1% 81.5% 74.5% 41.6% 8.7% -2.0% 12.0% 169.6% 31.3% 38.0% Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Yr-on-Yr Chg. 13.3% -1400% -2.2% -82.7% 254.9% 8.2% 14.6% -7.8% 2.3% 505% 16.1% 8.2% % of Total % -7.1% 13.7% -1.0% 10.7% 34.7% 100.0% 14.1% 21.0% 4.8% 65.1% 34.8% Notes: 1. Total includes net-imports from Russia and Asia-Pacific region. 2. Total OPEC includes the other eight cartel members. 3. As of latest month. Source EIA Petroleum Supply Monthly. C5: US Regional Crude Oil Production (million barrels per day) PAD District U.S. Major Producers East Mid-West S-Cent N-West West Total Alaska Calif. 1 Louis. Texas G. of Mex Q Q Q Q Q Yr-on-Yr Chg % -7.9% -5.5% -14.2% -4.7% -6.7% 0.7% -9.0% -8.5% -9.9% 6.2% Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Yr-on-Yr Chg. -8.1% -9.1% -5.5% -14.8% 1.8% -6.2% 12.5% -5.9% -10.9% -7.8% 0.2% R/P Ratio Notes: 1. California includes Federal Offshore crude oil production. 2. Gulf of Mexico includes Federal Offshore production adjacent to Texas and Louisiana. 3. Crude oil Reserve-Production ratio as of latest production month. Crude oil production does not include NGLs. Source: EIA Petroleum Supply Monthly. Relevant Independent Objective

20 Page 20 C6: US Refinery Activity Crude Input (MMbpd) - Utilization (percent) East Mid-West South-Central North-West West U.S. Input Util. Input Util. Input Util. Input Util. Input Util. Input Util Q Q Q Q Q Yr-on-Yr Chg. -5.1% 1.5% 0.3% 2.4% 0.1% 0.2% Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Yr-on-Yr Chg. -4.7% 19.0% -1.3% -3.8% -11.4% 0.6% % of Total 1 6.8% 22.7% 52.5% 3.7% 14.3% 100.0% Notes: 1) As of most recent month. Source: EIA Petroleum Supply Monthly. C7: US Refinery Margins ($US per barrel) NY Harbor Chicago US Gulf Los Angeles (East Coast Comp.) (WTI) (WTS) (ANS) Q Q Q Q Q Yr-on-Yr Chg. 13.9% -35.5% 9.3% -31.6% Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Yr-on-Yr Chg. -8.4% -22.4% 8.0% -52.7% Note: Based on specific crude being processed in average cracking refinery in a given area. As of February 2010, NY Harbor Arab Med. is now East Coast Composite. Source: Oil and Gas Journal.

21 Page 21 D1: Canada Petroleum Supply and Demand Balances (million barrels per day) Canada East West Supply Demand Net-Exp Stk. Chg. Supply Demand Balance Supply Demand Balance Q Q Q Q Q Yr-on-Yr Chg. -0.3% 4.2% -4.9% 32.1% -4.3% -1.9% 17.0% Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Yr-on-Yr Chg. 5.0% 0.2% 8.1% 90.1% -8.4% 1.7% 13.8% % of Total % 100.0% 6.7% 56.0% 93.3% 44.0% Notes: 1. As of most recent month. See notes for Table C1 for additional comments. Source: Statistics Canada s Energy Statistics Handbook. D2: Canada Demand by Product (million barrels per day) Finished Products Gasoline Distil. Resid. Total Q Q Q Q Q Yr-on-Yr Chg. 5.1% 0.2% 28.3% 3.1% Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Yr-on-Yr Chg. 1.9% -5.1% -96.3% -3.6% Notes: 1. Total includes other finished petroleum products. 2. Total petroleum demand includes refinery feedstocks, additives/oxygenates and other hydrocarbons. Source: Statistics Canada s Energy Statistics Handbook. D3: Canada Petroleum Stocks (million barrels) Finished Products Crude Oil Petrol. Gasoline Distil. Resid. Total 1 Total Total Q Q Q Q Q Yr-on-Yr Chg. 0.0% 2.5% 38.1% 3.3% -28.9% -19.0% Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Yr-on-Yr Chg. 7.2% 6.7% -8.3% 3.7% -30.0% -20.1% Notes: 1. Total includes other finished petroleum products. 2. Total petroleum stocks include NGLs, refinery feedstocks, additives/ oxygenates and other hydrocarbons. All stocks are closing levels. Source: Statistics Canada s Energy Statistics Handbook. Relevant Independent Objective

22 Page 22 D4: Canada Crude Oil Production (million barrels per day) Major Producers Canada Petroleum Type Alta. Sask. B.C. N.W.T. Atlantic Total 1 Light SCO Heavy Bitumen NGLs Q Q Q Q Q Yr-on-Yr Chg. 0.9% -13.9% 11.8% 17.1% 47.8% 0.5% -4.9% -1.1% -11.3% 5.3% 23.0% Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Yr-on-Yr Chg. 5.7% -13.7% 0.5% -8.9% 149.2% 5.9% 3.4% 27.1% -10.6% 0.9% 2.1% Note: Total includes small amounts of production from Manitoba and Ontario. Source: Statistics Canada s Energy Statistics Handbook. D5: Canada Petroleum Imports by Source (thousand barrels per day) Non-OPEC OPEC Imports Mexico U.S. U.K. Norway Total 1 Algeria Nigeria S. Arabia Venez. Total 2 P. Gulf Total Q Q Q Q Q Yr-on-Yr Chg 0.0% -4.4% 10757% % 12.0% 32.2% % 0.0% 0.0% -15.4% 0.0% 6.5% Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Yr-on-Yr Chg. 0.0% -28.6% 0.0% 0.0% 11.7% % 0.0% 0.0% 0.0% % 0.0% -3.9% % of Total 3 0.0% 54.7% 0.0% 9.0% 100.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 100.0% Notes: 1. Includes all non-opec production. 2. Includes production by the other seven OPEC members. 3. As of most recent month. Sources: Statistics Canada s Energy Statistics Handbook.

23 Page 23 E1: World Drilling Activity (active oil and gas rigs) OECD Non-OECD OPEC World N. A. Europe Asia-Pac Total Asia Non-Asia Total 1 P. Gulf Non-Gulf Total Total , , , , , , ,592 4Q , ,033 1Q ,729 2Q ,412 3Q ,538 4Q ,690 Yr-on-Yr Chg % -13.0% -58.7% -19.0% -5.2% -26.8% -18.6% -6.8% -17.8% -10.2% -16.9% Dec , ,966 Jan ,889 Feb ,748 Mar ,550 Apr ,424 May ,404 Jun ,407 Jul ,482 Aug ,547 Sep ,584 Oct ,620 Nov ,678 Dec ,772 Yr-on-Yr Chg. -5.6% -10.9% -37.5% -6.6% 0.0% -25.8% -16.0% -9.5% -13.7% -10.8% -9.9% % of Total % 4.6% 0.6% 53.8% 10.3% 12.5% 22.8% 16.6% 6.8% 23.4% 100.0% Notes: 1. Does not include active rigs in the Former Soviet Union and onshore rigs in China. 2. As of latest month. Source: Baker Hughes, Inc. E2: North American Drilling Activity (active oil and gas rigs) United States Canada North America 1 East Mid-West S-Cent N-West West Total Land 2 Offshore Total Oil Gas Total , ,861 1, , , , Q Q Q Q Q Yr-on-Yr Chg % -31.5% -20.1% -20.3% -17.8% -22.3% -22.3% -23.3% 3.1% -12.4% -37.9% -17.6% Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Yr-on-Yr Chg % -23.6% -2.7% -4.5% -12.0% -10.8% -11.0% -5.8% 30.6% 2.8% -27.4% -3.2% % of Total 3 5.3% 15.8% 4.3% 40.2% 11.3% 75.2% 72.5% 2.7% 24.8% 85.0% 15.0% 100.0% Notes: 1. Excluding Mexico. 2. Includes drilling on inland waterways. 3. As of latest month. Source: Baker Hughes, Inc. Relevant Independent Objective

24 Page 24 Geographical Specifications 1. The World: OECD is comprised of countries from three regions: North America (Canada, Mexico, US); Europe (Austria, Belgium, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Luxembourg, the Netherlands, Norway, Poland, Portugal, the Slovak Republic, Spain, Sweden, Switzerland, Turkey, UK); and Asia-Pacific (Australia, Japan, New Zealand, South Korea). OPEC is comprised of Persian Gulf (Iran, Iraq, Kuwait, Qatar, Saudi Arabia, United Arab Emirates) and non-persian Gulf countries (Algeria, Indonesia, Libya, Nigeria, Venezuela). Non-OECD is comprised of countries from three regions: Former Soviet Union (Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kirghizstan, Moldova, Russia, Crude Oil Qualities Producing API Country or Gravity Region F) Sulfur Content (%) BBLs/Metric Tonne Crude Stream Tapis Blend Malaysia Ekofisk Blend Norway WTI Texas GCS Gulf of Mexico Oklahoma Sweet Oklahoma Kansas Sweet Kansas Wyoming Sweet Wyoming ELS Alberta Brent Blend United kingdom Bonny Light Nigeria Oman Blend Oman Arabian Light Saudi Arabia Minas Indonesia Isthmus Mexico Michigan Sour Michigan WTS Texas Urals Russia Tia Juana Light Venezuela Dubai U.A.E Lost Hills California Cano Limon Colombia Arabian Heavy Saudi Arabia ANS Alaska Oriente Ecuador Hardisty Heavy Alberta Maya Mexico Kern River California Tajikistan, Turkmenistan, Ukraine, Uzbekistan); Asia (including non-oecd Oceania); and non-asia (Africa, Middle East, Latin America, and non- OECD Europe). 2. United States: East (PADD I) New England (Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, Vermont); Central Atlantic (Delaware, Maryland, New Jersey, New York, Pennsylvania, and the District of Columbia) and Lower Atlantic (Florida, Georgia, North Carolina, South Carolina, Virginia, and West Virginia). Mid -West (PADD II) Illinois, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, Oklahoma, South Dakota, Tennessee, and Wisconsin. South-Central (PADD III) Alabama, Arkansas, Louisiana, Mississippi, New Mexico and Texas. North-West (PADD IV) Colorado, Idaho, Montana, Idaho, Montana, Wyoming. West (PADD V) Alaska, Arizona, California, Hawaii, Nevada, Oregon, Washington. 3. Canada: East is comprised of Ontario, Manitoba, Quebec and the Maritime provinces (New Brunswick, Newfoundland and Labrador, Nova Scotia, and Prince Edward Island). West is comprised of Alberta, British Columbia, Saskatchewan and the northern territories (NorthWest Territories, Nunavuut, and Yukon). Additional Notes 1. Petroleum and oil refer to crude oil and natural gas liquids (NGLs), whereas crude oil refers to its namesake and field condensates. Condensates derived from natural gas processing plants are classified as NGLs. 2. The spot price is for immediate delivery of crude oil or refined products at a specific location. Spot transactions are generally on a cargo by cargo basis. In contrast, a futures price is for delivery of a specified quantity of a commodity at a specified time and place in the future. 3. Crude oil sold Free-On-Board (FOB) is made available to the buyer at the loading port at a particular time, with transportation and insurance the responsibility of the buyer. Crude oil sold Cost-Insurance-Freight (CIF) is priced at a major destination point, with the seller responsible for the transportation and insurance to that point. A Delivered transaction is similar to a CIF transaction, except the buyer in the former pays based on the quantity and quality ascertained at the unloading port, whereas in a CIF transaction, the buyer accepts the quantity and quality as determined at the loading port. 4. Processing gain is the volume of which refinery output is greater than crude oil inputs. The difference is due to the processing of crude oil products, which in total have a lower specific gravity than crude oil. 5. Unaccounted for crude oil reconciles the difference between crude input to refineries and the sum of domestic production, net imports/exports, stock changes and documented losses (in the U.S.). 6. Totals may not equal the sum of their parts in the statistical tables due to rounding. For more information, please contact Dinara Millington at dmillington@ceri.ca. Canadian Energy Research Institute 150, Street NW Calgary, AB T2L 2A6