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Notes:

• In this presentation, crude oil prices will be discussed in two ways:
  • How average crude prices move up and down with the global supply/demand balance and world events; and
  • How the price of an individual crude varies because of its quality relative to other crude oils sold and as a function of the regional markets in which its sold.

• The values of different quality crudes vary over time based on the value the market places on such quality attributes. A heavy crude oil has more heavy, high-boiling point “bottoms” material that goes to residual fuel or asphalt, or can be cracked or converted to light products using downstream conversion process facilities.

• The remainder of this talk will focus mainly on the factors that have affected these quality differentials historically, and will look at what has been occurring recently. It will conclude with a short-term outlook.