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Goldman Sachs index change roils NYMEX

RFG contract drops more than 8%

New York—Front-month reformulated gasoline
futures dived more than 8% on the New York
Mercantile Exchange August 10 after the big
Goldman Sachs Commodity Index announced
it would no longer roll any of its RFG positions
into the RBOB contract. instead, it has opted
to spread its volumes into crude and heating
oil.

September unleaded RFG on the NYMEX
settled 18.33 cents lower at $1.9889/gal
August 10. Crude and heating oil followed
gasoline lower. September crude settled
$2.35/barrel lower at $74/barrel and Sep-
tember heating oil settled 8.13 cents lower at
$2.0250/gal.

Markets had opened lower on fears a
foiled terrorist plot in the UK would cause a
drop in product demand, but analysts expect-
ed the impact to be short lived.

“Although the foiled terror attack in Britain
has shocked the market into questioning its
demand assumptions, the US gasoline market
remains the anchor that is pulling the rest of
the market down,” Tim Evans, energy analyst
at CitiGroup, said in a report. “It has consis
tently rejected bullish news this week, includ-
ing Monday's $2.22 gain in crude oil on the
Prudhoe Bay shutdown and the 3.2 million
barrel drop in DOE gasoline stocks reported
Wednesday.”

Why a threat to airlines would have such a
dramatic impact on US gasoline prices was
difficult to explain. Spot jet fuel prices tum-
bled in Europe following news of the planned
attacks, but firmed in the afternoon. Traders
said they could not see any dramatic change
in the prompt physical structure of jet unless
the travel disruptions continued.

Meanwhile, Goldman Sachs in June
announced a change to its index that was
expected to move the bulk of New York gaso-
line futures trade over to the ethanol blend-
stock RBOB and away from reformulated gaso-
line (ON 6/9).

The company said August 10 the current
weighting in its index given to the RBOB con-
tract will remain as is, but overall the gasoline
apportionment will decline. September RBOB
settled 13.09 cents lower at $2.0678/gal.

The August 10 announcement follows on
a similar decision announced by Goldman
Sachs July 12 regarding the September roll

Weekly EIA gas storage levels (Bcf)

| This week Last week Change Year ago‘ S-Vear average

| Consuming Region East 1,554 1,555 1 1,359 1,342
Consuming Region West 380 373 7 368 334
Producing Region 829 a7 18 730 712

| Total US 2,763 2,775 12 2,487

Estimated working gas in storage for the week ended August 4

period. Goldman left the door open for further
adjustments, saying it “will continue to moni:
tor market conditions and keep market partici-
pants apprised of its intentions with respect
to the GSCI and the gasoline futures market,
and will make additional announcements, as
necessary or appropriate in connection with
further developments.”

Open interest in the RFG contract has
tumbled to about 80,000 contracts, leaving
the market vulnerable to exaggerated moves
due to a lack of liquidity.

RBOB trade

At the same time, open interest has been
slow to develop in the RBOB contract, which
was launched in October 2005 to eventually
replace RFG as the benchmark US gasoline
futures contract following the January 2007
ban on the use of MTBE in the state of New
Jersey. New York State already has banned
MTBE. New York Harbor, with terminals in both
states, is the delivery point for NYMEX gaso-
line and heating oil futures.

Market sources have disagreed on the via-
bility of RBOB—a blendstock requiring the
addition of ethanol at a terminal in order to
become finished gasoline. Some have said
that RBOB, as a blendstock, is not a close
enough proxy for finished gasoline and would
have difficulty ever gaining traction, while oth-
ers have said open interest will develop as
the RFG contract is phased out.

The last RFG contract listed is January
2006. Open interest in RBOB hit a record
high of 58,230 contracts August 9, while RFG
totaled 80,579 lots.

The alltime high open interest for the RFG
contract was 181,485 contract on March 24,
2005.

Additionally, non-commercials, which are
primarily comprised of hedge funds, were long
a total of 28,329 contracts of gasoline (RFG
and RBOB) futures and options as of August
1, the latest data available from the Commod-
ity Futures Trading Commission.

Gasoline opened below a six-month sup-
port line, triggering sell stops, a floor source
Said, and locals, or independent floor traders,
sensing there was no buying kept pressure on
prices throughout the session.—Linda Rafield,
David Marino

2,389

Oil prices drop on news of
foiled terror plot on aircraft

London—Oil prices tumbled August 10 after
British police said they had foiled a plot to
blow up passenger aircraft flying from Britain
to the US. North Sea Brent crude, which set
new records above $78/barrel earlier this
week as BP partially closed its Prudhoe Bay
oil field in Alaska, was trading back below
$76/barrel August 10.

Air travel to and from Britain was plunged
into chaos as the British Airports Authority,
which manages the country’s main airports,
suspended flights into and out of London
Heathrow, one of the world’s busiest airports,
for most of the day.

UK Home Secretary John Reid said
police and security service MIS had carried
out “a major counterterrorism operation”
overnight. Police and security service MIS
were investigating “an alleged plot to bring
down a number of aircraft through mid-flight
explosions, causing a considerable loss of
life,” he said.

Reid said 21 people were in custody and
that the police operation was “complex” and
“ongoing,” and that the UK threat level had
been raised to critical as a precautionary
measure. The Home Office web site explains
that critical, the highest level of threat, means
an attack is expected imminently.

“As regards the specific plot, we think
that the main players are in custody,” Reid
told a news conference broadcast live on tel-
evision.

US Homeland Security chief Michael
Chertoff told a Washington news conference
the alleged bomb plot was in the “final
stages” of planning when it was foiled
overnight by British police.

“They had accumulated and assembled
the capabilities that they needed and they
were in the final stages of planning before
execution,” Chertoff said, quoted by AFP

In an earlier statement on the DHS web
site, Chertoff announced that in light of the
overnight arrests in Britain, the US govern-
ment had raised the country’s threat level to
“severe, or red, for commercial flights originat-
ing in the United Kingdom bound for the Unit-
ed States.”

“This adjustment reflects the critical, or
highest, alert level that has been implement-
ed in the United Kingdom. To defend further
against any remaining threat from this plot,
we will also raise the threat level to high, or
orange, for all commercial aviation operating
in or destined for the United States,” the
Statement said, adding that there was current-
ly no indication of plotting within the US.

“We believe that these arrests have signif-
icantly disrupted the threat, but we cannot be
sure that the threat has been entirely elimi-
nated or the plot completely thwarted,” the
statement said.—Staff reports

8

OILGRAM NEWS / VOLUME 84 / NUMBER 153 / FRIDAY, AUGUST 11, 2006


New GSCI Press Release Posted on Reuters Page 2 of 2
Disclaimer:

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you.

8/11/2006


Chicago Mercantile Exchange

20 South Wacker Drive 312/930.1000 te!
Chicago, IL 60606-7499 312/466.4410 fax
www.cme.com

August 11, 2006

Ms. Eileen Donovan

Office of the Secretariat

Commodity Futures Trading Commission
Three Lafayette Centre

1155 21* Street, NW :
Washington, DC 20581 -

RE: — Section Sc(c)(1) and Regulation Section 40.6. Certification of Revisions to the Goldman
Sachs Commodity Index for November 2006 and Normalizing Constant for September
2006. CME Submission #06-71.

Dear Ms. Donovan:

In CME Submission #06-53 dated June 9, 2006, Chicago Mercantile Exchange Inc. (“CME” or
“Exchange”) notified the Commission of changes to the Goldman Sachs Commodity Index
(‘GSCI’) Futures and Options contracts for September 2006 through January 2007.
Furthermore, in CME Submission #06-62 dated July 13, 2006, the Exchange notified the
Commission of changes to the GSCI for October 2006.

On Wednesday, August 9, 2006, Goldman Sachs announced plans for changes to the
composition of the November 2006 GSCI Futures and Options contracts (copies of the Goldman
Sachs press release and Platts news story are attached). To understand these latest revisions,
recall that the gasoline component in the August 2006 GSCI consists of no RB and all HU, and
in the September 2006 GSCI it consists of 1/3 RB and 2/3 HU.

For the October 2006 GSCI, the “second” one-third of the HU was distributed into the other,
non-gasoline components of the GSCI, namely NYMEX Crude Oil, ICE Brent Crude, NYMEX
Heating Oil, and ICE Gas Oil. As a result, the RB component in the October 2006 GSCI
remained the same as in the September 2006 GSCI, and Goldman Sachs indicated that it would
monitor market conditions before announcing any plans for the November 2006 and subsequent
contract months.


Ms. Eileen Donovan

GSCI Revisions for November 2006 and Normalizing Constant for September 2006
. August 11, 2006

Page 2

According to the August 9 announcement, the “third” one-third of the HU will be distributed
into the other, non-gasoline components of the GSCI, namely NYMEX Crude Oil, ICE Brent
Crude, NYMEX Heating Oil, and ICE Gas Oil, just as was done with the “second” one-third of
the HU. As a result, the RB component in the November 2006 GSCI will remain the same as in
the September 2006 and October 2006 GSCI.

Notice that the November 2006 contract month will not be listed for trading until Wednesday,
August 16, so these changes do not affect any contracts with open interest.

In a related matter involving the HU replacement process, on August 4, 2006 Goldman Sachs set
the Normalizing Constant to be used for settlement of the September 2006 GSCI Futures and
Options contracts. CME hereby notifies the Commission that the September 2006 Normalizing
Constant is 5696.060 The Exchange will notify the Commission when Goldman Sachs sets the
Normalizing Constants for the October 2006 and subsequent contract months.

The Exchange certifies that these actions comply with the Commodity Exchange Act and the
rules thereunder.

If you have any questions regarding this submission, please contact Mr. Paul Peterson at (312)

930-4587 or via e-mail at ppeterso@cme.com . Please refer to CME Submission #06-71 in all
correspondence regarding this matter.

Sincerely,

4

John W. Labuszewski, Managing Director
Research & Product Development


New GSCI Press Release Posted on Reuters Page | of 2

PRESS RELEASE
AUGUST 9, 2006

On July 12, 2006 Goldman, Sachs & Co. ("Goldman Sachs") announced that, for the roll occurring in September 2006
(the "September Roll") in relation to the Goldman Sachs Commodity Index ("GSCI") futures contract expiring in
October 2006, it would roll the existing portion of the GSCI that is attributable to the Reformulated Gasoline
Blendstock for Oxygen Blending ("RB") futures contract on the New York Mercantile Exchange but would not roll any
portion of the GSCI that is attributable to the New York Harbor Unleaded Gasoline contract ("HU") contract into the
RB contract. Goldman Sachs has determined to follow this same procedures with respect to the roll of the GSCI
occurring in October 2006 (the “October Roll") in relation to the GSCI futures contract expiring in November 2006.
Accordingly, for the October Roll, the portion of the GSCI attributable to the RB contract will be rolled into the prompt
month RB contract and the portion of the GSCI attributable to the HU contract will be distributed to other contracts
included in the non-RB petroleum product complex of the GSCI. The precise weights of the contracts to be included in
the GSCI for purposes of the GSCI futures contract expiring in November 2006 are attached. Goldman Sachs will
continue to monitor market conditions and keep market participants apprised of its intentions with respect to the GSCI
and the gasoline futures market, and will make additional announcements, as necessary or appropriate in connection
with any further developments.

Contract Aug Roll Sep Roll Oct Roll
Crude wit 11730.68 12121.69 12512.70
Crude Brent 5555.881 5741.070 5926.259
No 2 Heating Oil 111515.9 115233.0 118950.0
Gasoil 194.4298 200.9106 207.3913
unl. Gasoline (HU) 72221.80 36110.90 0

unl. Gasoline (RB) 36110.90 36110.90 36110.90

8/11/2006