Slide 4 of 10

Notes:

• The downturn in world oil prices can be understood by going back to the global markets briefly and looking at what is happening to supply and demand.

• As the figure shows, stocks are usually built in the second and third quarters, and drawn down in the fourth and first quarters (winter), when demand is high. In years when crude supply is in surplus of demand, there is a net stock build. (Compare the dark areas where demand exceeds supply and stocks are being drawn down to the areas where the dotted demand line runs below the supply and stocks are being built.)

• Starting in 1997, production has been in surplus and prices have fallen under the weight of excess volumes available for sale.