Energy Market Summary April 24, 2022

Petroleum prices fell for the second week in four and fourth in seven. A decidedly mixed number of influences
resulted in the appearance of prices meandering at various points through the week. The prospects of higher
interest rates, a sharp increase in Chinese Covid rates, both of which should inhibit demand, and Saudi Arabian
Crude exports reaching two-year highs were the key drivers weighing on markets. Increasing strife in Libya
limiting exports, bullish EIA statistics showing domestic Crude production near one year highs and record high
Crude exports from the US served to limit losses. An emerging theme of a contra seasonal shift in refinery
production geared to optimize Distillate output in the summer to replace vast shortfalls of Russian supplies is
a common thread across global markets. Total commercial petroleum inventories in the US fell by 8.1 MB on
the week. WTI prices fell by 4.1%, Brent by 4.5% and RBOB by 2.3%. Distillate prices increased by 2.2%.

Comments by the Federal Reserve indicating an increasingly aggressive policy to raise interest rates and tame
rampant inflation dovetailed with an IMF forecast reducing global economic growth prospects in driving US
equity indexes lower. On the week, the Dow fell 1.9%, the S&P 2.7% and the NASDAQ 3.8%. The dollar index
increased by 0.62 to settle at 101.12. Gold prices fell $30.60 per ounce lower on the week,settling at $1,934.30.

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Shanghai, the focal point of Covid’s resurgence in China, has been in near quarantine conditions for a number
of weeks. Overall demand of petroleum in China is down by at least 1.2 MBPD, according to data gleaned from
government reports. This represents a drop of nearly 20% in Chinese demand versus levels of last year at this

Shipping data and international market research groups concur that Russian output has fallen by more than
10%, approaching levels of 1.5 MBPD since its invasion of the Ukraine.

Distillate exports from the United States have averaged 1.6 MBPD over the last two weeks, leaving US Distillate
inventories 20% lower than levels of last year at this time.

Discussions have led nowhere among European countries regarding imposition of a ban of Russian imports.
Germany, perhaps the country most reliant on Russian energy in the EU, claims it can eliminate the flow of
Russian oil imports by the end of 2022 but will still be heavily dependent on Russian Natural Gas imports.

Approximately 500 KBPD of Libyan exports were blockaded this week as Benghazi-based Russian-backed
factions continue to challenge the authority of the Tripoli-based UN-backed government.

US Crude inventories fell for a first week in three and fifth in eight, falling by 8.02 MB. This was the largest weekly drop in US
Crude inventories since July 2020. Crude stocks are now 15% below their five-year average. The price of Crude fell $4.88 on the
week. Inventories in the three PADDs affected by trans-Atlantic trade fell by 5.263 MB. The reduction was disproportionately
large in PADD 3, the US Gulf Coast, where stocks fell by 3.501 MB. The PADD 3 utilization rate of 94.9% and a near doubling of
Crude exports to a level of 4.270 MBPD, the biggest weekly increase since September 2017, were key elements in the sharp
reduction of Crude supplies. It now appears that the increases in the release of Crude from the Strategic Petroleum Reserve are
largely dedicated to exports. Inventories at the Nymex delivery point of Cushing Oklahoma fell for the first week in three, dropping
by 185 KB. The increase in the flow of exports is also attributable in part to this reduction in Cushing. Domestic production
increased for a third week in four, rising by 100 KBPD to a level of 11.9 MBPD. Overall inventories were reduced despite this
increase in production as utilization rates increased for a ninth week in 10. We expect the high flow of exports to continue.
Shipping data indicates it should be at a slightly lower rate in the week ahead. As a consequence, we anticipate US Crude
inventories will fall by 4.5 to 5.0 MB in the coming week.

US Gasoline inventories fell for a third consecutive week and 10th in 11, dropping by 761 KB. Gasoline inventories remain 3%
below their five-year average and are 2.6 MB below levels of last year at this time. The price of RBOB fell by 764 points on the
week. Inventories in the three PADDs affected by trans-Atlantic trade fell by 581 KB. The reduction was disproportionately large
in PADD 1, the US Atlantic, where stocks fell by 1.709 MB. Inventories in the PADD 1 subsection that encompasses New York
Harbor, the Nymex delivery point, fell by 1.512 MB. This was most conspicuous as imports of Gasoline rose for the first week in
four, increasing by 158 KBPD to a level of 597 KBPD. Shipping data indicates a likely increase in imports in the week ahead by as
much as 200 KBPD. The average price at the pump for a gallon of Gasoline in the United States increased in the past week and is
now $4.12. National demand increased by 132 KBPD to a level of 8.868 MBPD. This renders Gasoline demand at near seasonal
norms. Likely static production coupled with an increase in the flow of imports may result in Gasoline inventories growing by 1.0
to 1.5 MB in the week ahead.

US Distillate inventories fell for a second consecutive week and 11th in 14, dropping by 2.664 MB. Distillate inventories are now
20% below their five-year average, are 32.8 MB below levels of last year at this time and are well below their five-year lows. The
price of ULSD gained 838 points on the week. Inventories in the three PADDs affected by trans-Atlantic trade fell by 3.125 MB.
The most conspicuous change was PADD 1, the US Atlantic, where inventories fell by 2.647 MB. Inventories in PADD 3, the US
Gulf Coast, increased by 356 KB as utilization rates in the region rose to 94.9% of capacity. Distillate exports fell in the past week,
dropping by 291 KBPD to a level of 1.478 MBPD. Despite softening freight values, we expect export flows to increase in the week
ahead, rising to a level as high as 1.86 MBPD. Distillate demand increased by 338 KBPD to a level of 3.822 MBPD as early
agricultural demand emerges. Given expectations of increased exports as well as prospects of a slight increase in demand, we
anticipate Distillate inventories to fall by 3.0 to 3.5 MB in the coming week.

Reduced Russian supplies, stagnating Western economies and a resurgence of Covid may result in somewhat directionless price
behavior in the near term. Both short and long-term prospects for the increase in the relative value of Distillate versus other
petroleum streams is likely to persist.

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