Crude Oil Price Forecast

Transcription

1 Crude Oil Price Forecast Michael Ye Economics Department St. Mary s College of fmaryland U.S.A. Presentation at East Asia Summit 7th Energy Cooperation Task Force Meeting International Seminar Energy Future: Turning Challenge into Opportunity, June Seoul Korea

2 Features of Today s Talk It is non-technical based on technical efforts It focuses on short-run run forecasting with some discussions i on medium to long-runs

3 Highlights of Today s Talk Different regimes in crude oil market Inventories and excess production capacity; and their changing relations with crude oil price Key reasons for recent high prices A short-run crude oil price forecast modeling Other possible short-run run factors Medium to long-run factors

4 Crude Oil Since 1974 Real Crude Oil Price in December 2007 Dollar Dollars per Barrel n-74 n-76 n-78 n-80 n-82 n-84 n-86 n-88 n-90 n-92 n-94 n-96 n-98 n-00 n-02 n-04 n-06 Nominal Crude Oil Price

5 Crude Oil Price in the Three Regimes from Early 1990s to Present R1 R2 R3 Nominal Dollars per Barrel n-92 n-07 n-93 n-94 n-95 n-96 n-97 n-98 n-99 n-00 n-01 n-02 n-03 n-04 n-05 n-06

6 Petroleum Market Regimes R1: nuary 1992 to June 1999, when the market was viewed as being in equilibrium. R2: July 1999 to May 2004, when OPEC reestablished control of the market with excess production capacity for crude oil. R3: June 2004 to present, where there is practically no excess production capacity for crude oil.

7 Price Determinants in Regimes 1&2 Inventory Captures expected seasonality and general trends in production and demand as well as unexpected supply or demand shifts. Provides immediate supply when needed d and can become a precautionary demand to cushion fears of a shortage. Excess Production Capacity Has operational as well as psychological impacts on prices Impacts inventory management behavior.

8 OECD Petroleum Inventory (in Billion Barrels) n-90 n-91 n-92 n-93 n-94 n-95 n-96 n-97 n-98 n-99 n-00 n-01 n-02 n-03 n-04 n-05 n-06 n-07 Normal Level Actual Level Relative Level

9 Excess Production Capacity Observed Level Critical Level Capacity below the critical level Million Barrels per Day n-92 n-93 n-94 n-95 n-96 n-97 n-98 n-99 n-00 n-01 n-02 n-03 n-04 n-05 n-06 n-07 Excess Capacity Critical Value Derived Capacity

10 The Changing g Relationship between Crude Oil Price and Inventory WTI Price in Nom minal Doll lars June 2004 to December 2007 July 1999 to May 2004 nuary 1992 to June Inventory in Billion Barrels Regime 1 Regime 2 Regime 3

11 Changing Relationship between Crude Oil Price & Excess Production Capacity W TI Pric ce in No ominal Dollars June 2004 to September 2006 November 2006 to December 2007 October 2006 nuary 1992 to June 1999 July 1999 to May Excess Production Capacity in Million Barrels per Day Regime 1 Regime 2 Regime 3A Transition Regime 3B

12 Reasons for High Prices in Regime 3 OPEC is unwilling and/or unable to increase production capacity Non-OPEC producers are unable to add more production capacity timely End users seem to be willing and able to End users seem to be willing and able to accept the high prices

13 A Short-Run Forecast Model Relative inventory Excess production capacity A variable reflecting users acceptance and OPEC s accommodation of high prices

14 Forecast of Crude Oil Prices Given 1 st Two Month Prices in 1992 Forecasted WTI Price Observed WTI Prices 95% Confidence Bounds Nominal Dollars per Barrel n-92 n-93 n-94 n-95 n-96 n-97 n-98 n-99 9 n-00 0 n-01 n-02 n-03 n-04 n-05 n-06 n-07 n-08

15 Other Possible Short-Run Factors Exchange rate (dollar depreciation) World economy, especially economies in Asia Short-run interest rate Non-commercial positions

16 Medium to Long Run Factors OPEC and Non-OPEC s willingness and ability to increase production capacity World economies responses Unconventional liquid id fuels: biofuels, oil sands, and CTL Crude oil reserves

17 World Crude Oil Reserves

18 Long-Run Projections