Derivative Instruments and Hedging Activities

3 Months Ended

Mar. 31, 2013

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities

Derivative Instruments and Hedging Activities

The company’s derivative instruments principally include crude oil, natural gas and refined product futures, swaps, options, and forward contracts. None of the company’s derivative instruments is designated as a hedging instrument, although certain of the company’s affiliates make such a designation. The company’s derivatives are not material to the company’s financial position, results of operations or liquidity. The company believes it has no material market or credit risks to its operations, financial position or liquidity as a result of its commodities and other derivatives activities.

Derivative instruments measured at fair value at March 31, 2013, and December 31, 2012, and their classification on the Consolidated Balance Sheet and Consolidated Statement of Income are as follows:

Consolidated Balance Sheet: Fair Value of Derivatives Not Designated as Hedging Instruments

(Millions of Dollars)

Type of Contract	Balance Sheet Classification	At March 31 2013		At December 31 2012
Commodity	Accounts and notes receivable, net	$	41	$	57
Commodity	Long-term receivables, net	23		29
Total Assets at Fair Value		$	64	$	86
Commodity	Accounts payable	$	77	$	112
Commodity	Deferred credits and other noncurrent obligations	33		37
Total Liabilities at Fair Value		$	110	$	149

Consolidated Statement of Income: The Effect of Derivatives Not Designated as Hedging Instruments

(Millions of dollars)

		Gain / (Loss) Three Months Ended March 31
Type of Contract	Statement of Income Classification	2013			2012
Commodity	Sales and other operating revenues	$	(75	)	$	(118	)
Commodity	Purchased crude oil and products	(4		)	(19		)
Commodity	Other income	(1		)	5
		$	(80	)	$	(132	)

The table below represents gross and net derivative assets and liabilities subject to netting agreements on the Statement of Financial Position at March 31, 2013.

Consolidated Balance Sheet: The Effect of Netting Derivative Assets and Liabilities

(Millions of dollars)

	At March 31, 2013
	Gross Amount Recognized		Gross Amounts Offset in Statement of Financial Position		Net Amounts Presented in the Statement of Financial Position		Gross Amounts Not Offset in the Statement of Financial Position - Financial Instruments		Net Amount
Derivative Assets	$	999	$	935	$	64	$	57	$	7
Derivative Liabilities	$	1,045	$	935	$	110	$	12	$	98

Derivative assets and liabilities are classified on the Consolidated Balance Sheet as short-term and long-term accounts receivable and accounts payable.

The company uses derivative commodity instruments traded on the New York Mercantile Exchange and on electronic platforms of the Inter-Continental Exchange and Chicago Mercantile Exchange. In addition, the company enters into swap contracts and option contracts principally with major financial institutions and other oil and gas companies in the “over-the-counter” markets which are governed by International Swaps and Derivatives Association agreements and other master netting arrangements. Amounts not offset on the Consolidated Balance sheet represent positions that do not meet all the conditions for "a right of offset".