Current Market Conditions August-September 2010

• The World Oil Market
• Petroleum Products
• Price Pressures

The World Oil Market

World oil prices rose through the first quarter of 2010 mainly supported by steep OPEC production cuts and market expectations of global economic recovery. During the second quarter, oil prices fell with ongoing challenges in financial markets and growing uncertainty around the degree to which government economic policies can continue to contribute to recovery in the real economy. The reference crude oil price, West Texas Intermediate (WTI) at Cushing, Oklahoma, averaged about US$75 per barrel in June and July compared to about US$80 per barrel in April and May. Currently, with global inventories at healthy levels and substantial OPEC spare capacity, markets are well supplied, tempering the potential for extreme upside price volatility. Of course, geo-political events always have the potential to move oil markets as do events in financial markets.

Oil prices are expected to remain in the area of US$75 per barrel during August-September.

Petroleum Products

The summer driving season in North America runs from late May through early September. With crude oil prices expected to remain near current levels, and with underutilized refining capacity, gasoline prices are expected to remain near June-July levels over the remainder of the summer.

Listed below are the main factors that are expected to have an impact on gasoline prices over the outlook period.

Price Pressures

Gasoline

• Price of Crude Oil (uncertain pressure on price)
  The global oil market will continue to be driven by evolving economic conditions in the U.S. and around the world. With the economic outlook still uncertain, oil prices could move higher or lower over the outlook period.
• Inventory Levels (downward pressure on price)
  U.S. gasoline inventories are near the top of the five-year range.
• Demand (uncertain pressure on price)
  All else equal, gasoline prices are typically a few cents per litre higher in the summer because of increased demand. In the important U.S. market, however, gasoline demand has not yet recovered to pre-recession levels.

For further crude oil pricing data and information, please see our Helpful Links. The following sections are also available: How Canadian Markets Work, Canadian Industry and FAQs.