Latest Oil Market Update Monday, January 31, 2011

Latest Oil Market Update Monday, January 31, 2011

The uprising in Egypt has caused a sharp rise in crude prices (Brent futures were trading at $100.70/bbl and WTI futures $91.10/bbl at the time of writing), due to fears of potential spread to other Middle Eastern countries. Egyptian oil and gas production facilities do not appear to be at risk, as these are far from population centres. However, Egypt serves as an important transit avenue for oil and LNG travelling from the Middle East to Europe, and to a lesser extent the US, through the Suez Canal and the Sumed pipeline. While disruption to this passage could have an important impact on oil and gas markets, it does not currently appear likely.

The closure of the Suez Canal and/or Sumed Pipeline, while not taking oil off the market, would divert tankers around the southern tip of Africa (the Cape of Good Hope), adding greatly to transit time and tying up significant tanker capacity. This route would significantly increase shipping costs as well as transportation time, as oil tankers would have to divert their route several thousands of kilometres. It would take approximately 15 additional days to reach the same European destination. Amounts going to the US which would normally transit the canal would have to add an additional 8-10 days.

The Suez Canal is 1,000 feet at its narrowest point and is unable to handle large tankers. Without the Sumed pipeline, sellers would have to either load crude onto ships half the size of the VLCCs or smaller, or take VLCCs through the canal only half full. The Sumed pipeline is a 320-km-long oil pipeline that links the Ain Sukhna terminal on the Gulf of Suez with Sidi Kerir on the Mediterranean. It provides an alternative to the Suez Canal for transporting oil from the Middle East to the Mediterranean.

The widely quoted volume of 1.8 mb/d of crude and products passing via Suez in 2009 accounts for volumes flowing both

northbound and southbound. Therefore any impact on European oil supply from a closure of the Canal would be mitigated by lower southbound volumes exiting the Mediterranean. In the case of crude oil, equal amounts, of roughly 0.3 mb/d passed through the canal in 2009, whereas for products, this was mostly southbound fuel oil and northbound clean products such as gasoline and middle distillates. We estimate that an additional 1.1 mb/d of oil flowed northbound through the Sumed Pipeline (total capacity of 2.4 mb/d). In the event of a closure of the Suez Canal, northbound volumes could be re-routed using spare capacity on the Sumed pipeline.

The Suez Canal is also an important route for LNG imports into Europe, mainly from Qatar (in 2009, 17.5 million metric tons – approx.

equivalent of 0.4 mb/d): Europe sourced 25% of its total LNG supplies from Qatar in 2009 (20 bcm flowing through Suez to Italy, Spain, UK and Belgium). Qatari tankers can go via Cape of Good Hope, but would add time and cost.

• Brent crude oil futures hit $100/bbl on Monday on fears that the uprising in Egypt could spread across the Middle East, which produces over a third of world oil supplies, or restrict flows normally transiting the Suez.

• Suez serves as an important transit route for oil and LNG travelling from the Middle East to Europe and further west, and consists of two parts: the Suez Canal and the Sumed Pipeline. In 2009, 1 mb/d of crude and refined products is estimated to have been shipped northwards through the canal, while 0.8 mb/d went southwards. A further 1.1 mb/d is estimated to have been shipped through the Sumed Pipeline.

• While a disruption to flows through the Suez passage could have a notable impact on the oil market, it does not currently appear likely.

• The Suez Canal is also an important route for LNG imports into Europe, mainly from Qatar, which currently account for 25% of European LNG imports.

Crude Futures Prices ($/bbl) Front Month Closing Prices

75 80 85 90 95 100

Oct Nov Dec Jan

NYM EX WT I ICE Brent

Source: ICE, NYMEX

Latest Oil Market Update:

Oil Prices

January 28, 2011 High Low 28 Jan close 21 Jan close Δ ^{Change % Change}

NYMEX WTI Mth1 (Adj) 89.73 85.11 89.34 89.11  ^{0.23 0.26}

NYMEX WTI Mth2 (Adj) 91.68 90.63  ^{1.05 1.15}

NYMEX WTI Mth3 (Adj) 93.43 92.04  ^{1.39 1.49}

ICE Brent Mth1(Adj) 99.74 97.14 99.42 97.60  ^{1.82 1.83}

NYMEX No 2 Mth 1 (¢/Gal) 270.33 264.40 269.02 265.08  ^{3.94 1.46} NYMEX RBOB Mth1 (¢/Gal) 246.00 238.69 245.68 245.89  ^{-0.21 -0.09} ICE Gasoil Mth1 (Adj) ($/T) 838.00 818.00 829.50 818.50  ^{11.00 1.33}

NYMEXHenry Hub(Mth1)($/mmBtu) 4.37 4.25 4.32 4.74  ^{-0.42 -9.72}

Weekly Data US Weekly Stock Changes

Week ending 21 Jan 11 EIA (mb)

Product Stock

Level Change

Vs previous

week

Change Vs previous year

Crude 340.6 4.8 13.9

Distillate 165.7 -0.1 8.2

Motor Gasoline 230.1 2.4 0.6

Heating Oil 42.0 -1.6 0.8

RFG gasoline 0.3 0.0 -0.2

Kerosene 42.7 -0.3 -0.9

Crude Runs (mb/d) 14.1 -0.2 0.5

Monday, January 31, 2011

NYMEX Crack Spreads ($/bbl) Front Month Closing Prices

0 5 10 15 20 25 30

Oct Nov Dec Jan

RBOB No.2 Heating Oil

Source: NYMEX

Crude Futures Prices ($/bbl) Front Month Closing Prices

75 80 85 90 95 100

Oct Nov Dec Jan

NYMEX WTI ICE Brent

Source: ICE, NYMEX

Physical Crude Prices ($/bbl)

75 80 85 90 95 100

Oct Nov Dec Jan

Dated Brent WTI Mth1(Adj)

Dubai Mth1(Adj)

NYMEX WTI Forward Price Curve

85 87 89 91 93 95 97 99

1 2 3 4 5 6 7 8 9 10 11 12

$/bbl

31-Dec-10 14-Jan-11

21-Jan-11 28-Jan-11

Source: NYMEX

US Weekly Total Crude Oil Stocks Five-Year Range - Excluding SPR

280 300 320 340 360 380

Jan Apr Jul Oct

mb

5-yr Average 2010 2011

Source: EIA

US Weekly Total Gasoline Stocks Five-Year Range

170 180 190 200 210 220 230 240

Jan Apr Jul Oct

mb

5-yr Average 2010 2011

Source: EIA

US Weekly Total Distillate Stocks Five-Year Range

90 100 110 120 130 140 150 160 170 180 190

Jan Apr Jul Oct

mb

5-yr Average 2010 2011

Source: EIA

US Weekly Refinery Throughputs Five-Year Range

11 12 13 14 15 16 17

Jan Apr Jul Oct

mb

5-yr Average 2010 2011

Source: EIA

US Weekly Gasoline Supplied Five-Year Range

8.4 8.6 8.8 9.0 9.2 9.4 9.6 9.8

Jan Apr Jul Oct

mb

5-yr Average 2010 2011

Source: EIA

US Weekly Distillate Supplied Five-Year Range

3.0 3.2 3.4 3.6 3.8 4.0 4.2 4.4 4.6 4.8 5.0

Jan Apr Jul Oct

mb

5-yr Average 2010 2011

Source: EIA

Japanese Weekly Refinery Throughput

2.8 3.0 3.2 3.4 3.6 3.8 4.0 4.2 4.4 4.6

Jan Apr Jul Oct

mb/d

2008 2009

2010 2011

Source:

Japanese Weekly Finished Product Stocks (incl. naphtha)

70 75 80 85 90 95 100 105

Jan Apr Jul Oct

mb

2008 2009

2010 2011

Source: PAJ Source: Platts

Latest Oil Market Update:

Full-Cost Refinery Margins ($/Bbl) Average for Week ended

Oct-10 Nov-10 Dec-10 Δ Month Δ 29-Dec-10 5-Jan-11 12-Jan-11 19-Jan-11 26-Jan-11 Δ Week Δ NW Europe

Brent (Cracking) 2.82 2.62 1.92  -0.69 1.57 1.06 1.46 0.84 1.34  0.50

Urals (Cracking) 2.95 2.84 3.23  0.40 3.06 2.56 2.53 2.85 3.44  0.59

Brent (Hydroskimming) 0.12 -0.07 -1.76  -1.69 -2.18 -2.55 -2.35 -2.89 -2.13  0.75

Urals (Hydroskimming) -2.44 -2.61 -3.58  -0.97 -3.85 -4.06 -4.26 -3.96 -2.95  1.01

Mediterranean

Es Sider (Cracking) 1.80 0.97 1.37  0.39 2.41 1.04 1.49 2.18 2.64  0.47

Urals (Cracking) 2.16 0.95 1.33  0.38 2.09 0.96 1.36 1.90 2.64  0.74

Es Sider (Hydroskimming) -3.74 -4.57 -5.49  -0.92 -5.04 -6.02 -6.04 -5.27 -4.52  0.75

Urals (Hydroskimming) -4.61 -6.11 -7.14  -1.04 -6.85 -7.37 -7.43 -7.04 -5.72  1.32

US Gulf Coast

Bonny Light (Cracking) -1.60 -2.61 -2.56  0.05 -2.75 -2.21 -2.43 -2.05 -2.25  -0.20

Brent (Cracking) -3.02 -3.90 -4.12  -0.22 -4.19 -3.87 -3.99 -4.13 -3.81  0.32

LLS (Cracking) -0.67 -1.51 -1.49  0.02 -1.35 -1.81 -0.27 0.45 0.15  -0.31

Mars (Cracking) -0.16 -0.87 -1.87  -0.99 -2.01 -2.22 -0.95 -0.58 0.40  0.98

Mars (Coking) 1.77 1.46 1.13  -0.32 1.44 1.00 2.46 3.42 4.07  0.65

Maya (Coking) 3.87 3.96 4.72  0.76 5.33 5.31 6.82 7.76 8.43  0.67

US West Coast

ANS (Cracking) -1.14 -1.12 -0.58  0.54 -1.11 -1.95 -2.23 -3.37 -0.37  3.00

Kern (Cracking) 1.26 1.33 3.25  1.92 3.14 3.32 3.74 2.46 3.01  0.55

Oman (Cracking) 0.23 -2.69 -1.16  1.52 -1.22 -0.79 -2.51 -3.10 -2.71  0.39

Kern (Coking) 9.69 7.57 9.90  2.33 10.07 8.77 10.81 8.21 10.98  2.78

Singapore

Dubai (Hydroskimming) -1.97 -2.46 -3.01  -0.56 -3.62 -2.18 -2.84 -1.98 -1.65  0.33

Tapis (Hydroskimming) -4.75 -4.80 -4.01  0.79 -4.38 -4.16 -4.80 -5.10 -4.22  0.88

Dubai (Hydrocracking) 0.75 0.61 1.11  0.50 0.86 2.10 1.10 2.12 2.14  0.02

Tapis (Hydrocracking) -2.77 -2.42 -1.69  0.73 -1.82 -1.75 -2.70 -2.81 -2.36  0.45

Monday, January 31, 2011

Med Refining Margins

-10 -8 -6 -4 -2 0 2 4

Oct Nov Dec Jan

$/bbl

Urals Hydroskimming Urals Cracking

USGC Refining Margins

-5 -4 -3 -2 -1 0 1 2

Oct Nov Dec Jan

$/bbl

Mars Cracking Bonny Cracking

Singapore Refining Margins

-5 -4 -3 -2 -1 0 1 2 3

Oct Nov Dec Jan

$/bbl

Dubai Hydroskimming Dubai Hydrocracking

NWE Refining Margins

0 1 2 3 4 5 6

Oct Nov Dec Jan

$/bbl

Brent Cracking Urals Cracking

USWC Refining Margins

-10 -5 0 5 10 15 20

Oct Nov Dec Jan

$/bbl

Kern Coking ANS Cracking

China Refining Margins

-8 -6 -4 -2 0 2 4

Oct Nov Dec Jan

$/bbl

Dubai Cracking Cabinda Hydroskimming

The International Energy Agency's ("IEA") Oil Industry and Market Division makes every attempt to ensure the accuracy, completeness and clarity of content of this report. The IEA makes every effort to ensure, but does not guarantee, the accuracy or

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this report. The IEA makes no representation or warranty regarding the correctness of any information contained herein, or the appropriateness of any transaction for any person.

The present report is prepared for general circulation and is circulated for general information only. Neither the information nor any opinion expressed herein constitutes an offer, or an invitation to make an offer, to buy or sell any securities or any options, futures

or other derivatives related to such securities. Nothing herein shall be construed as a recommendation to buy or sell.

Fundamentals:

Demand

Demand (mb/d) Annual Growth (%)

1Q10 2Q10 3Q10 4Q10 2010 1Q10 2Q10 3Q10 4Q10 2010

North America 23.58 23.78 24.24 24.04 23.91 0.6 3.6 4.1 2.1 2.6

Europe 14.17 14.11 14.79 14.62 14.42 -4.9 -1.1 2.2 1.8 -0.5

Pacific 8.19 7.32 7.60 8.02 7.78 0.9 0.6 4.8 0.4 1.6

Total OECD 45.94 45.21 46.62 46.68 46.11 -1.1 1.6 3.6 1.7 1.5

Asia 19.17 19.77 19.25 20.22 19.60 9.9 6.5 3.8 6.9 6.7

Middle East 7.15 7.55 7.98 7.38 7.52 5.6 3.7 3.1 3.9 4.0

Latin America 6.05 6.30 6.46 6.34 6.29 4.4 5.2 6.0 3.4 4.7

FSU 4.19 4.14 4.39 4.35 4.27 5.4 7.0 6.8 7.8 6.7

Africa 3.18 3.28 3.23 3.22 3.23 -2.2 1.6 1.8 3.5 1.2

Europe 0.70 0.71 0.71 0.70 0.70 -6.4 -6.4 -3.2 -2.3 -4.6

Total Non-OECD 40.45 41.74 42.02 42.21 41.61 6.5 5.2 4.0 5.5 5.3

World 86.38 86.95 88.64 88.89 87.72 2.3 3.3 3.8 3.5 3.2

US 18.93 19.10 19.57 19.32 19.23

Europe 5* 8.78 8.67 9.07 8.95 8.87

China 8.93 9.36 9.23 9.82 9.34

Japan 4.79 4.04 4.33 4.53 4.42

India 3.39 3.45 3.14 3.36 3.33

Russia 2.94 2.95 3.20 3.11 3.05

Brazil 2.59 2.70 2.80 2.74 2.71

Saudi Arabia 2.36 2.75 3.05 2.57 2.68

Canada 2.19 2.23 2.26 2.26 2.24

OPEC

OPEC Crude Production & Capacity (mb/d)

Oct 2010 Nov 2010 Dec 2010 Sustainable

Production

Supply Supply Supply Capacity¹

Algeria 1.27 1.27 1.27 1.31 0.04 50%

Angola 1.68 1.66 1.62 1.92 0.30 49%

Ecuador 0.47 0.47 0.48 0.50 0.02 27%

Iran 3.65 3.68 3.68 3.70 0.02 23% 1 Capacity levels can be reached within 30 days and sustained for 90 days.

Kuwait² 2.30 2.29 2.32 2.54 0.22 78% 2 Includes half of Neutral Zone production.

Libya 1.56 1.56 1.56 1.80 0.24 56% 3 Nigeria's current capacity estimate excludes some 250 kb/d of shut-in capacity.

Nigeria³ 2.20 2.18 2.28 2.50 0.22 0% 4 Includes upgraded Orinoco extra-heavy oil assumed at 440 kb/d in December.

Qatar 0.80 0.82 0.82 1.00 0.18 33%

Saudi Arabia² 8.60 8.50 8.60 12.10 3.50 64%

UAE 2.33 2.29 2.32 2.69 0.37 87%

Venezuela⁴ 2.21 2.19 2.20 2.35 0.15 47%

OPEC-11 27.07 26.91 27.15 32.43 5.28 45%

Iraq 2.41 2.42 2.44 2.58 0.15

Total OPEC 29.48 29.33 29.58 35.01 5.42

World Balance Summary

DEMAND ^{2Q10 3Q10 4Q10 2010 1Q11 2Q11 3Q11 4Q11 2011}

OECD Demand 45.2 46.6 46.7 46.1 46.3 45.0 46.1 46.3 45.9

NON-OECD Demand 41.7 42.0 42.2 41.6 42.3 43.4 43.7 43.4 43.2

World Demand 86.9 88.6 88.9 87.7 88.6 88.4 89.8 89.7 89.1

SUPPLY

OECD North America 14.0 14.1 14.3 14.1 14.0 13.7 13.8 14.1 13.9

OECD Europe 4.2 3.8 4.2 4.2 4.2 4.0 3.9 4.1 4.1

OECD Pacific 0.6 0.6 0.6 0.6 0.6 0.6 0.7 0.7 0.6

Total OECD Supply 18.8 18.5 19.0 18.9 18.8 18.3 18.4 18.9 18.6

NON-OECD Supply 29.7 29.9 30.1 29.8 30.5 30.4 30.4 30.6 30.5

of which FSU 13.5 13.5 13.7 13.6 13.8 13.8 13.6 13.8 13.7

Processing Gains 2.3 2.3 2.3 2.3 2.3 2.3 2.4 2.4 2.3

Global Biofuels 1.9 2.1 1.8 1.8 1.5 2.0 2.4 2.1 2.0

Total Non-OPEC 52.8 52.8 53.3 52.8 53.1 53.1 53.5 53.9 53.4

OPEC Crude 29.1 29.3

OPEC NGLs 5.2 5.4 5.5 5.3 5.7 5.8 5.9 6.0 5.8

Total OPEC 34.2 34.6

Total OPEC incl. Angola & Ecuador 34.2 34.6

World Supply 87.1 87.4

Stock Change & Call

OECD Stock Change (Total Oil) 0.9 -0.4

Total Stock Change & Misc 0.1 -1.2

Adjusted Call on OPEC & Stock change 28.2 29.8 30.0 29.3 29.7 29.3 30.2 29.7 29.7

OECD Stocks

5 Yr Avg Nov-09 Sep-10 Oct-10 Nov-10 Chg kb/d Change mb Vs Yr-1 (mb) Vs 5 yr avg Volume (mb)

Crude 965 996 981 1,009 1,009 -29 -0.9 12.9 43.5 Total Products 1,411 1,464 1,466 1,441 1,432 -281 -8.7 -31.8 20.5 Total Oil 2,678 2,745 2,744 2,750 2,742 -268 -8.3 -3.2 63.8 Days Cover (of forward demand)

By Total Oil 59.7 58.8 59.1 58.7

By Total Products 31.8 31.4 31.0 30.6

OMR: 18 January 2011

Spare Capacity vs Dec 2010 Supply

Percent Compliance with

Volume Cuts