1. Post-War Oil Markets: Everything Is OK, Right? Dennis Eklof - Executive Managing Director, Global Energy Bruce Cavella – Senior Economist June 12, 2003

2. Copyright  2003 Global Insight, Inc. 2 Global Oil Markets 2003½ : Where Do We Stand?  Little damage to Iraqi oil infrastructure from war.  Demand Growth: SARS, weak economic environment: wait until next year.  Non-OPEC: The taps are WIDE OPEN.  OPEC: The taps are (nearly) WIDE OPEN.  Prices: Prices fell prior to and during war, but bombings in Riyadh, low inventories, and slow Iraqi recovery have pushed up prices.  The Outlook: Low inventories, slow Iraqi return, natural gas worries in the United States, and production adjustments by OPEC will support prices in coming months.

3. Copyright  2003 Global Insight, Inc. 3 Global Oil Markets 2003½ : Where Have We Been?

4. Copyright  2003 Global Insight, Inc. 4 Global Oil Markets 2003½ : Where Do We Stand? Demand Growth Stronger in 2004

5. Copyright  2003 Global Insight, Inc. 5 Natural Gas Prices: Supporting Limited Oil Demand Growth  Current US short to mid-term gas/oil switching capacity about 0.65 to 0.70 mbd  At least two thirds has already switched, a major factor contributing 0.5 mbd to recent growth in resid and distillate demand  High gas prices almost certain to continue through 1H2004 so some additional switching possible  Important long-term issue is whether higher long- term gas prices will provide oil demand growth or merely reduced industrial activity and import substitution

6. Copyright  2003 Global Insight, Inc. 6 US Natural Gas Prices: Continued Upward Trend for Now

7. Copyright  2003 Global Insight, Inc. 7 Global Oil Markets 2003½ : Where Do We Stand? OECD Commercial Stocks and Forward Supply

8. Copyright  2003 Global Insight, Inc. 8 Global Oil Markets 2003½ : Where Do We Stand? Non-OPEC Production Growing  Non-OPEC production growing by nearly 1 million b/d this year.  Growth in non-OPEC production meets all of expected demand growth in 2003.  Non-OPEC production increases by nearly 1 million b/d again in 2004.  Little room for OPEC-10 to expand production in 2004 particularly with return of Iraqi oil.

9. Copyright  2003 Global Insight, Inc. 9 Non-OPEC Production Growth

10. Copyright  2003 Global Insight, Inc. 10 Iraqi Oil Production

11. Copyright  2003 Global Insight, Inc. 11 Global Oil Markets 2003½ : Where Does OPEC Stand?

12. Copyright  2003 Global Insight, Inc. 12 Global Oil Markets 2003½ : OPEC Continues To Manage the Market and Prices

13. Copyright  2003 Global Insight, Inc. 13 OPEC Basket Price

14. Copyright  2003 Global Insight, Inc. 14 “OPEC Taps Are Open And Oil Is On The Way!” – March teleconference.  Saudi Arabia chartered 20-25 ships to bring extra crude to market in mid- to late-January and again in late March.  Six-week sailing time to the U.S. meant that a wave of oil was on the way.

15. Copyright  2003 Global Insight, Inc. 15 Where Is the Oil?  Oil may be “slow-steaming”.  Oil may have been diverted to Caribbean storage or to other destinations.

16. Copyright  2003 Global Insight, Inc. 16 Global Oil Markets 2003½ : Where Do We Stand? U.S. Commercial Stocks and Forward Supply

17. Copyright  2003 Global Insight, Inc. 17 Near-Term Price Scenarios