Political Instability & Crude Oil Pricing: Short Term Outlook Presented at ISM Midwinter Conference February 2006

Page # 2 Petral Consulting Company knowledge to bridge the gap Petral Chronicle February 7 th, 2004 Saudi Royal Family Abdicates Country Spirals into Chaos Crude Oil Prices Spike to $45 per barrel

Page # 3 Petral Consulting Company knowledge to bridge the gap Petral Chronicle August 7 th, 2004 Conservative & Pro-Western Factions of Saudi Royal Family at War Country Spirals into Chaos Crude Oil Prices Spike to $60 per barrel

Page # 4 Petral Consulting Company knowledge to bridge the gap Petral Chronicle February 7 th, 2005 Conservative & Pro-Western Factions of Saudi Royal Family at War Country Spirals into Chaos Crude Oil Prices Spike to $100 per barrel

Page # 5 Petral Consulting Company knowledge to bridge the gap Petral Chronicle February 7 th, 2005 Toto … we’re not in Kansas anymore Crude Oil Prices Spike to $100 per barrel

Page # 6 Petral Consulting Company knowledge to bridge the gap Flashpoints & Sources of Instability  Venezuela » Chavez has consolidated his power » Chavez uses oil revenues to fund government spending // maintenance of oil fields suffering » Oil fields in western Venezuela are high maintenance with natural decline rates of 20-25% per year – EIA statistics say production has been constant at 2.5 MM Bpd for 2 years

Page # 7 Petral Consulting Company knowledge to bridge the gap Other Flashpoints & Sources of Instability  Indonesia » Al Qaeda Has Mounted 2 Major Attacks » Local Islamic Forces Engaged in Civil War with Government Forces » Tourism Suffering // Crude Production Unaffected.. So Far  Nigeria » Conflict in Niger Delta Will Continue to Disrupt Production

Page # 8 Petral Consulting Company knowledge to bridge the gap Crude Prices & Saudi Crude Oil Production

Page # 9 Petral Consulting Company knowledge to bridge the gap Crude Prices & Middle East Crude Oil Production

Page # 10 Petral Consulting Company knowledge to bridge the gap Crude Prices & Russia Crude Oil Production

Page # 11 Petral Consulting Company knowledge to bridge the gap Crude Prices & North Sea Crude Oil Production

Page # 12 Petral Consulting Company knowledge to bridge the gap Crude Inventory Gulf Coast & Mid-Continent

Page # 13 Petral Consulting Company knowledge to bridge the gap U.S. Crude Imports

Page # 14 Petral Consulting Company knowledge to bridge the gap U.S. Refinery Crude Runs

Page # 15 Petral Consulting Company knowledge to bridge the gap WTI minus Brent

Page # 16 Petral Consulting Company knowledge to bridge the gap WTI minus Dubai/Oman

Page # 17 Petral Consulting Company knowledge to bridge the gap Gulf Coast Refinery Crack Spread Margin

Page # 18 Petral Consulting Company knowledge to bridge the gap U.S. Gasoline Production

Page # 19 Petral Consulting Company knowledge to bridge the gap U.S. Gasoline Imports

Page # 20 Petral Consulting Company knowledge to bridge the gap U.S. Gasoline Inventory

Page # 21 Petral Consulting Company knowledge to bridge the gap Gulf Coast Refinery Margin Crack Spread

Page # 22 Petral Consulting Company knowledge to bridge the gap Professional NYMEX Crude Traders Long Positions- Short Positions

Page # 23 Petral Consulting Company knowledge to bridge the gap Professional NYMEX Crude Traders # of Long Positions

Page # 24 Petral Consulting Company knowledge to bridge the gap Professional NYMEX Crude Traders # of Short Positions

Page # 25 Petral Consulting Company knowledge to bridge the gap WTI at Cushing: Cash Market

Page # 26 Petral Consulting Company knowledge to bridge the gap Conclusions & Observations  From the perspective of historical correlations, fundamentals are bearish for WTI prices.  From a NYMEX perspective, too many traders expanded short positions in the 4 th quarter. a price rebound in January has been a 100% lock since 1999 and short-covering reinforced the rebound.  Fundamentals will remain bearish but traders have to be concerned about the upcoming hurricane season – this factor is likely to kick in early this year (April/May).

Page # 27 Petral Consulting Company knowledge to bridge the gap Conclusions & Observations  Once a dependable source of incremental crude supply, Saudi Arabia has not increased crude oil production since the 3 rd quarter of 2004 (18 months)  Aramco says requests for crude are being met 100%.  Russia resumed state control of oil and gas production and is becoming viewed as an unreliable supplier

Page # 28 Petral Consulting Company knowledge to bridge the gap Conclusions & Observations  Uncertainties regarding crude production in Iraq, Iran Nigeria and Venezuela likely to keep traders and buyers ‘on edge’  Crude production In Venezuela likely to be stagnant or gradually declining during 2006/2007 due to the impact of Chavez “reforms” of PDVSA // several major Gulf Coast refineries are vulnerable  The bullish trend is likely to remain intact through August or September

Page # 29 Petral Consulting Company knowledge to bridge the gap Long Term Outlook  Due to bullish short term considerations and growing uncertainties about global supply development, Petral forecasts for crude oil prices of $50-60 per barrel now extend into  The uncertainties about demand growth in China, lagging development of new production in key areas like Russia, delays in development of production in Iraq point to stronger prices for much longer than we had forecast just a year ago.

Page # 30 Petral Consulting Company knowledge to bridge the gap West Texas Intermediate