OIL PRICES Developments and Effects Mag. Johannes Benigni, January 2001 PVM Oil Associates - Vienna Strategic Energy Services
PRICE MOVERS Gasoil 0.2 FOB Barges [USD/mt mt] 350 320 290 Rigid Emission Controls Just in time Inventory Policy Seasonal Product Mix 260 230 200 170 140 110 80 OPEC Slowdown in Demand High Freight Rates Short-term Fall in Upstream Investment Refinery Capacity Speculation (Lower Prices Heating Oil) 04.01.99 04.03.99 04.05.99 04.07.99 04.09.99 04.11.99 04.01.00 04.03.00 04.05.00 04.07.00 04.09.00 04.11.00 04.01.01
SUPPLY & DEMAND Demand increase continues to slide mainly due to slow down in US economy. OPEC Supply: For first time in history remains below its quotas. Production cuts a proactive decision. Real Output Curbs less than on Paper. Non Non-OPEC Supply: Increase does not correspond to rising prices. S&D Data accuracy
Woldwide Consumption Europe 23.87 24.07 24.57 15.86 15.82 16.06 3.50 3.49 3.42 1999 2000 2001 1999 2000 2001 FSU 1999 2000 2001 North America 4.26 4.34 4.51 20.15 20.66 21.59 1999 2000 2001 Middle East 4.77 4.84 4.99 1999 2000 2001 Latin America 2.32 2.34 2.39 1999 2000 2001 Africa 1999 2000 2001 Asia Pacific
Global Oil Demand [mbpd] 80.00 79.00 78.00 77.00 76.00 75.00 74.00 73.00 72.00 71.00 70.00 1997 1999 2001e 1Q 2Q 3Q 4Q Yearly Average
Oil demand per region [mbpd] Oil demand (mbpd) Annual change (%) 1996 1997 1998 1999 2000 2001 1997 1998 1999 2000 2001 North America 22.20 22.70 23.13 23.87 24.07 24.57 2.25% 1.89% 3.20% 0.84% 2.08% Latin America 4.50 4.42 4.76 4.77 4.84 4.99-1.78% 7.69% 0.21% 1.47% 3.10% Europe OECD 14.90 14.99 15.28 15.12 15.07 15.30 0.60% 1.93% -1.05% -0.33% 1.53% Europe non-oecd 0.80 0.77 0.76 0.74 0.75 0.76-3.75% -1.30% -2.63% 1.35% 1.33% Pacific 8.80 8.97 8.41 8.63 8.65 8.93 1.93% -6.24% 2.62% 0.23% 3.24% FSU 4.40 4.27 3.73 3.50 3.49 3.42-2.95% -12.65% -6.17% -0.29% -2.01% China 3.70 4.08 4.19 4.48 4.79 5.08 10.27% 2.70% 6.92% 6.92% 6.05% Other Asia 6.40 6.73 6.75 7.04 7.22 7.58 5.16% 0.30% 4.30% 2.56% 4.99% Middle East 4.00 4.19 4.17 4.26 4.34 4.51 4.75% -0.48% 2.16% 1.88% 3.92% Africa 2.30 2.32 2.35 2.32 2.34 2.39 0.87% 1.29% -1.28% 0.86% 2.14% World 71.80 73.43 73.52 74.73 75.59 77.53 2.27% 0.12% 1.65% 1.15% 2.57%
World Oil Demand [mbpd] 78.00 76.00 +1.15 % +2.57 % 74.00 72.00 +2.27 % +0.12 % +1.65 % 70.00 +1.04 % 68.00 66.00 Source: IEA 1995 1996 1997 1998 1999 2000e 2001e
in mbpd World Oil Demand 2001 [mbpd] Demand as expected in Demand as expected in Net Change Change in % July 2000 November 2000 N. America 24.54 24.07-0.47-1.92% OECD Europe 15.36 15.07-0.29-1.89% OECD Asia-Pacific 8.95 8.65-0.30-3.35% FSU 3.42 3.49 0.07 2.05% Non-OECD Europe 0.75 0.75 0.00 0.00% China 5.05 4.79-0.26-5.15% Other asia 7.71 7.22-0.49-6.36% L. America 4.98 4.84-0.14-2.81% Middle East 4.51 4.34-0.17-3.77% Africa 2.42 2.34-0.08-3.31% World 77.71 75.59-2.12-2.73%
HISTORICAL PRICE DEVELOPMENT US$ 15-25 price neutral zone Sweet Sour Differentials International Oil Flows Increasing US Dependence on Foreign Oil (56.6% of the crude consumed by Americans in 2000 foreign) Sharp Drop in the US Gasoline Production due to high MTBE prices (Dec 2000: minus 600,000 bpd, RFG: minus 50%)
45 Historical Crude Price Development Brent Dated [USD/bbl] 40 35 30 25 20 Neutral Zone 15 10 5 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
8 NYMEX WTI and Dubai FM vs Dated Brent [US$/bbl] 6 WTI vs Brent Dated 4 2 0-2 -4 Dubai vs Brent Dated -6-8 Jan 99 Feb 99 Mar 99 Apr 99 May 99 Jun 99 Jul 99 Aug 99 Sep 99 Oct 99 Nov 99 Dec 99 Jan 00 Feb 00 Mar 00 Apr 00 May 00 Jun 00 Jul 00 Aug 00 Sep 00 Oct 00 Nov 00 Dec 00 Jan 01
Gasoil 0.5 Singapore vs FOB MED [US$/mt] 60 Arbitrage 40 20 0-20 -40-60 May 1993 Nov 1993 May 1994 Nov 1994 May 1995 Nov 1995 May 1996 Nov 1996 May 1997 Nov 1997 May 1998 Nov 1998 May 1999 Nov 1999 May 2000 Nov 2000
OPEC OPEC reached its limits in 2000 Real expected production cuts less than announced. Iraq remains a wild card. Mulling Changes in its Price Band OPEC as Swing Producer
OPEC's Production 2000 [mbpd] in mbpd Quota Jul 00 Sep 00 Quota Oct 00 Oct 00 Quota Nov 00 Nov 00 Algeria 0.811 0.810 0.836 0.840 0.853 0.850 Indonesia 1.317 1.310 1.358 1.290 1.385 1.320 Iran 3.727 3.900 3.843 3.810 3.917 3.750 Kuwait 2.037 2.225 2.101 2.210 2.141 2.220 Libya 1.361 1.430 1.404 1.440 1.431 1.450 Nigeria 2.091 2.000 2.156 2.130 2.198 2.140 Qatar 0.658 0.690 0.678 0.710 0.692 0.740 Saudi Arabia 8.253 8.595 8.512 8.680 8.674 8.790 UAE 2.219 2.230 2.289 2.340 2.333 2.290 Venezuela 2.927 2.930 3.018 2.940 3.077 2.980 OPEC excl. Iraq 25.401 26.120 26.195 26.390 26.700 26.530 Iraq 2.555 2.850 2.900 3.000 2.900 2.790 Total OPEC incl. Iraq 27.956 28.970 29.095 29.390 29.600 29.320
Aug 00 Sep 00 Oct 00 Nov 00 OPEC's Quotas and Production [mbpd] 27.000 26.000 25.000 OPEC's Quota OPEC-10 Production 24.000 23.000 22.000 21.000 Apr 99 May 99 Jun 99 Jul 99 Aug 99 Sep 99 Oct 99 Nov 99 Dec 99 Jan 00 Feb 00 Mar 00 Apr 00 May 00 Jun 00 Jul 00
OPEC Oil Production excl. NGLs [mbpd] 30.00 29.00 28.00 27.00 26.00 25.00 24.00 23.00 22.00 OPEC incl. Iraq OPEC excl. Iraq Feb.98 Jun.98 Oct.98 Feb.99 Jun.99 Oct.99 Feb.00 Jun.00 Oct.00 21.00 20.00
Saudi and World Oil Reserves 20.31% Saudi Arabia
NON-OPEC OPEC PRODUCTION Upstream Spending: 1998 = -9 % 1999 = -18 % 2000 = +15-20 % 2001 = +15-20 % Lack of skilled workers putting brakes on non-opec production increase. Non Non-Opec Production Increase 2000 = 1.2 % 2001 = 0.7 % Increase in 2001 < Increase in 2000
2400 Worldwide Rig Count 2200 2000 1800 1600 1400 1200 1000 800 Jan.98 Apr.98 Jul.98 Oct.98 Jan.99 Apr.99 Jul.99 Oct.99 Jan.00 Apr.00 Jul.00 Oct.00
FREIGHT RATES One third of total fleet over 15 years in 2001. 38 new VLCCs likely to be delivered this year. About 35 VLCCs expected to be scrapped. Crude Freight Rates might go down due to lower OPEC production but no dramatic fall in prices expected.
World VLCC Fleet - Age Profile up to 4 years 26% Over 20 years 32% 15-19 years 2% Source: Petroleum Argus 5-9 years 28% 10-14 years 12%
Freight Rates for 80,000 Crude Carriers [US$/bbl] 2.1 1.7 1.3 0.9 Novorossiysk to Augusta Ventspils to Wilhelmshaven 0.5 Jan 00 Mar 00 May 00 Jul 00 Sep 00 Nov 00 Jan 01
Freight Rates for 30,000 Clean Product Carriers [US$/bbl] 3.2 3 2.8 2.6 2.4 2.2 2 1.8 1.6 1.4 1.2 1 Novorossiysk to Augusta 0.8 Ventspils to Wilhelmshaven 0.6 Jan 00 Mar 00 May 00 Jul 00 Sep 00 Nov 00 Jan 01
INVENTORIES OECD OECD-Stocks more comfortable but we are not out of woods. European Inventories improving. Oil prices dependent on total US-Inventory levels. Distillate inventories still 8.4 mb below the previous year s level. Gasoline stocks higher than last year s levels but MTBEs tight market likely to fuel prices in summer.
U.S. Crude Oil Inventory Levels ['000 bbls] 360,000 350,000 340,000 1999 330,000 Average 96-00 320,000 310,000 1996 300,000 2001 290,000 2000 280,000 05 Jan 2001 270,000 Jan Feb Mar Apr May Jun Jul Sep Oct Nov Dec
U.S. Mogas Inventory Levels ['000 bbls] 240,000 1999 230,000 220,000 210,000 Average 96-00 1996 200,000 2001 2000 190,000 05 Jan 2001 180,000 Jan Feb Mar Apr May Jun Jul Sep Oct Nov Dec
U.S. Distillates Inventory Levels ['000 bbls] 170,000 160,000 150,000 1999 140,000 130,000 05 Jan 2001 120,000 2001 Average 96-00 110,000 100,000 2000 1996 90,000 80,000 Jan Feb Mar Apr Ma Jun Jul Se Oct No De
175,000 U.S. Distillates Inventory Levels ['000 bbls] 150,000 125,000 100,000 75,000 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
U.S. Total Inventory Levels ['000 bbls] 730,000 710,000 1999 690,000 670,000 650,000 Average 96-00 630,000 05 Jan 2001 1996 610,000 2001 590,000 2000 570,000 Jan Feb Mar Apr May Jun Jul Sep Oct Nov Dec
550,000 U.S. Total Petroleum Inventory Levels and WTI FL [weekly] 42 575,000 600,000 35 625,000 28 650,000 675,000 21 700,000 14 725,000 Total Petroleum stocks, left scale - Inverted WTI, right scale ['000 bbls] [US$/bbls] 750,000 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 7
MARKET STRUCTURE Cash & Carry Arbitrage 1998 Backwardation 1999-2000
Dec 02 Market Structures Forward Values of Dated Brent (IPE Strip) [US$/bbl] 36 34 32 30 November 2000 January 2001 28 26 24 22 20 Nov 00 Dec 00 Jan 01 Feb 01 Mar 01 Apr 01 May 01 Jun 01 Jul 01 Aug 01 Sep 01 Oct 01 Nov 01 Dec 01 Jan 02 Feb 02 Mar 02 Apr 02 May 02 Jun 02 Jul 02 Aug 02 Sep 02 Oct 02 Nov 02
32 27 22 17 12 7 Feb.99 Apr.99 Jun.99 Aug.99 Oct.99 Dec.99 Feb.00 Apr.00 Jun.00 Aug.00 Oct.00 Dec.00 Feb.01 Apr.01 Jun.01 Aug.01 Oct.01 Dec.01 Feb.02 Apr.02 Jun.02 Aug.02 Oct.02 Dec.02 Forward Values of Dated Brent (IPE Strip) [US$/bbl] Jan.99 Nov.00
REFINING MARGIN Increased Volatility in Refining Margins Seasonality in Margins Healthy margins in North America due to high product demand Product Specification Changes European Margins being driven by US
Crack [US$/mt] - Prem Unl FOB Barges vs. Brent Dated 155 145 135 125 115 105 Min 93-00 Max 93-00 Forward Curve Cash crack aver of current month Mean 96-00 Last 12 months View 95 85 75 65 55 61.491934 45 35 25 15 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
130 Crack [US$/mt] - Jet CIF Cargoes NWE vs. Brent Dated 120 110 100 90 Min 93-00 Max 93-00 Forward Curve Cash crack aver of current month Mean 95-00 Last 12 months View 80 76.029934 70 60 50 40 30 20 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
110 100 90 80 Crack [US$/mt] - EN590 Cargoes CIF NWE vs. Brent Dated Min 95-00 Max 95-00 Forward Curve Cash crack aver of current month Mean 95-00 Last 12 months View 70 60 59.40 50 40 30 20 10 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
80 Crack [US$/mt] - Gasoil.2 FOB Barges Rotterdam vs. Brent Dated 70 60 50 46.404934 Min 92-00 Max 92-00 Forward Curve Cash crack aver of current month Mean 96-00 Last 12 months View 40 30 20 10 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Long Term World Oil Supply Peak Years range from 2021 to 2112 depending on different scenarios EIA / DOE scenario expects peak later than other analysts
USGS 5% 2000 USGS Mean 2000 USGS 95% 2000 Campbell 1995 Masters 1994 Campbell 1992 Bookout 1989 Masters 1987 Martin 1984 Nehring 1982 Halbouty 1981 Meyerhoff 1979 Nehring 1978 Nelson 1977 Folinsbee 1976 Adams & Kirby 1975 Linden 1973 Moody 1972 Moody 1970 Shell 1968 Weeks 1959 MacNaughton 1953 Weeks 1948 Pratt 1942 Published Estimates of World Oil Ultimate Recovery 0 0.5 1 1.5 2 2.5 3 3.5 4 Source: USGS and Colin Campbell Trillions of Barrels
12 EIA World Conventional Oil Production Scenarios 90 USGS Estimates of Ultimate Recovery Peak Range 46 yrs or 91 yrs Billion Barrels per Year 80 70 60 50 40 30 20 10 Ultimate Recovery Probability BBls -------------------- --------- Low (95 %) 2,248 Mean (expected value) 3,003 High (5 %) 3,896 History Mean Low (95 %) High (5 %) 2021 2067 3 % Growth 2 % Growth 1 % Growth 0 % Growth 2112 900 Billion Bbls Moves Peak 10 Years From 2037-2047 Decline R/P = 10 0 1900 1925 1950 1975 2000 2025 2050 2075 2100 2125 Note: U.S. volumes were added to the USGS foreign volumes to obtain world totals.
Probability of Ultimate Recovery WORLD OIL PRODUCTION SCENARIOS Ultimate Recovery (Billion barrels) Annual Production Growth Rate (Percent) Estimated Peak Year Estimated Peak Production Rate (Million barrels per year) (Million barrels per day) 95 Percent 2,248 0.0 2045 24,580 67 2,248 1.0 2033 34,820 95 2,248 2.0 2026 42,794 117 2,248 3.0 2021 48,511 133 Mean 3,003 0.0 2075 24,580 67 (expected 3,003 1.0 2050 41,238 113 value) 3,003 2.0 2037 53,209 146 3,003 3.0 2030 63,296 173 5 Percent 3,896 0.0 2112 24,580 67 3,896 1.0 2067 48,838 134 3,896 2.0 2047 64,862 178 3,896 3.0 2037 77,846 213
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