Dark Markets and Oil Prices Energy Information Administration 2009 Energy Conference Session 6: Financial Markets and Short-Term Energy Prices 07 April 2009 Washington

All prices are those current at the end of the previous trading session unless otherwise indicated. Prices are sourced from local exchanges via Reuters, Bloomberg and other vendors. Data is sourced from Deutsche Bank and subject companies.DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1.

Adam E. SieminskiChief Energy EconomistDeutsche Bank AGadam.sieminski@db.com+ 1 202 662 1624

Oil Prices Spiked

WTI oil prices rose sharply from early 2007 and then collapsed

0

30

60

90

120

150

Jan-96 Jan-98 Jan-00 Jan-02 Jan-04 Jan-06 Jan-08

WTI Oil Price (USD/bbl)

Source: Nymex, Deutsche Bank

Somebody Must Be Blamed

The Dark Markets

2

Speculation?

0

200

400

600

800

1000

1200

1400

1600

1800

Jan-96 Jan-98 Jan-00 Jan-02 Jan-04 Jan-06 Jan-08

Contracts (thousands)

Open interest in the Nymex crude oil contract

Source: CFTC, Deutsche Bank

3

This shape looks a lot like the oil price graph.

But Was It Really All Speculators?

What other forces were at work in the oil price run-up?

4

Global GDP Growth Went Ballistic

Strongest economic growth since the 1973 oil spike

5

Source: International Monetary Fund, January-2009

Deutsche Bank

The incredibly strong global economic growth from 2004 through 2007 drove the demand for all commodities upward, including oil.

0

1

2

3

4

5

6

7

8

9

1970 1974 1978 1982 1986 1990 1994 1998 2002 2006

World GDP

Emerging Markets

Annual % Change 7.7%

4.9%

Baltic Dry Freight Index

Source: Reuters, Deutsche Bank

Demand Got Too High and It Wasn’t Just Oil

6

0

2000

4000

6000

8000

10000

12000

Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09

The Baltic Freight Index has been a useful barometer for global growth cycles.

What about the role played by consumption subsidies in Asia and the Middle East?

And what about Strategic Reserve purchases?

-250

0

250

500

750

1000

1Q1996 1Q1998 1Q2000 1Q2002 1Q2004 1Q2006 1Q2008

Russia Supply Growth Average 1996-2007 4 Qtr Mov Avg

thousand b/dyear-over-year change

7

Supply Growth Got Too Low

Pres. Putin’s policies in his first term worked but in his second term were a disaster for oil output.

VenezuelaNigeriaIranIraqMexicoNorth Sea

Source: IEA, Deutsche Bank

Russian Oil Production Growth

OPEC Spare Production Got Too Low

As OPEC cuts quotas, spare capacity increases

Source: IEA, Deutsche Bank

8

The lack of spare OPEC production capacity played a strong role in the run- up in oil prices in 2003-08; this is reversing in 2009-10.

0

1

2

3

4

5

6

7

2001 2002 2003 2004 2005 2006 2007 2008

million b/d

Spare Refinery Capacity Got Too Low

Ability to refine high sulfur crude oil was exhausted

Source: BP Statistical Review, Deutsche Bank

9

The lack of spare refining capacity played a strong role in the run- up in oil prices in 2007-08; this is reversing in 2009-10.

0

2

4

6

8

10

12

14

16

1980 1983 1986 1989 1992 1995 1998 2001 2004 2007

million b/d

OECD Inventories Got Too Low

Days forward cover of OECD crude and product stocks

Source: IEA, DB Global Markets Research

10

A sign of weakness in the oil markets giving way to a more neutral stance.

47

49

51

53

55

57

59

61

Jan-98 Jul-99 Jan-01 Jul-02 Jan-04 Jul-05 Jan-07 Jul-08

DaysTotal OECD crude oil and product stocks relative to OECD demand

DEC 2007

11

The Dollar Got Too Low

What is the shifting dollar doing to commodities and oil?

Source: Nymex, Bloomberg, DB Global Markets Research

The dollar-oil regression is not perfect, but traders like it...

...and a study by the IMF says that gold and oil are sensitive to movements in the dollar.

1.20

1.25

1.30

1.35

1.40

1.45

1.50

1.55

1.60

Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-0930

45

60

75

90

105

120

135

150

USD/Euro WTI Oil Price (USD/bbl)

USD/bblUSD/Euro

Stronger US dollar

Declines Curves Got Too High

New developments are required for sustenance

12

60

65

70

75

80

85

90

95

2008 2009 2010 2011 2012 2013 2014 2015

mb/d Onstream Reserves growth Under development

Probable Other discoveries Yet-to-find

Running hard to stay in place.

Estimates for global oil production suggest that, absent investment, today’s global oil production base of 84mb/d will decline to near 75mb/d by 2015.

Source: Wood Mackenzie,

DB Global Markets Research

What Else?

Source: James D. Hamilton, Understanding Crude Oil Prices, Energy Journal Vol 30, No 2, 2009

13

Geologic Limitations

Low Elasticities

Time Delays

Monopoly Pricing

Scarcity Rent

Speculation may have played some role

Why Do We Blame Speculators?

…a more satisfying “sound-byte” than the complicated answer that involves a review of a large number of social and economic forces with inherent data limitations

Because it’s fun to point fingers

14

Adam Sieminski

Chief Energy Economist for Deutsche Bank, working with the Bank's global commodities research and trading units.

Drawing on extensive industry, government and academic sources, Mr. Sieminski forecasts energy market trends and writes on a variety of topics involving energy economics, climate change, politics and commodity prices. From 1998 to 2005 he served as the energy strategist for Deutsche Bank's global oil & gas equity team. Mr. Sieminski was the senior energy analyst for NatWest Securities in the US during 1988-1997, covering the major US international integrated oil companies. He received both his undergraduate degree in Civil Engineering and a masters in Public Administration from Cornell University.

He has been president of the US Association for Energy Economics and the National Association of Petroleum Investment Analysts. He is a member of the US National Petroleum Council, an advisory group to the US Secretary of Energy, and helped author the NPC's Global Oil and Gas Study: The Hard Truths. He also acts as a senior advisor for the Center for Strategic and International Studies in Washington and is an advisory board member of the Global Energy and Environment Initiative at Johns Hopkins / SAIS. He is a member of the London, New York and Washington investment professional societies, and holds the Chartered Financial Analyst (CFA) designation.

Analyst Certification The views expressed in this report accurately reflect the personal views of the undersigned lead analyst. In addition, the undersigned lead analyst has not and will not receive any compensation for providing a specific recommendation or view in this report. Adam Sieminski

Global Disclaimer Investing in and/or trading commodities involves significant risk and may not be suitable for everyone. Participants in commodities transactions may incur risks from several factors, including changes in supply and demand of the commodity that can lead to large fluctuations in price. The use of leverage magnifies this risk. Readers must make their own investing and trading decisions using their own independent advisors as they believe necessary and based upon their specific objectives and financial situation. Past performance is not necessarily indicative of future results. Deutsche Bank makes no representation as to the accuracy or completeness of the information in this report. Deutsche Bank may buy or sell proprietary positions based on information contained in this report. Deutsche Bank has no obligation to update, modify or amend this report or to otherwise notify a reader thereof. This report is provided for information purposes only. It is not to be construed as an offer to buy or sell any financial instruments or to participate in any particular trading strategy.

Unless governing law provides otherwise, all transactions should be executed through the Deutsche Bank entity in the investor’s home jurisdiction . In the U.S. this report is approved and/or distributed by Deutsche Bank Securities Inc., a member of the NYSE, the NASD, NFA and SIPC. In Germany this report is approved and/or communicated by Deutsche Bank AG Frankfurt authorised by Bundesanstalt für Finanzdienstleistungsaufsicht. In the United Kingdom this report is approved and/or communicated by Deutsche Bank AG London, a member of the London Stock Exchange and regulated by the Financial Services Authority for the conduct of investment business in the UK and authorised by Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin). This report is distributed in Hong Kong by Deutsche Bank AG, Hong Kong Branch, in Korea by Deutsche Securities Korea Co. and in Singapore by Deutsche Bank AG, Singapore Branch. In Japan this report is approved and/or distributed by Deutsche Securities Inc. This report may not be reproduced, distributed or published by any person for any purpose without Deutsche Bank's prior written consent. Please cite source when quoting.

Copyright © 2009 Deutsche Bank AG

Appendix 1 – Certification and Disclaimer

Country-Specific Disclosures

Australia: This research, and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act.

EU countries: Disclosures relating to our obligations under MiFiD can be found at http://globalmarkets.db.com/riskdisclosures.

Japan: Disclosures under the Financial Instruments and Exchange Law: Company name - Deutsche Securities Inc. Registration number - Registered as a financial instruments dealer by the Head of the Kanto Local Finance Bureau (Kinsho) No. 117. Member of associations: JSDA, The Financial Futures Association of Japan. Commissions and risks involved in stock transactions - for stock transactions, we charge stock commissions and consumption tax by multiplying the transaction amount by the commission rate agreed with each customer. Stock transactions can lead to losses as a result of share price fluctuations and other factors. Transactions in foreign stocks can lead to additional losses stemming from foreign exchange fluctuations.

New Zealand: This research is not intended for, and should not be given to, "members of the public" within the meaning of the New Zealand Securities Market Act 1988.

Russia: This information, interpretation and opinions submitted herein are not in the context of, and do not constitute, any appraisal or evaluation activity requiring a license in the Russian Federation.

Appendix 1 - Regulatory Disclosures