On June 23rd, 2011

1. Oil & Gas Journal Midyear Forecast - 2011 Bob Tippee, Editor Oil & Gas Journal Energy Advocates June 23, 2011

2. World oil demand OECD down slightly at 45.9 MM b/d; non-OECD up 3.5% at 43.4 MM b/d

3. World oil supply Non-OPEC: 53.3 MM b/d (+1.1%) OPEC NGL: 5.9 MMb/d (+10.2%) Stock change: -300 M b/d OPEC crude: 29.8 MM b/d (+1%)

4. Second-half problem (MMb/d)

5. The OPEC story World needs 30 MM b/d of OPEC crude in 2H OPEC production: 29.9 MM b/d average 1Q 29.2 MM b/d in May OPEC June 8 meeting Split interests: haves vs. have-nots No quota adjustment Unilateral production hikes by S. Arabia, others

6. IEA today: tapping strategic stocks Release 60 MM bbl in next month (2 MM b/d) North America 50%, Europe 30%, Asia 20% “…contribute to well-supplied markets and to ensuring a soft landing for the world economy” (Executive Director Nobuo Tanaka) Total storage: 1.6 billion bbl Reassess in 30 days In market by July; Saudi oil can take 3 months

7. Effect of IEA action 2 MM b/d jolt of supply Brent and WTI quickly dropped by 7% Muted (so far) condemnation from OPEC Policy shift: market lever vs. emergency supply

8. Price wild cards Saudi response to IEA stock draw Economic response – especially crisis economies of Europe Dollar vs. Euro Demand response Trader worries about shrunken cushions (inventories and idle production capacity)

9. Spare production capacity (EIA)

10. OECD stocks

11. US oil price WTI discount to Brent was almost $20/bbl yesterday (June 22).

12. US energy demand Assumes real GDP growth of 2% Federal Reserve yesterday lowered GDP growth projection for 2011 to 2.7-2.9% from 3.1-3.3% in April Fed raised unemployment rate projection to 8.6-8.9% from 8.4-8.7% in April

13. US oil demand

14. US demand for key products

15. US gas price WTI:HH price ratio 22:1 yesterday (June 22) vs. BTU ratio of 6:1

16. US demand for gas

17. US gas production

18. US gas imports Canada -9% Mexico -83.% LNG -7%

19. Treasury: Percentage depletion=subsidy “The President agreed at the G-20 Summit in Pittsburgh to phase out subsidies for fossil fuels so that the United States can transition to a 21st-century energy economy. Percentage depletion effectively provides a lower rate of tax with respect to a favored source of income. “

20. The Close the Big Oil Tax Loophole Act Foreign tax credit for dual-capacity taxpayers Domestic production deduction (Sect. 199) Current-year expensing of intangible drilling costs (IDCs) Percentage depletion Deduction for qualified tertiary injectants