© OECD/IEA - 2010

Short & Medium Term Oil Outlook

Presented to IEA-IEF-OPEC Symposium on Energy Outlooks

Riyadh, 23-24 January 2012

© OECD/IEA - 2010

1. Short term market developments Economic risks and supply surprises

© OECD/IEA - 2010

Two year price recovery stalled since spring But prices remain high by historical standards

Crude prices have slipped from April highs

Higher OPEC supply and weakening economy have eased some market concerns...

...though geopolitical issues provide price floor

WTI regains lost ground on regional fundamentals, Libya/NSea recovery and eurozone concerns

3 Source: IEA Oil Market Report

World: Oil Burden & Price

0%

1%

2%3%

4%

5%

6%7%

8%

9%

1973 1977 1981 1985 1989 1993 1997 2001 2005 2009

Nom

inal

Oil

Expe

nditu

res

as %

of

Nom

inal

GD

P

15

25

3545

55

65

7585

95

105$/bbl

Oil Burden WTI (real, 2008 base)

Contributing to the next shock?

1st oil shock

2nd oil shock

3rd oil shock

Post-recession recoveries

* ICE Brent from 2009 onwards

But high prices already contributing to economic slowdown & oil burden near 2008 levels

020406080

100120140160

Apr 08 Oct 08 Apr 09 Oct 09 Apr 10 Oct 10 Apr 11 Oct 11

$/bbl Benchmark Crude Prices

WTI Cushing Dated Brent Dubai

Data source: Platts analysis

© OECD/IEA - 2010

Short Term Oil Demand: Bending But Not Breaking

4 Source: IEA Oil Market Report

Demand growth dipped into negative territory in 4Q12 for first time since 2009

Global GDP growth assumed at 3.8% and 3.9% for 2011 and 2012, respectively

Short-term economic risks lie to the downside

Still, robust gasoil demand underpins product demand Industrial strength

still lingers, particularly in the US

Diesel use upside if there are further non-oil generation outages

Gasoil Demand, Actual & F'Castmb/d

10.511.0

11.512.012.513.0

13.514.0

1Q07 4Q07 3Q08 2Q09 1Q10 4Q10 3Q1123.524.024.525.025.526.026.527.027.5

OECD Non-OECD World (RHS)

-4.0-3.0-2.0-1.00.01.02.03.04.0

1Q2008 1Q2009 1Q2010 1Q2011 1Q2012

mb/d World Demand Growth, y-o-y

OECD Non-OECD World

© OECD/IEA - 2010

Demand-side risks skewed to the downside

Consensus economic outlook scaled back since the spring

Curbs 2011 demand growth to well below 2010, now 0.7 mb/d

NB Japan nuclear offset boosts CODB and fuel oil

2012 outlook depends on GDP profile

Difference between 3.9% & 2.6% GDP growth =1.2 mb/d

Income elastic non-OECD demand impact is greatest

Global GDP Growth Assumption:Difference vs. Previous MTOGM

3.63.84.04.24.44.64.85.05.2

2010 2011 2012 2013 2014 2015 2016

Y-o-Y, %

Current Previous

2010 2011 2012% mb/d % mb/d

Base GDPGlobal GDP (y-o-y chg) 5.0% 3.8% 3.9%

OECD 46.2 45.6 45.3 -1.2% -0.56 -0.7% -0.30Non-OECD 42.1 43.4 44.8 3.0% 1.25 3.2% 1.37

World 88.3 89.0 90.0 0.8% 0.69 1.2% 1.07Lower GDP

Global GDP (y-o-y chg) 5.0% 2.6% 2.6%OECD 46.2 45.6 45.0 -1.3% -0.58 -1.3% -0.59

Non-OECD 42.1 43.3 43.8 2.7% 1.13 1.3% 0.57World 88.3 88.8 88.8 0.6% 0.55 0.0% -0.02

Oil Demand Sensitivity(million barrels per day)

2011 vs. 2010 2012 vs. 2011

© OECD/IEA - 2010

One-off factors can have major impact Japan Turning Towards Thermal Power

Japan’s nuclear capacity likely to dip to low levels in early 2012 as more plants go offline for normal maintenance with uncertain restart times

In the absence of policy changes, oil and LNG likely to make up most all of the shortfall

Under scenario where nuclear power plants restart in 2012 Incremental crude + fuel oil burn for power generation needs would rise to

230 kb/d above normal in 2011; 270 kb/d above normal in 2012 By contrast, oil fired generation would normally consume about 200 kb/d

Under worst case scenario of no nuclear restart Incremental oil needs could rise to 460 kb/d versus normal nuclear profile

6 Source: IEA Oil Market Report

0

5

10

15

20

25

Apr 11 Aug 11 Dec 11 Apr 12 Aug 12 Dec 12

TWh Japan: Nuclear Power Generation Scenarios

No nuclear restart Some nuclear restartNormal nuclear power

Shortfall to be filled by oil and gas

-

100

200

300

400

500

Jul 11 Oct 11 Jan 12 Apr 12 Jul 12 Oct 12

k b/d Japan: Forecast Incremental Oil Demand For Power vs Normal

Fuel Oil Crude Oil

© OECD/IEA - 2010

Demand puzzles to watch in coming months

5

6

7

8

9

10

11

2003/04 2005/06 2007/08 2009/10 2011/12

Million US Northeast: Households by Primary Heating Source, Winter Period

Natural gas

Heating oil

Source: EIA; 2011/2012 is EIA projection

Slowing? But +400 kb/d Nuclear restart? Oil 0.2-0.4 mb/d

Lower seasonality? +/-0.3 mb/d

0

200

400

600

800

Jan Mar May Jul Sep Nov

kb/d Japan : Oil Consumption (Crude + Fuel Oil) for Power Generation*

2007 2008 20092010 2011

*Main Utilities; Source: FEPC, IEA

China: Apparent Gasoil Demand

1.7

2.2

2.7

3.2

3.7

4.2

Nov 09 May 10 Nov 10 May 11 Nov 11

mb/d

OMR DemandAdjusted for OGP/Xinhua Stock ChangesAdjusted for JODI Stock Changes

86

87

88

89

90

91

Jul1

0A1

0S1

0O

10 N10

D10

Jan

11 F11

M11 A1

1M

11 J11

Jul1

1A1

1S1

1O

11 N11

D11

Jan1

2

Evolution of IEA Demand Projections

2010 Demand 2011 Demand 2012 Demand

mb/d

© OECD/IEA - 2010

2011 tells a story of supply disappointment... ...risk of more to come in 2012?

Unplanned outages curb non-OPEC supply by 0.7 mb/d in 2H11

Libyan supply loss cost the market 425 mb so far, while OPEC & IEA collective action compensated around 75%

Libyan recovery could slow, and market is pricing in concerns on Iranian supply availability

8 Source: IEA Oil Market Report

-0.2

0.2

0.6

1.0

1.4

1.8

2.2

2010 2011 2012 2013 2014 2015 2016

mb/d Libyan Crude Oil Capacity

Previous Current

IEA kb/d

% Total 2011 Oil Demand

% Total Exports

Belgium 36 5% 1%Czech Republic 5 3% 0%France 58 3% 2%Germany 15 1% 1%Greece 103 30% 4%Italy 185 13% 7%Japan 327 7% 13%South Korea 228 10% 9%Netherlands 19 2% 1%Poland 3 1% 0%Spain 161 12% 6%Turkey 196 29% 8%UK 11 1% 0%IEA Pacific 555 8% 22%IEA Europe 792 7% 31%IEA Total 1347 7% 53%OthersChina 550 6% 22%India 310 9% 12%Other Asia 240 3% 9%Non-OECD Asia 1100 5% 44%Total Asia 1655 65%South Africa 80 14% 3%

Total 2527 100%

Source: IEA databases, Lloyds/Apex

Estimated Jan-Sep 2011 Imports of Iranian Crude

© OECD/IEA - 2010

Non-OPEC also suffers unscheduled 2011 outages

-50 -140 -140 -40-130

-260 -320

-150-130

-360-360

-540

-850

-650

-450

-250

-50

1Q 2Q 3Q 4Q

kb/d Non-OPEC Supply 2011 Selected Shut-ins & Maintenance

Planned Maintenance (N. Sea)Unplanned Outages (N.Sea)Other Unplanned Outages

-0.4-0.20.00.20.40.60.81.01.21.4

1996 2000 2004 2008 2012

mb/d Total Non-OPEC Supply, y-o-y chg

Consistent shortfalls averaging 0.7 mb/d from non-OPEC in 2011, even without major hurricane outages

Working assumption is that 2011 is an outlier…

…and that non-OPEC can potentially grow 1 mb/d in 2012

-200-100

0100200300400500600kb/d Selected Non-OPEC Supply Annual Changes(2011 & 2012)

2011 Growth 2012 Growth

© OECD/IEA - 2010

2012 supply uncertainties abound

0

1

2

3

4

5

6

7

8

9

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

mb/d OPEC Spare Capacity

OPEC Effective Spare Capacity Iraq Ven/Nig Libya

52

52.5

53

53.5

54

Jul1

0

A10

S10

O10 N1

0

D10

Jan

11 F11

M11 A1

1

M11 J1

1

Jul1

1

A11

S11

O11 N1

1

D11

Jan1

2

Evolution of IEA Non-OPEC Supply Projections

2010 Non-OPEC 2011 Non-OPEC 2012 Non OPEC

2011 demonstrates again that non-OPEC potential supply faces downside risks

Geopolitical risks throw market spotlight on spare production capacity

IEA defines OPEC capacity as available in 30 days, sustainable 90, excl. surge

Effective spare capacity acknowledges that short term capacity to boost supply may be constrained

© OECD/IEA - 2010 Source: IEA Oil Market Report

OPEC December supply estimated +240 kb/d to 30.9 mb/d Monthly market assessments for OPEC supply based on a

combination of JODI data, tanker tracking & other market intelligence, amid data and definitional issues

Amid economic uncertainty, and weak non-OPEC performance, 2H11 OPEC supply, though increasing, seems to have lagged underlying demand

2012 ‘call on OPEC crude & stock change’ oscillates around 30 mb/d, some 0.5 mb/d less than in 2011

2011 OPEC output recovers after Libya disruption

11

OPEC Crude Oil Production

28

29

30

31

32

33

Jan Mar May Jul Sep Nov Jan

mb/d

2008 2009 2010 2011

Entire series based on OPEC Composition as of January 2009 onwards (including Angola & Ecuador & excluding Indonesia)

Quarterly Call on OPEC Crude + Stock Change

26272829303132

1Q 2Q 3Q 4Q

mb/d

2010 2011 2012Entire series based on OPEC Composition as of January 2009 onwards (including Angola & Ecuador & excluding Indonesia)

© OECD/IEA - 2010

Physical market has tightened sharply since mid-2010 – more to come in 2012?

Post-recession demand bounce drove tightening market in 2010

2011 tightness has derived from supply side factors

This, & uncertain OPEC response post-Libya crisis, drove IEA LCA decision

Increased consensus now over underlying 2012 ‘call’, and OPEC raises target to 30 mb/d

12 Source: IEA Oil Market Report

-2.0-1.5-1.0-0.50.00.51.01.5

8384858687888990

1Q07 1Q08 1Q09 1Q10 1Q11

mb/dmb/d Demand/Supply Balance into 4Q11

Implied Stock Ch.&Misc to Bal (RHS)Oil DemandOil Supply

OECD Industry Total Oil StocksRelative to Five-Year Average

-100-50

050

100150200

Nov 09 May 10 Nov 10 May 11 Nov 11

mb

Pacific North AmericaEurope OECD

OECD Total Oil Stocks Scenario*

2500

2600

2700

2800

Jan Apr Jul Oct Jan

mb

Range 2006-2010 Avg 2006-20102010 2011e2011 2012e

* OPEC d d i 30 89 b/d f D b 2011 d

© OECD/IEA - 2010

Inventories: major gaps in data coverage

-2.0-1.5-1.0-0.50.00.51.01.52.0

1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

mb/d Quarterly Miscellaneous to Balance (MtB)

Negative MtB = non-OECD stockdraw, demand lower than data suggest orsupply higher than data suggest

Positive MtB = non-OECD stockbuild, demand higher than data suggest orsupply lower than data suggest

China Monthly Oil Stock Change*

(10)

(5)

0

5

10

May 11 Jul 11 Sep 11 Nov 11

mb

Crude Gasoline Gasoil Kerosene

Source: China Oil, Gas and Petrochemicals

OECD inventory data far from perfect – monthly revisions of +/- 10 mb not uncommon

But at least there is regular, comprehensive, timely reporting

This is missing for non-OECD, notably major growth markets like China and India

Asian storage additions (strategic & comm) could add 400 kb/d to underlying crude & product demand in 2012-2016

© OECD/IEA - 2010

2. Medium Term Oil Markets December 2011 update

© OECD/IEA - 2010 15 Source: IEA Oil Market Report

Price assumption based on prevailing futures strip

Economic outlook arguably shifting towards ‘low case’

‘Low-Case’ sensitivity GDP growth averages 3% per

annum, 2011-16 Versus 4.4% in ‘Base-Case’

Global Demand up 0.8% (or 0.7 mb/d) per annum Versus 1.2% (1.1 mb/d) ‘Base’

Oil intensity declines by 2-3% annually

Working assumptions: medium term outlook Global GDP: Base vs. Lower Case

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

2010 2011 2012 2013 2014 2015 2016

% Chg

Low GDP Base GDP

Oil Intensity (1995 = 100)

60

65

70

75

80

85

90

95

100

1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015

OECD Non-OECD

60.40

78.12

105.79105.17

102.81

101.28 100.69 100.88

60.40

78.12

108.82 103.56100.01

96.2593.26 91.08

5060708090

100110120

2009 2010 2011 2012 2013 2014 2015 2016

$/bbl OMR Price Assumption (nominal)

April 2011 (Brent) November 2011 (Brent)

© OECD/IEA - 2010

Creates two very different demand profiles

Difference in 2016 oil demand between the two cases is 2.4 mb/d (92.6 mb/d vs 95 mb/d)

But in both cases, non-OECD drives demand growth

Exceeding 50% global market share by 2013 Robust growth driven by rising incomes and

assumption that price subsidies only removed gradually

Global Oil Demand:GDP & Efficiency Sensitivity

84

88

92

96

2008 2010 2012 2014 2016

mb/d

Base GDP & 3% Avg. Yearly Efficiency GainsLower GDP & 2% Avg. Yearly Efficiency Gains

OECD vs. non OECD Oil Demand

25

30

35

40

45

50

55

1996 1999 2002 2005 2008 2011 2014

mb/d

OECD Non-OECD

© OECD/IEA - 2010

Demand growth is all about non-OECD & transport Average Global Oil Demand Growth 1998-2004/2004-2010/2010-2016

thousand barrels per day

(mb/d)1998-2004 1.43 1.8%2004-2010 0.81 1.0%2010-2016 1.21 1.3%

Avg Global Demand Growth

19

-184-110

421366

202 176

23

391

-257-100

187312 294

77 100 103

North America

Latin America Africa

Middle East

Europe FSU

722576

801Asia

OECD vs. Non-OECD Cumulative Oil Demand Growth by Use, 1997-2015

(10)

(5)

-

5

10

15

20

25

30

1997 1999 2001 2003 2005 2007 2009 2011 2013 2015

mb/d

Non-OECD - OtherNon-OECD - TransportationOECD - OtherOECD - Transportation

OECD demand peaked in 2005 Demand growth now focused in 3

regions: Asia, Mid.East & L.America Asia alone generates 55% of the total

and China 35% Premium & subsidised markets sustain

growth, despite high prices Understanding market trends requires

better non-OECD data

© OECD/IEA - 2010

Transport & Gasoil Underpin Demand Growth

Transport fuel use generates 65% of total oil growth, even though some will derive from biofuels and NGLs

Oil has fewer short-to-medium term competitors in transport

40% of growth, 30% of total demand by 2016 will be gasoil/diesel

Engine efficiency, all-round flexibility, make gasoil ‘ fuel of choice’

Bunker sulphur quality changes and ever-present fuel switching possibilities add further lustre to gasoil’s rising star

Bunker fuels rise from 4.3 mb/d to 5 mb/d, with residual fuel oil’s 75% share diminishing

World: Total Bunkers Demand

2.0

2.5

3.0

3.5

4.0

4.5

5.0

2001 2003 2005 2007 2009 2011 2013 2015

mb/d

Gasoil

Fuel Oil

World: Gasoil Demand

25.5%

26.5%

27.5%

28.5%

29.5%

30.5%

1996 2000 2004 2008 2012 2016-80%

-40%

0%

40%

80%

120%

As % of Total Demand As % of Total Growth

© OECD/IEA - 2010

Non-OPEC growth focus is shifting

19 Source: IEA Oil Market Report

-1.5-1.0-0.50.00.51.01.52.0mb/d Non-OPEC Supply - Yearly Change

NAM OECD EUR FSUChina Other Asia LAMPG & Biofuels Other Total

FSU provided main impetus for non-OPEC supply in the early part of the last decade

Baton now passed to the Americas – USA, Canada and Brazil

© OECD/IEA - 2010

What’s changed since June? US Light Tight Oil Raises Non-OPEC Supply Estimates

20 Source: IEA Oil Market Report

Downward revisions in 2011-2013 due to unplanned outages, project delays, difficult investment climate in some MENA countries.

Upward revisions due to uptick in E&P spending (rises by 22% in 2011, 10% in 2012), rosier N. American outlook.

2016 LTO revised up by 500 kb/d from June MTOGMR

NGL supply revised up because producers are targeting liquids-rich tight oil plays.

380 620 870 1,140 1,3201,530 1,700

01,0002,0003,0004,0005,0006,0007,000

2010 2011 2012 2013 2014 2015 2016

US Crude and Condensate Output

Total Light Tight OilGulf of MexicoAlaskaOther L48 Crude and Condensate

kb/d

-100

-600 -490-150

170520

710

-800-600-400-200

0200400600800

1000

2010 2011 2012 2013 2014 2015 2016

kb/d Non-OPEC Supply - Revisions

North America ChinaMiddle East OECD EuropeOth Asia OECD PacificAfrica Latin AmericaFSU Total Non-OPEC

© OECD/IEA - 2010

OPEC Crude Capacity Set to Rise 2.33 Mb/d Expected to Reach 38.1 mb/d by 2016

21 Source: IEA Oil Market Report

Crude oil expansion plans in the medium-term are moving apace, with capacity now forecast to increase by 2.33 mb/d to 38.1 mb/d by 2016

Capacity growth is 200 kb/d higher than our previous forecast for the 2010-16 period, with upward revisions to Iraq partially offset by delays to Iranian projects

Iraq accounts for 80% of the increase, with capacity forecast to increase by a sharp 1.87 mb/d, to 4.36 mb/d on average by 2016, which is higher by 340 kb/d since our June report, largely due to steady progress at the country’s 12 JVs

32.0

33.0

34.0

35.0

36.0

37.0

38.0

39.0

2010 2011 2012 2013 2014 2015 2016

mb/d OPEC Crude Oil Capacity

Previous Current

2.0

2.5

3.0

3.5

4.0

4.5

2010 2011 2012 2013 2014 2015 2016

mb/d Iraq Crude Oil Capacity

Previous Current

© OECD/IEA - 2010

Profile of new global oil supplies is changing

With OPEC NGLs also gaining +2.0 mb/d to 7.4 mb/d, ‘other supplies’ outstrip conventional crude in generating 2010-2016 supply growth

Other supplies also eat into the share of demand growth that needs to be sourced from refining crude….

0.01.02.03.04.05.06.07.08.09.0

OPEC* Non-OPEC Total

mb/dComponents of Global Liquids

Growth 2010-16

Crude NGLsUS Light Tight Oil Non-ConvBiofuels Processing Gain

* OPEC crude is capacity additionsGlobal Refinery processing gains included in Non-OPEC

0.0

2.0

4.0

6.0

8.0

2011 2012 2013 2014 2015 2016

mb/d Cumulative Demand Growth and Sources of Supply

GTL/CTL BiofuelsNGL transfers Refinery IntakeDirect crude burn Processing Gains

© OECD/IEA - 2010

…Leaving refining (at least in OECD) under pressure

Net refining capacity growth of 8.7 mb/d (all non-OECD) outstrips expected demand growth by 2 mb/d

Suggests there is more OECD capacity closure or rationalisation to come

The one bright spot will be middle distillates, with refiners positioned to produce clean diesel better able to resist intense competitive pressures

-1.0

0.0

1.0

2.0

3.0

2011 2012 2013 2014 2015 2016

mb/d Crude Distillation Additions

OECD ChinaOther Asia Middle EastLatin America Other Non-OECD

-5

0

5

10

15

2002 2005 2008 2011

$/bbl Refinery Cracking Margins

Med Urals NWE UralsNWE Brent USGC MarsSingapore Dubai

Source: Purvin & Gertz Inc.

© OECD/IEA - 2010

European refinery rationalisation gains pace Closures amount to 1.35 mb/d since 2008

© OECD/IEA - 2010

The medium term in summary Weaker demand baseline

& stronger supply lead to easier market balances than in June 2011

Spare capacity to increase from 2013 onwards in the base case

Uncertainties persists – eurozone, global economy, China, subsidies, supply risks, boom & bust refining

Supply growth struggles to exceed +1 mb/d annually, so outlook hinges critically on economic growth

Demand migration to non-OECD, & shift to more difficult oil needs better data for better forecasts

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

mb/dmb/d Medium-Term Oil Market Balance (Base Case)

Effective OPEC Spare Capacity (RHS) World Demand Growth World Supply Capacity Growth

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

mb/dmb/d Medium-Term Oil Market Balance (Lower GDP Case)

Effective OPEC Spare Capacity (RHS) World Demand Growth World Supply Capacity Growth

© OECD/IEA - 2010

Thank you for your attention

© OECD/IEA - 2010

-0.3

-0.2

-0.1

0.0

0.1

0.2

0.3

0.0

0.5

1.0

1.5

2.0

2.5

3.0

1Q06 1Q08 1Q10 1Q12 1Q14 1Q16

mb/dmb/d Processing Gains

Revision (RHS) CurrentPrevious

02468

101214

2010 2011 2012 2013 2014 2015 2016

mt/y Ethylene Capacity Additions

OECD ChinaMiddle East Other Non-OECDPrevious MTOGM

150

165

1802010 2012 2014 2016

Etylene Capacity, mt/y

North America EuropePacific AsiaChina FSULatin America Middle EastOther Regions

0306090

120150

Global Oil Intensity

-4.0%-3.5%-3.0%-2.5%-2.0%-1.5%-1.0%-0.5%0.0%

1996 2001 2006 2011 2016

Y-o-YChg

Short & Medium Term Oil Outlook��Presented to IEA-IEF-OPEC Symposium �on Energy Outlooks �Riyadh, 23-24 January 2012Slide Number 2Two year price recovery stalled since spring � But prices remain high by historical standardsShort Term Oil Demand: Bending But Not BreakingDemand-side risks skewed to the downsideOne-off factors can have major impact�Japan Turning Towards Thermal PowerDemand puzzles to watch in coming months2011 tells a story of supply disappointment... ...risk of more to come in 2012?Non-OPEC also suffers unscheduled 2011 outages2012 supply uncertainties aboundSlide Number 11Physical market has tightened sharply since mid-2010 – more to come in 2012?Inventories: major gaps in data coverageSlide Number 14Working assumptions: medium term outlook Creates two very different demand profilesDemand growth is all about non-OECD & transportTransport & Gasoil Underpin Demand GrowthNon-OPEC growth focus is shiftingWhat’s changed since June?�US Light Tight Oil Raises Non-OPEC Supply Estimates OPEC Crude Capacity Set to Rise 2.33 Mb/d Expected to Reach 38.1 mb/d by 2016Profile of new global oil supplies is changing …Leaving refining (at least in OECD) under pressureEuropean refinery rationalisation gains pace�Closures amount to 1.35 mb/d since 2008Slide Number 25Slide Number 26Slide Number 27