London, 12 May 2010

Highlights from the IEA: Both the global economy and the oil sector face testing times after a series of natural and man‐made crises in recent months. Drawing similarities between coincident but disparate events risks sounding trite, but in each case policy responses will be crucial in determining the investment environment for the next decade. While most agree that a gradual shift towards a lower carbon economy is desirable, the reality is that oil will retain a pivotal role in satisfying the transportation and consumer aspirations of the world’s population for decades to come. So decisions made today that affect the way oil is produced, traded, stored, transformed, shipped and consumed really matter for the sake of the global economy.

• Crude prices fell by over $10/ bbl in early‐May, the biggest weekly decline in 18 months amid an evolving Eurozone debt crisis and sell‐off in global equity markets. Subsequent moves by EU finance ministers to guarantee liquidity for vulnerable economies saw partial recovery, with WTI futures recently trading at $76/bbl and ICE Brent at $79.50/bbl.

• Global oil demand is revised down by 190 kb/d on average for 2009 and 2010, equating to 84.8 mb/d (‐1.2 mb/d year‐on‐year) and 86.4 mb/d (+1.6 mb/d) respectively. Revisions stem largely from changes to non‐OECD historical baseline data, as slightly higher GDP prognoses from the IMF are counterbalanced by a higher price assumption.

• OPEC crude output rose by 40 kb/d in April, to 29.03 mb/d, sustaining a trend of largely stable supply since mid‐2009. The ‘call on OPEC crude and stock change’ for 2010 is cut by 0.4 mb/d to 28.7 mb/d on lower demand estimates and higher non‐OPEC supply. The ‘call’ peaks in 3Q10 at 29.4 mb/d but recedes in 4Q10 on rising non‐OPEC supplies.

• Non‐OPEC oil supply fell to 52.4 mb/d in April, on seasonal output curbs. The 2010 forecast is revised up 0.2 mb/d to 52.3 mb/d on higher expectations for the US, Canada and China. Growth in 2010 of 0.8 mb/d is the strongest since 2004 and matches that for OPEC NGLs. The Deepwater Horizon drilling accident in the US Gulf has led to a major crude spill. Regional production is unaffected but the incident may lead to tighter safety measures and delay further offshore leasing.

• OECD industry stocks rose by 7.3 mb to 2 709 mb in March, with divergent trends in crude and products across all OECD regions. Stock cover in days of forward demand rose to 60.5 days by end‐March but stood 1.1 days below March 2009 levels. Preliminary April data show a sharp 47.4 mb build in onshore stocks and higher floating storage.

• The 2Q10 global refinery crude run estimate is raised to 73.3 mb/d, up 450 kb/d from 1Q10 and 370 kb/d higher than in last month’s report. Sharply higher US crude runs in April, due to improved complex margins and a quick exit from seasonal turnarounds, combine with stronger expectations for Chinese throughputs.

Ends --