1. Author: Tom Giaever-Enger Managing Editor
Is a renowned commentator on the oil sector
This overview was prepared and delivered the 3rd week of September 2004
On a rising market but BEFORE the record highs
Author: Tom Giaever-Enger Managing Editor
Sep 21, 2004

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3. Agenda Supply constraints Effects of limited supply Increased demand
Effects of growth of demand
Higher prices
Effects of a high price environment

4. Agenda Supply constraints Effects of limited supply Increased demand
Effects of growth of demand
Higher prices
Effects of a high price environment

5. Factors Affecting Crude Prices on NYMEX

6. Year in Review - Price Fluctuations

7. Unforeseen Events, Geopolitical Factors

8. Supply Constraints OPEC Non-OPEC
Sustainable spare capacity dropped under 2%
Iraq: creaking infrastructure and sabotage
Venezuela: quality and quantity declining
Non-OPEC
Reserves declining faster in mature giant fields
Conservative hike in E+P budgets despite prices
FSU output taken for granted
Strikes in Norway, Nigeria

9. Supply Side Factors

10. Effects of Supply Constraints
Accentuated impact of geopolitical tensions
Futures prices lifted on long-term supply concerns
Greater speculative influence on prices
Increased volatility and unpredictability
Feedback loop encouraging more investment in oil
Without worldwide recession, prices kept higher

11. Agenda Supply constraints Effects of limited supply Increased demand
Effects of growth of demand
Higher prices
Effects of a high price environment

12. Increased Demand Asia US Globalization is energy-intensive
Asian demand is unexpectedly strong
State subsidies are a catalyst for runaway demand
Precursor for strategic stockpiling US
Global economic recovery led by the US
Difficulties meeting environmental regulations
Insufficient refining capacity
Conversion and cracking capacity maxed out

13. Prompt Crack Spreads versus Dubai: PFC

14. Demand Side Factors

15. Effects of Increased Oil Demand in Asia
High refining margins
Higher tanker charter prices
Growing reliance on Middle East, W. African crudes
Increased competition for Russian oil
Dependence growing on coal, nuclear power
Power and water shortages to dent demand

16. Agenda Supply constraints Effects of limited supply Increased demand
Effects of growth of demand
Higher prices
Effects of a high price environment

17. Higher Prices - A Shock? In previous oil shocks, prices tripled
Crude sales as share of global GDP have dropped
Previous spikes caused by supply dislocations
High prices are not “shocking” the global economy
But there are negative impacts on oil trading
And the market expects prices high for some time

18. Forward Curve: Paradigm Shift?

19. Effects of Higher Oil Prices
Oil producing countries
Adjusting to a higher OPEC price band
Retain objective to keep oil competitive
But global oil production will peak soon
Oil consuming countries
Energy efficiency increased in the short-term
ASEAN+3 pursuing regional stockpiling, alternatives
Economic output hampered in the long term
Conclusion

20. Thank you. Tom Giaever-Enger Managing Editor +65 6530 6504 tom_enger@platts.com www.platts.com