Slide 19 of 25

Notes:

• In the 1995-1996 period, light-heavy crude oil differentials expanded as the light crude surpluses in the Atlantic Basin began to move to the Asian market, which was unprecedented. This new market for the Atlantic Basin light sweet crude oils gave them new price support.
  • Although not shown, early reports indicate that West African flows in early 1997 were as high as 1 million barrels per day, and averaged about 0.7 million barrels per day for the year.
  • However, with the Asian crisis, first quarter 1998 flows may be less than 0.3 million barrels per day.

• In 1995-1996, a growing world economy was rapidly removing the crude oil surplus that had occurred in the early 1990’s, and crude oil prices rose. Light product markets were strengthening with the economy, and new heavy crude oil production was entering the market (see earlier slide).

• All of these factors tended to widen the light-heavy differentials.