May 6, 2011

Global

Energy Weekly
Oil prices plunge in a major market correction

Commodities Research

Oil prices undergo a sharp correction

Brent crude oil prices plummeted yesterday (May 5), falling $10.39/bbl to $110.80/bbl as of the NYMEX close, extending the declines of the past three days. In our view, this sharp decline resulted from prices pushing ahead of fundamentals in recent weeks, leaving them vulnerable to a substantial correction. We believe the catalysts for the sell-off were a string of disappointing economic data releases and the DOE statistics published on May 4.
David Greely
(212) 902-2850 david.greely@gs.com Goldman Sachs & Co.

Stefan Wieler, CFA

(212) 357-7486 stefan.wieler@gs.com Goldman Sachs & Co.

Jeffrey Currie
+44(20)7774-6112 jeffrey.currie@gs.com Goldman Sachs International

While a large portion of the risk premium likely came out of prices yesterday, we remain wary of the potential for further downside in coming days
The sell-off yesterday (May 5) has likely removed a large portion of the risk premium that we believe has been embedded in oil prices, which could suggest further downside may be limited from here. However, we remain wary of potential further downside should economic data releases in coming days continue to disappoint, with the focus now turning to todays (May 6) Non-farm payroll report in the United States.

Allison Nathan
(212) 357-7504 allison.nathan@gs.com Goldman Sachs & Co.

Johan Spetz
+44(20)7552-5946 johan.spetz@gs.com Goldman Sachs International

We continue to see fundamentals tightening over the course of this year, likely pushing prices back to recent highs by next year
It is nevertheless important to reiterate that while we saw recent prices as having risen above the levels consistent with underlying near-term supplydemand fundamentals, we continue to believe that the oil supply-demand fundamentals will tighten further over the course of this year, and likely reach critically tight levels by early next year should Libyan oil supplies remain off the market. Consequently, it is important to emphasize that even as oil prices are pulling back from their recent highs, we expect them to return to or surpass the recent highs by next year.

The Goldman Sachs Group, Inc. does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. For important disclosures, see the text preceding the disclosures or go to www.gs.com/research/hedge.html.

The Goldman Sachs Group, Inc.

Goldman Sachs Global Economics, Commodities and Strategy Research

May 6, 2011

Global

Hedging and trading recommendations

Petroleum
Hedging recommendations
Consumers: The recent sell-off has likely removed a substantial portion of the risk premium that we believe has been embedded in prices due to concerns about contagion in the MENA region. Although we believe that additional economic disappointments could generate more downside, it is important to reiterate that while we saw recent prices as having risen above the levels consistent with underlying near-term supply-demand fundamentals, we continue to believe that supply-demand fundamentals will tighten further over the course of this year, and likely reach critically tight levels by early next year should Libyan supplies remain off the market. With effective OPEC spare capacity now well below 2 million b/d, any further disruption in supply would significantly tighten the market, suggesting consumers should consider options strategies to mitigate this upside risk to prices. Refiners: Refining margins have recently shown counter-seasonal strength. However, this strength largely owes to the local weakness in WTI. As we expect the spread between WTI and Brent will narrow from current levels, we also expect product cracks to weaken. Further, we maintain that refining margins will remain under pressure owing to the large increase in refining capacity in Asia. As a result, we view any renewed rise in long-dated refinery margins in 2011 as a selling opportunity for refinery hedgers. For 2012 and beyond, we believe that crude will be the bottleneck in the system, rather than refining; this will squeeze margins from the crude side through backwardation, suggesting that refiners should also look for potential time-spread hedges. Producers: While the risk-reward trade-offs for producer risk management programs have slightly diminished with the recent sell-off, additional economic disappointments could generate more downside in the near term. We recommend that producers look at option strategies to hedge against this risk. However, we expect supply-demand balances to continue to tighten to critically tight levels in 2012, with prices rising back to or above recent levels by next year. Consequently, we think opportunities for producer hedging longer-term are less attractive.

Goldman Sachs Global Economics, Commodities and Strategy Research

May 6, 2011

Global

Current trading recommendations

Current trades Long UK Natural Gas Buy Q4 2012 ICE UK NBP Natural Gas Long Soybeans Buy November 2011 CBOT Soybean Long Gold Buy December 2011 COMEX Gold October 11, 2010 - Precious Metals $1,364.2/toz $1,484.9/toz $120.7/toz November 18, 2010 - Agriculture Update $11.60/bu $13.07/bu $1.47/bu April 26, 2011 - Natural Gas Weekly 70.8 p/th 70.1 p/th (0.7 p/th) First recommended Initial value Current Value Current profit/(loss)1

As of close on May 5, 2011. Inclusive of all previous rolling profits/losses.

Source: Goldman Sachs Global ECS Research.

Goldman Sachs Global Economics, Commodities and Strategy Research

May 6, 2011

Global

Price actions, volatilities and forecasts

Prices and monthly changes1 units Energy WTI Crude Oil Brent Crude Oil RBOB Gasoline USGC Heating Oil NYMEX Nat. Gas UK NBP Nat. Gas Industrial Metals LME Aluminum LME Copper LME Nickel LME Zinc Precious Metals London Gold London Silver Agriculture CBOT Wheat CBOT Soybean CBOT Corn NYBOT Cotton NYBOT Coffee NYBOT Cocoa NYBOT Sugar CME Live Cattle CME Lean Hog
1 2 3 4
4

Volatilities (%) and monthly changes2 Change Realized2 Change 4Q 09 1Q 10

Historical Prices 2Q 10 3Q 10 4Q 10 1Q 11

Price Forecasts3 3m 6m 12m

05 May Change Implied2

$/bbl $/bbl $/gal $/gal $/mmBtu p/th

99.80 110.80 3.10 2.83 4.26 55.32

-8.67 -10.26 -0.07 -0.29 -0.03 -8.08

29.6 30.2 27.5 26.6 34.7 26.8

-4.94 -5.83 -6.29 -5.88 0.09 -0.49

40.5 38.0 33.9 40.7 38.3 34.7

14.1 10.1 4.6 19.2 3.8 -9.7

76.13 75.54 1.94 1.94 4.93 31.83

78.88 77.37 2.11 2.01 4.99 33.35

78.05 79.41 2.17 2.07 4.35 37.48

76.21 76.96 2.00 2.01 4.23 42.68

85.24 87.45 2.22 2.31 3.98 51.74

94.60

100.00 101.00 104.00

105.52 105.00 105.00 107.00 2.68 2.78 4.20 56.77 2.72 2.88 3.75 66.90 2.60 2.91 4.00 83.10 2.79 3.00 4.25 71.50

$/mt $/mt $/mt $/mt

2635 8820 24525 2125

21.4 26.5 33.6 31.7

-1.57 -1.87 -1.01 -0.83

21.5 26.6 41.9 29.8

1.2 0.7 6.4 -5.4

2037 6677 17593 2241

2037 6677 17593 2241

2199 7274 20163 2307

2122 7042 22431 2052

2110 7278 21271 2043

2365 8614 23619 2333

2200 9300 19500 2400

2200 9600 19500 2400

2200 11000 19500 3100

-510 -975 -292

$/troy oz $/troy oz

1481 37.8

-0.6

-68
-64 -55

49

15.9 38.9

0.10 2.45

15.7 67.5

3.0 20.0

1099 17.6

1110 16.9

1197 18.3

1228 19.0

1370 26.4

1388 31.9

1480 24.7

1565 26.1

1690 28.2

cent/bu cent/bu cent/bu cent/lb cent/lb $/mt cent/lb cent/lb cent/lb

723 1320 705 147 288 3087 20.9 109.8 92.4

37.9 26.5 39.3 n/a n/a n/a 34.0 n/a n/a

-2.12 -2.69 -2.72 n/a n/a n/a -6.01 n/a n/a

41.3 24.1 33.7 48.7 30.7 33.4 34.6 19.4 30.7

-5.9 -4.1 -15.1 4.9 -3.0 -3.2 -12.7 -1.8 6.7

522 1002 386 71 139 3259 23.6 83.6 57.8

496 955 370 76 134 3070 24.4 90.5 69.7

467 957 355 81 140 2987 15.5 93.7 81.9

653 1035 422 87 174 2863 20.2 95.0 79.7

707 1245 562 128 205 2856 29.0 100.5 71.2

786 1379 670 179 257 3307 30.5 111.2 86.2

775 1500 860 150 235 2700 25.0 115.0 95.0

750 1575 780 125 200 2700 20.0 115.0 105.0

750 1575 700 125 175 2700 20.0 120.0 95.0

-49
-7.1 31 67

-12.6 -1.8

Monthly change is difference of close on last business day and close a month ago. Monthly volatility change is difference of average volatility over the past month and that of the prior month (3-mo ATM implied volatility, 1-mo realized volatility). Price forecasts refer to prompt contract price forecasts in 3-, 6-, and 12-months time. Based on LME three month prices.

Source: Goldman Sachs Global ECS Research.

Goldman Sachs Global Economics, Commodities and Strategy Research

May 6, 2011

Global

Oil prices plunge in a major market correction

Brent crude oil prices plummeted yesterday (May 5), falling $10.39/bbl to $110.80/bbl as of the NYMEX close, extending the declines of the past three days (Exhibit 1). In our view, the sharp decline resulted from prices pushing ahead of fundamentals in recent weeks, leaving them vulnerable to a substantial correction (see GS Energy Weekly: Prices return to spring 2008 levels, but fundamentals not there yet, April 12, 2011). We believe that the catalysts for the sell-off yesterday were a string of disappointing economic data releases and the May 4 DOE statistics: ISM non-manufacturing index dropped sharply to 52.8 from the prior months 57.3, one of the largest drops in its history. Particularly troubling was the sharp decline in the new orders index, which fell 11.4 points the biggest monthly drop in the 14 years of the survey to 52.7. German manufacturing orders fell substantially in March, falling 4.0 percent from the prior month, against the consensus estimate of a 0.4 percent rise. In addition, the ECB left interest rates unchanged and adopted rhetoric that shows less concern about inflation. US initial jobless claims jumped to 474 thousand last week from 431 thousand the prior week and a consensus of 410 thousand. While several distortions likely contributed to the increase, the result was still poor. Due to the timing of the survey, this report is more likely to have implications for the May employment report than for todays (May 6) Non-farm payroll report. The Weekly Petroleum Status Report from the US DOE reported that US total petroleum inventories are continuing to make the turn into seasonal builds. Over the past two weeks US total petroleum inventories have built 10.4 million barrels. While US oil demand remains relatively flat, allowing total petroleum inventories to build, extremely low US refinery runs have concentrated the recent builds in crude oil and other product inventories, while motor gasoline and distillate inventories continue to draw.

Yesterdays (May 5) sell-off has likely removed a large portion of the risk premium that we believe has been embedded in oil prices, which suggests further downside may be limited from here. However, we remain wary of potential further downside should economic data releases in coming days continue to disappoint, with the focus now turning to todays (May 6) Non-farm payroll report in the United States. It is nevertheless important to reiterate that while we saw recent prices as having risen above the levels consistent with underlying near-term supply-demand fundamentals, we continue to believe that supply-demand fundamentals will tighten further over the course of this year, and likely reach critically tight levels by early next year should Libyan supplies remain off the market. Consequently, it is important to emphasize that even as oil prices are pulling back from their recent highswe expect them to return to or surpass the recent highs by next year.

Goldman Sachs Global Economics, Commodities and Strategy Research

May 6, 2011

Global

Exhibit 1: Oil prices plummeted in a major market correction

$/bbl
129 127 125 123 121 119 117 115 113 111 109 1-Apr-11 118 116 114 112 110 108 106 104 102 100 98 8-Apr-11 15-Apr-11 22-Apr-11 29-Apr-11

Brent price (LHS)

Source: NYMEX, ICE, GS Global ECS Research.

WTI price

Weekly DOE data shows signs of seasonal build in inventories, while the monthly DOE data for February shows oil demand weaker than previously estimated
This weeks Weekly Petroleum Status Report from the US Department of Energy showed a large build in US total petroleum inventories for the second week in a row, with oil demand remaining relatively flat. US total petroleum inventories have built 10.4 million barrels over the past two weeks, which is typical for this time of the year (Exhibit 2). Meanwhile, US total product demand decreased sharply week-over-week, down 1.25 million b/d; however, this was mainly due to a sharp decline in demand for the other products. Demand for the main products (motor gasoline, distillates, jet fuel and residual fuel) remains slightly above last years levels (Exhibit 3); however, US motor gasoline demand remains flat at a time of year when it typically increases. Interestingly, the rather flat US demand has allowed US total petroleum inventories to begin to build seasonally despite the fact that US net imports of total petroleum have dropped to the lowest levels since 1997.

Goldman Sachs Global Economics, Commodities and Strategy Research

May 6, 2011

Global

Exhibit 2: US total petroleum inventories have built over the past two weeks, in line with the seasonal trend
Thousand b/d
1,150

Exhibit 3: US demand for the major petroleum products remains only slightly above 2010 levels
Thousand b/d, (gasoline, jet fuel, distillate, residual fuel)
9,500 9,400

1,100

9,300 9,200

1,050 9,100 9,000 1,000 8,900 8,800 8,700 900 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 8,600 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Week ending 29 April

950

2011

2010

2009

2008

2007

5y avg (2003-07 indexed)

2011

2010

2009

2008

Week ending 29 April

Source: DOE, GS Global ECS Research.

Source: DOE, GS Global ECS Research.

While US total petroleum demand has remained relatively flat in the weekly data, the more comprehensive monthly data, which was released on Thursday last week, reported that US oil demand in February was substantially weaker than was first reported in the weekly data. US total petroleum demand in February was flat to 2010 levels, 750 thousand b/d below the weekly estimates (Exhibit 4). This large divergence was driven by substantial revisions in US demand for motor gasoline and the other petroleum products (Exhibit 5). As we have highlighted in the past (see Energy Weekly: Market pulls back even as demand surges forward, May 25, 2010), the more comprehensive monthly DOE demand estimates often vary substantially from the weekly estimates. However, the divergence between the two estimates in February was the largest since May of last year.

Exhibit 4: US total petroleum demand in February was much weaker than what the weekly data suggested
Thousand b/d
21,500

Exhibit 5: US motor gasoline demand was also likely lower than what the weekly data suggested
Thousand b/d
9600

9400 20,500 9200

Weekly DOE estimates

19,500

9000

8800

Weekly DOE estimates

8600 18,500

Monthly DOE release

8400

Monthly DOE release

17,500 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

8200 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2011 Weekly

2011 Monthly

2010

2009

2008

2011 Weekly

2011 Monthly

2010

2009

2008

Source: DOE, GS Global ECS Research.

Source: DOE, GS Global ECS Research.

Goldman Sachs Global Economics, Commodities and Strategy Research

May 6, 2011

Global

Interestingly, while divergences between the weekly and monthly data in the past have often been driven by changes in the export estimate, the February divergence was driven to a large part by an overstatement of US motor gasoline production in the weekly data. This difference has an important implication. When the US demand is lower in the monthly data because exports are higher, it suggests little change to overall demand levels, just a change in whether that demand is in the United States or outside of it. However, in February when US demand was lower in the monthly data because production was lower, it did lead to a lower estimate of overall demand levels relative to the weekly data. We believe this overstatement of US motor gasoline production in the February weekly data bears monitoring as it could be ongoing. In recent weeks, US crude runs at refineries have fallen to very low levels while reported US motor gasoline production has remained above last years levels. This suggests we could continue to see lower US motor gasoline estimates in the monthly data in coming months.

Exhibit 6: US motor gasoline production has remained relatively strong in the recent weekly data
Thousand b/d
9,700 9,500

Exhibit 7: even as US refinery runs have fallen to very low levels for this time of year
Thousand b/d
16,000

15,500
9,300 9,100 8,900 8,700

15,000

14,500

14,000
8,500 8,300 8,100 7,900 Jan Feb Mar Apr May 2011 Jun 2010 Jul Aug 2009 Sep 2008 Oct Nov Dec

13,500

13,000

12,500 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2011

2010

2009

2008

Source: DOE, GS Global ECS Research.

Source: DOE, GS Global ECS Research.

Goldman Sachs Global Economics, Commodities and Strategy Research

May 6, 2011

Global

US oil stocks
Million barrels
End-of-Week Product Total Petrol Crude Oil Total Product Mogas Jet Fuel Distillate Resid Other
Source: DOE.

US crude oil stocks

Million barrels
Change 30-Apr-10 1082.7 360.6 722.1 224.9 44.5 152.4 46.1 134.6 4Wk -1.3 8.9 -10.1 -12.1 -1.1 -8.4 1.7 8.1 Year -41.6 6.0 -47.6 -20.4 -4.7 -7.3 -7.9 64.7
280 300 340 380 400

29-Apr-11 1041.1 366.5 674.6 204.5 39.8 145.1 38.2 199.3

1-Apr-11 1042.4 357.7 684.7 216.7 40.9 153.5 36.5 191.2

2009

2010

360

2011

320

2008

260 Jan Feb Mar Apr May Jun Jul Sep Oct Nov Dec

Source: DOE.

US total hydrocarbon stocks

Million barrels
1200

US distillate stocks
Million barrels
180

2010
1150 170 160 150 1050

2011

1100

2011

2010 2009

2009 2008

140 130 120 110

1000

950

2008

900 100 850 90 80 Jan Feb Mar Apr May Jun Jul Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Sep Oct Nov Dec

800

Source: DOE.

Source: DOE.

US motor gasoline stocks

Million barrels
245

US residual fuel stocks

Million barrels
50

2011
235

2008 2010
45

2011 2008

2010

225 40 215

2009
205 35

195 30 185

2009

175 Jan Feb Mar Apr May Jun Jul Sep Oct Nov Dec

25 Jan Feb Mar Apr May Jun Jul Sep Oct Nov Dec

Source: DOE.

Source: DOE.

Goldman Sachs Global Economics, Commodities and Strategy Research

May 6, 2011

Global

WTI forward curve

US$/bbl
115.00 113.00 111.00

WTI-Brent forward curve

US$/bbl
0.00

-2.00

-4.00 109.00 107.00 105.00 103.00 101.00 -12.00 99.00 97.00 95.00 May-11 -14.00 -6.00

-8.00

-10.00

-16.00 Aug-11 Nov-11 Feb-12 May-12 Aug-12 Nov-12 Feb-13 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13

05May11

28Apr11

05Apr11

05May11

28Apr11

05Apr11

Source: Goldman Sachs Global ECS Research.

Source: Goldman Sachs Global ECS Research.

Historical realized WTI volatility

Percentage
110% 100%

Historical WTI prices

US$/bbl
155.00

135.00 90% 80% 70% 60% 50% 40% 30% 35.00 20% 10% Jan 00 15.00 Jan-00 75.00 115.00

95.00

55.00

Apr 01

Jul 02

Oct 03

Jan 05

Apr 06

Jul 07

Oct 08

Jan 10

Apr-01

Jul-02

Oct-03

Jan-05

Apr-06

Jul-07

Oct-08

Jan-10

Apr-11

Source: Goldman Sachs Global ECS Research.

Source: Goldman Sachs Global ECS Research.

321 NYMEX forward curve

US$/bbl
32.00

NYMEX heating oil crack forward curve

US$/bbl
31.00

29.00 27.00 27.00 22.00 25.00

17.00

23.00

21.00 12.00 19.00 7.00 17.00

2.00 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13

15.00 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13

05May11

28Apr11

05Apr11

05May11

28Apr11

05Apr11

Source: Goldman Sachs Global ECS Research.

Source: Goldman Sachs Global ECS Research.

Goldman Sachs Global Economics, Commodities and Strategy Research

10

May 6, 2011

Global

Historical NYMEX heating oil crack prices

US$/bbl
40.00 35.00 30.00 25.00

RBOB crack forward curve

US$/bbl
35.00

30.00

25.00

20.00 20.00 15.00 10.00 5.00 0.00 0.00 -5.00 Jan-00 May-11 Apr-01 Jul-02 Oct-03 Jan-05 Apr-06 Jul-07 Oct-08 Jan-10 Apr-11 Aug-11 Nov-11 Feb-12 May-12 Aug-12 Nov-12 Feb-13 15.00

10.00

5.00

05May11

28Apr11

05Apr11

Source: Goldman Sachs Global ECS Research.

Source: Goldman Sachs Global ECS Research.

Historical RBOB crack prices

US$/bbl
40.00 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00

USGC 1.0 percent fuel oil crack forward curve

US$/bbl
0.00 -1.00 -2.00 -3.00 -4.00 -5.00 -6.00 -7.00 -8.00

-5.00 -9.00 -10.00 Jan-06 May-11 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Aug-11 Nov-11 Feb-12 May-12 Aug-12 Nov-12 Feb-13

05May11

28Apr11

05Apr11

Source: Goldman Sachs Global ECS Research.

Source: Goldman Sachs Global ECS Research.

Goldman Sachs Global Economics, Commodities and Strategy Research

11

May 6, 2011

Global

Reg AC
We, David Greely, Stefan Wieler, CFA, Jeffrey Currie, Allison Nathan and Johan Spetz, hereby certify that all of the views expressed in this report accurately reflect our personal views, which have not been influenced by considerations of the firm's business or client relationships.

Disclosures
Global product; distributing entities
The Global Investment Research Division of Goldman Sachs produces and distributes research products for clients of Goldman Sachs, and pursuant to certain contractual arrangements, on a global basis. Analysts based in Goldman Sachs offices around the world produce equity research on industries and companies, and research on macroeconomics, currencies, commodities and portfolio strategy. This research is disseminated in Australia by Goldman Sachs & Partners Australia Pty Ltd (ABN 21 006 797 897) on behalf of Goldman Sachs; in Canada by Goldman Sachs & Co. regarding Canadian equities and by Goldman Sachs & Co. (all other research); in Hong Kong by Goldman Sachs (Asia) L.L.C.; in India by Goldman Sachs (India) Securities Private Ltd.; in Japan by Goldman Sachs Japan Co., Ltd.; in the Republic of Korea by Goldman Sachs (Asia) L.L.C., Seoul Branch; in New Zealand by Goldman Sachs & Partners New Zealand Limited on behalf of Goldman Sachs; in Russia by OOO Goldman Sachs; in Singapore by Goldman Sachs (Singapore) Pte. (Company Number: 198602165W); and in the United States of America by Goldman Sachs & Co. Goldman Sachs International has approved this research in connection with its distribution in the United Kingdom and European Union.
European Union: Goldman Sachs International, authorized and regulated by the Financial Services Authority, has approved this research in connection with its distribution in the European Union and United Kingdom; Goldman Sachs & Co. oHG, regulated by the Bundesanstalt fr Finanzdienstleistungsaufsicht, may also distribute research in Germany.

General disclosures
This research is for our clients only. Other than disclosures relating to Goldman Sachs, this research is based on current public information that we consider reliable, but we do not represent it is accurate or complete, and it should not be relied on as such. We seek to update our research as appropriate, but various regulations may prevent us from doing so. Other than certain industry reports published on a periodic basis, the large majority of reports are published at irregular intervals as appropriate in the analyst's judgment. Goldman Sachs conducts a global full-service, integrated investment banking, investment management, and brokerage business. We have investment banking and other business relationships with a substantial percentage of the companies covered by our Global Investment Research Division. Goldman Sachs & Co., the United States broker dealer, is a member of SIPC (http://www.sipc.org). Our salespeople, traders, and other professionals may provide oral or written market commentary or trading strategies to our clients and our proprietary trading desks that reflect opinions that are contrary to the opinions expressed in this research. Our asset management area, our proprietary trading desks and investing businesses may make investment decisions that are inconsistent with the recommendations or views expressed in this research. We and our affiliates, officers, directors, and employees, excluding equity and credit analysts, will from time to time have long or short positions in, act as principal in, and buy or sell, the securities or derivatives, if any, referred to in this research. This research is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Clients should consider whether any advice or recommendation in this research is suitable for their particular circumstances and, if appropriate, seek professional advice, including tax advice. The price and value of investments referred to in this research and the income from them may fluctuate. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur. Fluctuations in exchange rates could have adverse effects on the value or price of, or income derived from, certain investments. Certain transactions, including those involving futures, options, and other derivatives, give rise to substantial risk and are not suitable for all investors. Investors should review current options disclosure documents which are available from Goldman Sachs sales representatives or at http://www.theocc.com/about/publications/character-risks.jsp. Transactions cost may be significant in option strategies calling for multiple purchase and sales of options such as spreads. Supporting documentation will be supplied upon request. All research reports are disseminated and available to all clients simultaneously through electronic publication to our internal client websites. Not all research content is redistributed to our clients or available to third-party aggregators, nor is Goldman Sachs responsible for the redistribution of our research by third party aggregators. For all research available on a particular stock, please contact your sales representative or go to http://360.gs.com. Disclosure information is also available at http://www.gs.com/research/hedge.html or from Research Compliance, 200 West Street, New York, NY 10282. Copyright 2011 Goldman Sachs. No part of this material may be (i) copied, photocopied or duplicated in any form by any means or (ii) redistributed without the prior written consent of The Goldman Sachs Group, Inc.

Goldman Sachs Global Economics, Commodities and Strategy Research

12