CERI Crude Oil Report

Transcription

1 December 2017 Oil Market 2017 Year in Review Dinara Millington It has been a turbulent year with natural disasters, geopolitical tensions, and deep political divisions occurring in many countries. Concerning economic growth, however, 2017 ended positively, with gross domestic product (GDP) continuing to accelerate around much of the world in the widest cyclical upswing since the start of the decade. According to the International Monetary Fund (IMF), growth accelerated in the majority of countries. Of more importance, some of the countries that had high unemployment (for example, several in the eurozone, are participating in the growth surge and experiencing strong employment growth. Some of the larger emerging market economies, such as Argentina, Figure 1: Global GDP Growth Editorial Committee: Ganesh Doluweera, Dinara Millington, Megan Murphy, Allan Fogwill About CERI Founded in 1975, the Canadian Energy Research Institute is an independent, registered charitable organization specializing in the analysis of energy economics and related environmental policy issues in the energy production, transportation, and consumption sectors. Our mission is to provide relevant, independent, and objective economic research of energy and environmental issues to benefit business, government, academia and the public. For more information about CERI, please visit our website at or contact us at info@ceri.ca. Brazil, and Russia, exited their recessions. Still, in per capita terms, growth in almost half of emerging markets and developing economies particularly the smaller ones lagged behind advanced economies, and almost a quarter have seen declines. Countries that struggled include fuel exporters and low-income economies suffering from civil strife or natural disasters. Relevant Independent Objective

2 Page was another volatile year for oil markets, with prices towards the end of the year appearing on track to a sustainable recovery after several false starts. If 2016 was the year of cutting costs, 2017 was finally the year of cutting stocks. Global inventories began drawing consistently. While the data outside of the non-oecd is less transparent, available indicators all point to tightening balances. Figure 2: OECD Total Crude and Product Stocks Source: IEA Oil Market Report data, Figure by CERI. Several notable events also happened that, while not directly impacting oil prices, certainly had an impact on perceptions of global risk and forecasts of future economic growth. Oil markets have generally shrugged off most geopolitical risk since the price crash of 2014, with oversupply being sufficient to cover any potential disruptions. However, as balances have slowly tightened, geopolitical risk is again able to impact crude prices. In this climate, Donald Trump was sworn in as President of the United States while in Europe several elections led to a wave of right-wing party victories. In the Middle East, Saudi Arabia has been undergoing significant changes, announcing a new Crown Prince and launching a national corruption crackdown that involved several members of the royal family. The Organization of Petroleum Exporting Countries (OPEC) and non-opec production cuts which started late 2016 took some time to show up in the supply/demand numbers, but later in 2017 helped to push up crude prices as crude inventories started to fall. At its annual November 2017 meeting, OPEC extended the supply deal in place through the end of 2018, placing additional caps on Libyan and Nigerian production. This decision and evidence of compliance has since supported prices at their highest level all year. With world oil prices now back in the mid-$60 range and exporter revenue increasing, there is less pressure on OPEC members to cheat on the deal. The agreement by Libya and Nigeria to restrain their exports will contribute to the agreement s effectiveness. The large share of the production cut that the Saudis are taking, however, is still the key to the production freeze. The big question is if the price increase will incentivize more upstream producers to resume or increase production, specifically US tight oil producers. Questions are being raised over the optimistic US Energy Information Administration (US EIA) and the International Energy Agency (IEA) forecasts about the future of US tight oil production. The IEA s Executive Director Fatih Birol recently said shale (oil and gas) production would make the US the undisputed leader of global oil and gas markets for decades to come. 1 Under the Reference Case in their latest Annual Energy Outlook, the EIA is forecasting that it expects US tight oil production to increase by an additional 300,000 barrels per day (bpd) in 2018, leaving total US oil production at 9.3 million barrels per day (MMbpd) (US tight oil production is expected to increase to 4.6 MMbpd in 2018). 2 The production forecast is even higher under the High Resource and Technology scenario. A recently released paper by the Massachusetts Institute of Technology (MIT), 3 based upon a detailed examination of Bakken oil production, concluded that EIA forecasts for US oil and gas production from new wells will be lower than currently projected. This study has important implications for the future of US tight oil production. The EIA s model assumes that technical advances such as well length and the amount of water and sand used in fracturing will increase output at new wells by roughly 10 percent each year; MIT findings from the Bakken region suggest it s closer to 6.5 percent. Extrapolating from the studies conducted in the Bakken basin, the research suggests that total US oil and natural gas production from new wells could miss the EIA estimate by more than 10 percent in The overestimates would get progressively worse each year as oil in sweet spots is exhausted, and technology fails to close the gap. There is also the issue of API gravity of US tight oil ratings are too high for many refiners that were retrofitted to handle heavier crude types and it is becoming difficult to market. Even though the US has

3 Page 3 been exporting between 1 and 2 MMbpd, the tight oil inventories are building in central storage facilities such as Cushing. This could have an impact on continental crude oil prices if the inventories continue to grow also marked the year in which US President Donald Trump launched the renegotiation of the 23-year old North American Free Trade Agreement (NAFTA) with Canada and Mexico. 4 On August 16th, after months of threats, taunts and tweets, the first round of talks started in Washington. The sixth round of negotiations started on January 23, 2018 in Montreal. But the threat of the US totally pulling out of NAFTA is still present. The Trump Administration s goal is for the US to achieve energy dominance in global markets. 5 This goal is unrealistic without NAFTA. With an improved NAFTA, it could become a reality. Energy dominance is inherently outward-oriented. Achieving this goal will depend on whether the US can become a competitive exporter of energy not just oil but gas and even electricity that other countries depend on for their energy needs to such an extent that the US becomes a preferred supplier of energy in global markets. Endnotes 1 Peak Oil Review: December 4, US EIA Annual Energy Outlook 2017, Table AEO2017&cases=ref2017&sourcekey=0 3 Montgomery, J.B. and F.M. O Sullivan. Spatial variability of tight oil well productivity and the impact of technology, Applied Energy 195 (2017) The Economist, The North American Free-Trade Agreement renegotiation begins (17 August 2017), online: < 5 USA Today, Trump: U.S. will be energy dominant, online: news/2017/06/29/donald-trump-u-s-energydominant/ / Attention is now turning to where oil markets are likely to go in There is mixed opinion with some analysts seeing oil prices climbing into the $70 range as global oil markets continue to tighten and there is no longer a threat of a sudden surge in oil production. Fear of increased geopolitical turmoil in the Middle East will continue to contribute to higher prices. Others argue that prices will fall in the next six months as winter demand falls and US shale oil production increases in the second quarter. This remains to be seen. Relevant Independent Objective

4 Page 4 US$/bbl 80 WTI Spot - WTI Edmonton Crude - Brent Prices Light Price Price Differentials (US$/bbl) US$/bbl 9 US$/bbl 70 WTI - Edmonton Light Price Differentials (US$/bbl) Brent-WTI Differential WTI Brent Differential WTI Edmonton Light Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Dec-14 Dec-15 Dec-16 Dec-17 Spot Prices WTI Brent Cdn.Light* Cdn. Heavy* Year-to-Date Quarter-to-Date SOURCE: EIA. January 16, SOURCE: EIA. US$/bbl 70 WTI - Canadian WTI - Hardisty Heavy Heavy Benchmark Price (US$/bbl) Differentials US$/bbl 66 NYMEX WTI Crude Forward Curve 4 contract months 60 Differential WTI WCS Nov 13, 2017 Dec 11, 2017 Jan 10, Dec-14 Dec-15 Dec-16 Dec SOURCE: NRCan, EIA, Baytex. SOURCE: EIA, CERI.

5 SOURCE: EIA, CERI. SOURCE: NRCan. Page 5 NYMEX Petroleum Products CDN/US$ Exchange Rate US$/gal CDN/US$ RBOB Gasoline Heating Oil Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Dec-17 NYMEX Prices Unleaded Gasoline Heating Oil Year-to-Date Quarter-to-Date January 17, Oil Demand Global in Selected Oil Demand Countries US Products Demand December December 2017 Y-on-Y change MMbpd % 52.5% % 25% 20% % 15% % 10% % 5% % 50.0% 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 0% -5% 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 Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 non-opec Supply OPEC Supply non-opec Share of Global Supply Canadian Oil Production by product Mbpd 6,000 5,000 4,000 3,000 2,000 1, Q17 3Q17 4Q17 1Q18 2Q18 AB L/M/H AB Bitumen SK Other NGLs Synthetic 60.5% 60.0% 59.5% 59.0% 58.5% 58.0% 57.5% 57.0% Mbpd 16,000 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 2Q17 3Q17 4Q17 1Q18 2Q18 Alaska California Texas Federal GOM Other Lower 48 NGLs Other OECD Commercial Stocks by region Oct-14 Oct-15 Oct-16 Oct-17 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 24- December 29, 2017 M-on-M Change Crude Gasoline Distillate Products Total MMb Canadian Stocks on Land 3Q16 4Q16 1Q17 2Q17 3Q17 Relevant Independent Objective

8 Page 8 World Supply and Demand Balance (MMbpd) Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 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 Sep-17 Oct-17 Nov-17 Sep-17 Oct-17 Nov-17 Saudi Arabia Iran UAE Kuwait Qatar Angola Nigeria Libya Algeria Equatorial Guinea Ecuador Venezuela Gabon OPEC. Excl. Iraq Iraq Total OPEC WTI Price Projections ($US/barrel) Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 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. 11.8% 12.0% 9.9% 7.6% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Yr-on-Yr Chg. 11.2% 10.5% 13.4% 8.6% 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. 18.6% 18.5% 19.3% 18.2% 21.7% 23.4% 23.4% 18.9% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Yr-on-Yr Chg. 7.0% 7.5% 9.7% 8.8% 21.8% 20.8% 17.3% 13.8% 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. 25.0% 22.8% 22.0% 24.0% 25.4% 26.8% 27.4% 24.9% 26.6% 20.5% 24.0% 20.2% Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Yr-on-Yr Chg. 20.4% 18.3% 18.0% 19.7% 20.7% 21.9% 22.2% 19.7% 22.6% 16.3% 19.9% 14.6% 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 CDN Heavy Q Q Q Q Q Yr-on-Yr Chg. 19.0% 29.8% 33.8% 17.7% 19.9% 20.5% 17.7% 18.3% 21.4% 17.8% 15.6% 11.9% Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Yr-on-Yr Chg. 13.5% 25.8% 27.6% 15.7% 17.5% 18.0% 15.7% 15.5% 18.8% 15.2% 8.9% -7.5% Notes: 1. ANS is Delivered price on US West Coast. 2. As of August 2016, Edmonton Light Sweet is referred to as Canadian Sweet. 3. As of August 2016, Western Canadian Select is referred to as Canadian 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 1 CDN Heavy 2 Diff. GCS WTS Diff Q Q Q Q Q Yr-on-Yr Chg. 25.0% 26.8% 20.5% 24.1% 15.6% 11.9% 20.5% 19.9% Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Yr-on-Yr Chg. 20.4% 22.0% 16.3% 21.6% 8.9% -7.5% 18.0% 17.5% Notes: 1. As of August 2016, Edmonton Light Sweet is referred to as Canadian Sweet. 2. As of August 2016, Western Canadian Select is referred to as Canadian Heavy. 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. 12.4% 24.3% 22.9% 27.2% 24.9% Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Yr-on-Yr Chg. 11.4% 19.7% 18.3% 21.9% 20.1% 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. 17.0% 30.2% 22.4% 19.6% 17.2% 33.1% 21.6% 18.8% 27.9% Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Yr-on-Yr Chg. 34.5% 41.9% 31.7% 33.4% 32.4% 44.8% 28.1% 28.7% 36.0% 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. 14.8% 21.7% 21.3% 16.9% 21.7% 19.9% 15.2% 19.1% Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Yr-on-Yr Chg. 7.5% 20.0% 18.4% 8.7% 21.9% 17.0% 9.7% 15.2% 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. 4.3% 0.6% -6.7% 3.6% -3.1% -2.9% 2.0% -0.6% -2.8% -0.3% 0.3% 0.8% Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Yr-on-Yr Chg. 3.0% -6.6% 2.4% 1.4% -4.0% -3.0% -0.8% -2.2% -3.8% 2.1% -2.3% -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) Americas Europe Asia Oceania OECD Crude Product Total Crude Product Total Crude Product Total Crude Product 1 Total , ,020 1,401 2, , ,208 1,502 3, , ,177 1,500 2,985 3Q , ,176 1,556 3,060 4Q , ,177 1,500 2,985 1Q , , ,245 1,479 3,030 2Q , ,211 1,483 3,016 3Q , ,171 1,476 2,980 Yr-on-Yr Chg. 1.8% -6.4% -2.4% -3.5% -2.3% -2.4% -1.6% -7.9% -3.7% -0.4% -5.1% -2.6% Oct , ,196 1,522 3,048 Nov , ,182 1,522 3,028 Dec , ,177 1,500 2,985 Jan , , ,212 1,544 3,067 Feb , , ,228 1,521 3,056 Mar , , ,245 1,479 3,030 Apr , , ,223 1,516 3,054 May , , ,228 1,504 3,057 Jun , ,211 1,483 3,016 Jul , , ,206 1,495 3,031 Aug , ,166 1,511 3,014 Sep , ,171 1,476 2,980 Oct , ,152 1,454 2,940 Yr-on-Yr Chg. -3.2% -6.9% -4.5% -2.2% -2.6% -2.0% -8.1% 0.3% -3.3% -3.8% -4.5% -3.5% 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 Gabon Total 1 Iraq Q Q Q Q Q Yr-on-Yr Chg. -5.8% 4.4% -5.8% -7.5% -6.3% -2.9% 29.6% 203.2% -6.2% -9.1% -1.8% -13.0% -0.5% 1.1% Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Yr-on-Yr Chg. -6.3% 0.8% -7.3% -4.2% -6.2% -4.1% 7.2% 67.2% -9.8% -13.2% -1.8% -13.0% -3.1% -4.1% 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. 0.1% 71.8% 3.2% 113.9% 4.4% ###### 1.9% Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Yr-on-Yr Chg. 4.2% 18.3% 2.6% 3% 6.4% % 4.0% 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. 5.8% 0.1% -25.7% 13.3% 5.6% 6.8% -4.1% Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Yr-on-Yr Chg. 9.1% 0.9% -47.8% 20.0% 6.9% 11.5% -1.0% % of Total % 100.0% 3.7% 28.8% 25.2% 26.3% South-Central North-West West Supply Demand Balance Supply Demand Balance Supply Demand Balance Q Q Q Q Q Yr-on-Yr Chg. 5.6% -2.3% 12.3% -1.9% -4.1% 2.3% Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Yr-on-Yr Chg. 8.3% -5.9% 14.4% -2.7% -1.7% 6.9% % of Total % 25.3% 7.8% 3.7% 8.1% 16.0% 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. 0.0% 1.7% 2.2% -15.8% 0.2% -7.1% 0.1% Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Yr-on-Yr Chg. 2.8% 6.7% -1.4% 5.2% 1.3% -12.3% 0.9% 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 , ,856 1, , ,015 1, , ,031 1, Q , ,048 1, Q , ,031 1, Q , ,033 1, Q , ,009 1, Q , ,978 1, Yr-on-Yr Chg % 0.9% -3.3% -2.4% -0.7% -3.4% -1.8% -13.2% -3.2% -14.3% -7.5% -10.4% Oct , ,050 1, Nov , ,054 1, Dec , ,031 1, Jan , ,053 1, Feb , ,049 1, Mar , ,033 1, Apr , ,033 1, May , ,039 1, Jun , ,009 1, Jul , ,998 1, Aug , ,986 1, Sep , ,978 1, Oct , ,943 1, Yr-on-Yr Chg % 2.0% -5.6% -8.6% 0.4% -5.2% -4.7% -10.6% -4.7% -15.6% -17.3% -12.2% 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. 8.3% 98% -59.3% -18.5% 28.2% -19.7% -25.7% -24.2% -35.3% 44.0% -11.6% -18.3% Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Yr-on-Yr Chg. 18.7% 39% -85.8% % 15.3% -8.1% -47.8% -22.2% -43.3% 85% -5.0% -11.8% % of Total % -18.8% 3.7% -28.5% 23.6% 61.1% 100.0% 21.0% 22.8% 17.0% 118.4% 58.7% 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. -6.7% -5.9% 1.8% -5.7% -4.5% -1.0% 2.7% -10.9% -13.3% 0.2% 6.0% Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Yr-on-Yr Chg. 14.8% 8.6% 5.4% 11.6% -5.4% 5.2% -1.8% -8.6% -11.4% 6.6% 2.7% 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. 1.6% 3.8% -2.3% 4.5% 0.7% 0.0% Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Yr-on-Yr Chg. 0.9% -5.0% 6.2% 6.9% 8.0% 3.5% % of Total 1 6.7% 20.8% 53.8% 3.8% 14.9% 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. 53.9% 29.9% 39.5% 46.8% Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Yr-on-Yr Chg. 0.5% 163.6% 30.6% 17.9% 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. 6.3% 7.8% 6.1% -10.9% 6.9% 7.4% 8.8% Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Yr-on-Yr Chg. 2.0% 23.0% -12.2% -6.0% 19.0% 2.6% 28.1% % of Total % 100.0% 6.2% 54.2% 93.8% 45.8% 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. 0.6% 6.8% 13.3% 4.1% Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Yr-on-Yr Chg. 2.7% 19.3% -96.2% 9.1% 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. -3.2% 10.0% 2.4% 2.3% -1.1% 0.2% Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Yr-on-Yr Chg. 6.2% 1.2% -0.4% 4.7% -4.9% -1.2% 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. 8.6% 7.1% 5.0% % -12.5% 6.9% 1.9% 7.0% -0.8% 9.8% 15.8% Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Yr-on-Yr Chg. 1.7% 6.7% 2.8% % -8.2% 1.5% 4.9% -18.7% -1.8% 9.3% 40.3% 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% 18.4% 0.0% 0.0% 4.6% -66.4% 0.0% 0.0% 0.0% -66.4% 0.0% -6.7% Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Yr-on-Yr Chg. 0.0% >100% 0.0% 0.0% 12.5% >100% 0.0% 0.0% 0.0% >100% 0.0% 33.1% % of Total 3 0.0% 38.9% 0.0% 0.0% 84.5% 15.5% 0.0% 0.0% 0.0% 15.5% 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 , , , , , , ,027 4Q ,690 1Q , , ,966 2Q , , ,965 3Q , , ,102 4Q , , ,075 Yr-on-Yr Chg. 45.0% -8.1% 147.4% 41.0% 9.8% 4.5% 6.8% 1.1% -2.3% 0.2% 22.8% Dec ,772 Jan-17 1, , ,918 Feb-17 1, , ,994 Mar-17 1, , ,985 Apr , ,918 May-17 1, , ,935 Jun-17 1, , ,041 Jul-17 1, , ,110 Aug-17 1, , ,116 Sep-17 1, , ,080 Oct-17 1, , ,077 Nov-17 1, , ,058 Dec-17 1, , ,089 Yr-on-Yr Chg. 33.4% -13.4% 50.0% 29.6% 11.0% 5.9% 8.2% 1.7% -2.5% 0.5% 17.9% % of Total % 3.4% 0.7% 59.2% 9.7% 11.2% 20.9% 14.3% 5.6% 19.9% 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 , ,079 4Q Q ,027 2Q ,007 3Q ,155 4Q ,125 Yr-on-Yr Chg % 36.9% -14.0% 60.9% 55.7% 57.3% 60.0% -12.0% 14.1% 46.0% 53.8% 47.2% Dec Jan Feb ,053 Mar ,042 Apr May Jun ,081 Jul ,151 Aug ,164 Sep ,150 Oct ,126 Nov ,116 Dec ,135 Yr-on-Yr Chg % 30.8% -16.7% 45.1% 47.4% 46.7% 49.1% -15.8% -1.9% 33.0% 44.1% 34.7% % of Total 3 8.6% 15.3% 2.6% 43.3% 12.3% 81.9% 80.2% 1.7% 18.1% 84.0% 16.0% 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