JANUARY 2016 condensate products, not to mention all the NGLs such as propane (which use the same export terminals). At this time, there is adequate capacity to handle any increases in export flow. Indeed, in January 2016, the first boat loaded with U.S. crude was leaving Texas for Europe. IV.

SUMMARY Our analysis points to a base case for long period of low crude oil prices. The China-driven boom in emerging market demand is over. Slow growth due to aging demographic challenges will keep real GDP growth very slow in the mature, industrial countries.

Technological advances in fuel efficiency in transportation mean the elasticity of demand for crude oil with respect to economic growth is diminishing. And, on the supply-side, further technological improvements in oil extraction are reducing costs, allowing more production from fewer oil rigs. This all adds up to a prolonged period of low oil prices as our base case.

The price risks to the downside for oil prices come mostly from the possibility of a hard-landing in the Chinese economy leading to a global recession – not likely but worth considering. The price risks to the upside come from conflict in the Middle East, possibly involving Saudi Arabia and Iran, leading to major supply disruptions – again, this is a small probability event with a huge impact, so monitoring is required. Copyright © 2016 CME Group. All rights reserved. 7 .