Another Bull Market Consolidation or Have Oil Prices Headed South for the John Cook Director, EIA Petroleum Division New York Energy Forum September 5, Winter?
Limited Spare Capacity Weather/ Hurricane Effects Strong Global Demand Low Forward Cover Geopolitical Concerns Solid Economic Growth
WTI Crude Oil Price: 1998-2007 80 Forecast 70 Dollars per Barrel 60 50 40 30 20 10 Jan-98 Jul-98 Jan-99 Jul-99 Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Sources: History: EIA; Projections: Short-Term Energy Outlook, August.
WTI Futures Curves: The Deferred Price Has Also Increased in Recent Years Dollars per Barrel 80 70 60 50 40 30 20 8/31/ 8/31/2005 8/31/2004 8/29/2003 8/30/2002 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 Months Source: New York Mercantile Exchange.
World Oil Demand Growth Oil demand growth, million bbl/d 3.0 2.5 2.0 1.5 1.0 0.5 0.0 Rest of World US China 88 86 84 82 World oil 80 demand, 78 million bbl/d 76 74 72-0.5 1991-1999 Avg. 2000 2001 2002 2003 2004 2005 2007 70 Source: EIA, Short-Term Energy Outlook, August.
Growth in World Consumption & Non-OPEC Production 4.0 3.5 3.0 Demand Non-OPEC Supply* WTI Crude Oil Price Forecast 28 21 MMBD change from previous year 2.5 2.0 1.5 1.0 0.5 0.0-0.5-1.0 Demand growth exceeds non-opec supply growth 2003-Q1 2003-Q3 2004-Q1 2004-Q3 2005-Q1 2005-Q3 -Q1 -Q3 2007-Q1 2007-Q3 14 7 0-7 $ Per barrel change from previous year *Includes OPEC non-crude production, MMBD= million barrels per day Source: EIA, Short-Term Energy Outlook, August.
Recent Non-OPEC Supply Growth Is Mostly from Former Soviet Union (FSU) Countries 2.5 Year-on-Year Growth in Total Liquids Oil Production Million Barrels per Day 2.0 1.5 1.0 0.5 0.0-0.5-1.0 1Q95 3Q95 1Q96 3Q96 1Q97 3Q97 1Q98 3Q98 1Q99 3Q99 1Q00 3Q00 1Q01 3Q01 1Q02 3Q02 1Q03 3Q03 1Q04 3Q04 1Q05 3Q05 1Q06 3Q06 1Q07 3Q07 Non-OPEC, Non-FSU FSU Source: EIA, Short-Term Energy Outlook, August.
Will OPEC Keep Markets Adequately Supplied? Million Barrels per Day 33 31 29 27 25 23 21 19 17 15 '00 Q1 '00 Q3 '01 Q1 '01 Q3 '02 Q1 '02 Q3 History '03 Q1 '03 Q3 '04 Q1 '04 Q3 '05 Q1 '05 Q3 '06 Q1 '06 Q3 Projections '07 Q1 '07 Q3 OPEC Production OPEC Capacity Sources: History: EIA; Projections: Short-Term Energy Outlook, August.
OECD Total Commercial Oil Stocks Above Average Levels This Year 3,000 OECD Commercial Total Oil Inventories 2,900 2,800 Million Barrels 2,700 2,600 2,500 2,400 2005 2004 2,300 2,200 Source: International Energy Agency database, August.
But OECD Total Commercial Oil Stocks Low in Terms of Days Supply Days of Forward Consumption 66 OECD Commercial Total Oil Inventories 64 62 60 58 56 54 52 50 2005 2004 48 46 Source: International Energy Agency database, August.
OECD Total Commercial Petroleum Product Stocks Are About Average in Absolute Levels 1,700 OECD Commercial Total Petroleum Product Inventories 1,600 Million Barrels 1,500 1,400 1,300 2004 2005 1,200 1,100 Source: International Energy Agency database, August.
OECD Total Commercial Petroleum Product Stocks Are Low in Terms of Days Supply Days of Forward Consumption 34 OECD Commercial Total Petroleum Product Inventories 32 30 28 2005 2004 26 24 Source: International Energy Agency database, August.
$2005 Dollars per Barrel/Days Supply As Spare Capacity Increases in and 2007, OECD Days Supply Will Fall 80 70 60 50 40 30 20 10 0 Jan-90 Jan-91 WTI Spot ($2005) OECD Days Supply World Excess Production Capacity (right axis) Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Sources: WTI: Reuters; OECD Days Supply: International Energy Agency; World Excess Production Capacity: U.S. Energy Information Administration estimates. Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 8 7 6 5 4 3 2 1 0 Million Barrels per Day
During Mid 1990 s, Surplus Capacity Did Not Affect Price WTI Price 2005$/Barrel 50 45 40 35 30 25 20 15 10 5 0 WTI Crude Price vs. OPEC Surplus Crude Production Capacity (Jan 1993 - Dec 1998) 0 1 2 3 4 5 6 7 8 Surplus OPEC Capacity MMB/D Source: Reuters WTI; EIA Calculations
In Recent Years, Available Crude Capacity Affected Price 80 WTI Crude Price vs. OPEC Surplus Crude Production Capacity (Apr 1999 - Jul ) 70 WTI Price 2005$/Barrel 60 50 40 30 20 10 0 0 1 2 3 4 5 6 7 8 Surplus OPEC Capacity MMB/D Source: Reuters WTI; EIA Calculations
WTI Crude Oil Price / Inventory Relationship $80 $70 Nominal $ per Barrel $60 $50 $40 $30 $20 $10 1992-1999 January 2000 - April 2004 May 2004 - June $0 2.3 2.4 2.5 2.6 2.7 2.8 2.9 Billion Barrels Sources: Reuters database and International Energy Agency database, August.
OECD Inventories and Spare Production Capacity Have Explained Most of Recent Price Variation 80 70 WTI Spot Price Nominal $/Barrel 60 50 40 30 20 10 0 Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Dynamic Forecast (Inventories and Spare Capacity) Source: Reuters spot prices, EIA modeling.
U.S. Refining Capacity Surplus Disappearing, Creating Short-Term Challenge Million Barrels Per Day 20 18 16 14 12 10 8 6 4 2 0 U.S. Refining Capacity & Inputs Operable Capacity Gross Inputs Jan-81 Jan-83 Jan-85 Jan-87 Jan-89 Jan-91 Jan-93 Jan-95 Jan-97 Jan-99 Jan-01 Jan-03 Jan-05 Source: U.S. Energy Information Administration.
Capacity Surplus Varies Seasonally Million Barrels Per Day 20 18 16 14 12 10 8 6 4 2 0 Jan-00 U.S. Refining Capacity & Inputs Operable Capacity Jan-01 Jan-02 Gross Inputs Jan-03 Jan-04 Jan-05 Seasonal Squeezes Jan-06 Source: U.S. Energy Information Administration.
Seasonal Crude Use Down In Fall Worldwide 1500 Typical Crude Input Deviations from Annual Average 1000 500 0-500 -1000-1500 -2000 Jan Mar May Jul Sep Nov Thousand Barrels per Day OECD North America OECD Pacific OECD Europe Source: BP World Statistics 2005.
Initially, Other Regions Help Balance U.S Losses Million Barrels Per Day 17.0 16.5 16.0 15.5 15.0 14.5 14.0 13.5 13.0 12.5 12.0 U.S. Crude Input 2004 2005 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Crude Input Changes 2004-2005 Aug Sep Oct Nov Dec US -0.5-1.0-1.3-0.6-0.7 OECD Europe 0.0 0.5 0.6 0.7-0.1 OECD Asia -0.2 0.6 0.3 0.0 0.1 Source: International Energy Agency database, August, EIA Data
1.6 Gasoline Imports Are An Increasingly Important Supply Source U. S. Total Gasoline Imports Million Barrels per Day 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 2004 2005 Source: U.S. Energy Information Administration.
U.S. Four-Week Average Finished Gasoline Demand Begins to Show More Typical Growth 10% 8% 6% 4% 2% 0% -2% -4% -6% Year-on-Year Four-Week Average Growth Using Weekly Data 1/9 1/30 2/20 3/12 4/2 4/23 5/14 6/4 6/25 7/16 8/6 8/27 9/17 10/8 10/29 11/19 12/10 12/31 2004 2005 Source: EIA Weekly Petroleum Status Report.
U.S. Four-Week Average Finished Gasoline Demand Begins to Show More Typical Growth 6% Year-on-Year Four-Week Average Growth Using Weekly Data 4% 2% 0% -2% -4% 1/9 1/30 2/20 3/12 4/2 4/23 5/14 6/4 6/25 7/16 8/6 8/27 9/17 10/8 10/29 11/19 12/10 12/31 2005 Source: EIA Weekly Petroleum Status Report.
U.S. Four-Week Average Diesel Demand Has Returned to Pre-Hurricane Growth 16% 14% 12% 10% 8% 6% 4% 2% 0% -2% -4% -6% -8% 1/9 Year-on-Year Four-Week Average Growth Using Weekly Data 1/30 2/20 3/12 4/2 4/23 5/14 6/4 6/25 7/16 Source: EIA Weekly Petroleum Status Report. 8/6 2004 2005 8/27 9/17 10/8 10/29 11/19 12/10 12/31
U.S. Four-Week Average Diesel Demand Has Returned to Pre-Hurricane Growth 16% 14% 12% 10% 8% 6% 4% 2% 0% -2% -4% -6% -8% Year-on-Year Four-Week Average Growth Using Weekly Data 1/9 1/30 2/20 3/12 4/2 4/23 5/14 6/4 6/25 7/16 8/6 8/27 9/17 10/8 10/29 11/19 12/10 12/31 2005 Source: EIA Weekly Petroleum Status Report.
Chinese Oil Demand Continues Strong Growth 8.0 7.0 Million Barrels per Day 6.0 5.0 4.0 3.0 2.0 1.0 0.0 1Q 2Q 3Q 4Q 2003 2004 2005 Sources: History: EIA; Projections: Short-Term Energy Outlook, August.
Much of China s Oil Demand Growth in Last 2 Years Has Come From Gasoline and Diesel 500 Thousand Barrels Per Day 400 300 200 100 0 Gasoline Middle Distillates -100 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Source: BP World Statistics 2005.
Trans-Atlantic Arbitrage Brings Higher Distillate Imports 20 15 NYH-ARA Price Differential U.S. Distillate Imports 800 700 Cents per Gallon 10 5 0-5 -10 v -15-20 1/4/2002 5/4/2002 9/4/2002 1/4/2003 5/4/2003 9/4/2003 1/4/2004 5/4/2004 9/4/2004 1/4/2005 5/4/2005 9/4/2005 1/4/ 5/4/ 600 500 400 300 200 Thousand Barrels per Day 100 0 Source: EIA Weekly Petroleum Status Report.
OECD European Commercial Distillate Stocks Lie in the Upper Half of the Average Range 300 OECD Commercial European Middle Distillate Inventories Million Barrels 290 280 270 260 250 2005 240 230 2004 220 210 200 Source: International Energy Agency database, August.
OECD European Commercial Distillate Stocks Are Relatively Low in Terms of Days Supply Days of Forward Consumption 28 OECD Commercial European Middle Distillate Inventories 26 24 22 20 18 2005 2004 16 14 12 Source: International Energy Agency database, August.
Conclusions World oil demand growth, while off 2004 highs, is expected to continue at relatively high rates in and 2007. Non-OPEC oil supply is expected to grow by less than world oil demand in both and 2007. This will require either: More OPEC production, limiting any increase in spare production capacity, or Larger inventory drawdowns, sustaining relatively low stocks on a days supply basis. Global strength in distillate demand may mean a jump in U.S. spot prices to attract necessary imports this winter. Thus, oil markets are expected to remain tight this winter, with oil prices likely recovering from current relative seasonal softness. For job opportunities at EIA, go to http://tonto.eia.doe.gov/jobs/jobs3.asp or contact Dr. John Cook at john.cook@eia.doe.gov or (202) 586-5986
Back-up Slides
Changes in Speculative Activity Do Not Explain Changes in WTI Prices. 100,000 $80 Number of Contracts 75,000 50,000 25,000 0-25,000-50,000-75,000 Net Short Net Long WTI Near-Month Weekly Average Price $70 $60 $50 $40 $30 $20 $10-100,000 Jan-02 Apr-02 Jul-02 Oct-02 Jan-03 Apr-03 Jul-03 Oct-03 Jan-04 Apr-04 Jul-04 Oct-04 Jan-05 Apr-05 Jul-05 Oct-05 Jan-06 Apr-06 Nominal Dollars per Barrel $0 Net Position of Non-Commercial Participants in WTI Futures Contracts Since 2002 Source: NYMEX Commitment of Traders Report, Commodity Futures Trading Commission. Graph includes data up to May 2,.
Million Barrels per Day Light Product Imports Are An Increasingly Important Supply Source 2.4 2.2 2.0 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 U. S. Total Light Product (Gasoline, Distillate, Jet Fuel) Imports 2004 2005 Source: U.S. Energy Information Administration.
Product Imports Are An Increasingly Important Supply Source Million Barrels per Day 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 U. S. Gross Product Imports 2004 2005 Source: U.S. Energy Information Administration.
OECD Atlantic Basin Commercial Oil Stocks (Absolute Levels) 2,500 OECD Commercial Atlantic Basin Oil Inventories Million Barrels 2,400 2,300 2,200 2,100 2,000 1,900 2005 2004 1,800 Source: International Energy Agency database, August.
Regionally, OECD Atlantic Basin Commercial Oil Stocks Are Below Average in Terms of Days Supply Days of Forward Consumption 66 OECD Commercial Atlantic Basin Oil Inventories 64 62 60 58 56 2005 54 52 50 2004 48 46 Source: International Energy Agency database, August.
OECD North American Commercial Oil Stocks (Absolute Levels) 1,500 OECD Commercial North American Oil Inventories 1,400 Million Barrels 1,300 1,200 1,100 2005 2004 1,000 900 Source: International Energy Agency database, August.
OECD North American Commercial Oil Stocks Also Low in Terms of Days Supply Days of Forward Consumption 60 OECD Commercial North American Oil Inventories 58 56 54 52 50 48 2005 46 2004 44 42 40 Source: International Energy Agency database, August.
OECD European Commercial Oil Stocks (Absolute Levels) 1,100 OECD Commercial European Oil Inventories 1,050 Million Barrels 1,000 950 900 850 2004 2005 800 750 Source: International Energy Agency database, August.
OECD European Commercial Oil Stocks About Average in Terms of Days Supply Days of Forward Consumption 72 OECD Commercial European Oil Inventories 70 68 66 64 2005 62 60 2004 58 56 54 52 Source: International Energy Agency database, August.
OECD Pacific Commercial Oil Stocks (Absolute Levels) 550 OECD Commercial Pacific Oil Inventories 525 500 Million Barrels 475 450 425 400 375 2005 2004 350 Source: International Energy Agency database, August.
OECD Pacific Commercial Oil Stocks Once Again Low in Terms of Days Supply Days of Forward Consumption 65 OECD Commercial Pacific Oil Inventories 60 55 50 2004 2005 45 40 35 Source: International Energy Agency database, August.
OECD Atlantic Basin Commercial Gasoline Stocks (Absolute Levels) 440 OECD Commercial Atlantic Basin Gasoline Inventories Million Barrels 420 400 380 360 340 320 2004 2005 300 Source: International Energy Agency database, August.
OECD Atlantic Basin Commercial Gasoline Stocks Well Below Average in Terms of Days Supply Days of Forward Consumption 38 OECD Commercial Atlantic Basin Gasoline Inventories 36 34 32 30 28 26 2004 24 2005 22 Source: International Energy Agency database, August.
OECD North American Commercial Gasoline Stocks (Absolute Levels) 280 OECD Commercial North American Gasoline Inventories 270 260 Million Barrels 250 240 230 220 2004 2005 210 200 Source: International Energy Agency database, August.
OECD North American Commercial Gasoline Stocks (Days Supply) Days of Forward Consumption OECD Commercial North American Gasoline Inventories 32 30 28 26 24 2005 22 2004 20 18 Source: International Energy Agency database, August.
OECD European Commercial Gasoline Stocks (Absolute Levels) 170 OECD Commercial European Gasoline Inventories 160 150 Million Barrels 140 130 120 110 2005 2004 100 90 Source: International Energy Agency database, August.
OECD European Commercial Gasoline Stocks (Days Supply) Days of Forward Consumption 52 OECD Commercial European Gasoline Inventories 50 48 46 44 2005 42 40 2004 38 36 34 32 Source: International Energy Agency database, August.
OECD Pacific Commercial Gasoline Stocks (Absolute Levels) Million Barrels 32 31 30 29 28 27 26 25 24 23 22 21 20 OECD Commercial Pacific Gasoline Inventories 2005 2004 Source: International Energy Agency database, August.
OECD Pacific Commercial Gasoline Stocks (Days Supply) Days of Forward Consumption OECD Commercial Pacific Gasoline Inventories 22 21 20 19 18 17 16 15 14 2005 2004 13 12 Source: International Energy Agency database, August.
OECD Atlantic Basin Commercial Distillate Stocks (Absolute Levels) 550 OECD Commercial Atlantic Basin Middle Distillate Inventories 525 500 Million Barrels 475 450 425 400 2005 2004 375 350 Source: International Energy Agency database, August.
OECD Atlantic Basin Commercial Distillate Stocks Also Low in Terms of Days Supply Days of Forward Consumption 28 OECD Commercial Atlantic Basin Middle Distillate Inventories 26 24 22 20 18 2005 16 2004 14 12 Source: International Energy Agency database, August.
OECD North American Commercial Distillate Stocks (Absolute Levels) Million Barrels 250 OECD Commercial North American Middle Distillate Inventories 240 230 220 210 200 190 2005 2004 180 170 160 150 Source: International Energy Agency database, August.
OECD North American Commercial Distillate Stocks (Days Supply) Days of Forward Consumption 28 OECD Commercial North American Middle Distillate Inventories 26 24 22 20 18 2005 16 2004 14 12 Source: International Energy Agency database, August.
OECD Pacific Commercial Distillate Stocks (Absolute Levels) 110 OECD Commercial Pacific Middle Distillate Inventories 100 Million Barrels 90 80 70 60 2004 50 40 2005 Source: International Energy Agency database, August.
OECD Pacific Commercial Distillate Stocks About Average in Terms of Days Supply Days of Forward Consumption 22 OECD Commercial Pacific Middle Distillate Inventories 20 18 16 2004 14 12 2005 10 8 Source: International Energy Agency database, August.
OECD Atlantic Basin Commercial Crude Oil Stocks (Absolute Levels) 850 OECD Commercial Atlantic Basin Crude Oil Inventories Million Barrels 825 800 775 750 725 700 2005 2004 675 650 Source: International Energy Agency database, August.
OECD Atlantic Basin Commercial Crude Oil Stocks (Days Supply) Days of Forward Consumption 28 OECD Commercial Atlantic Basin Crude Oil Inventories 27 26 25 24 2005 23 22 21 2004 20 19 18 Source: International Energy Agency database, August.
OECD North American Commercial Crude Oil Stocks (Absolute Levels) 500 OECD Commercial North American Crude Oil Inventories 475 Million Barrels 450 425 400 375 2005 2004 350 325 Source: International Energy Agency database, August.
OECD North American Commercial Crude Oil Stocks (Days Supply) Days of Forward Consumption 28 OECD Commercial North American Crude Oil Inventories 27 26 25 24 2005 23 22 21 20 2004 19 18 Source: International Energy Agency database, August.
OECD European Commercial Crude Oil Stocks (Absolute Levels) 400 OECD Commercial European Crude Oil Inventories 375 Million Barrels 350 325 300 2004 2005 275 250 Source: International Energy Agency database, August.
OECD European Commercial Crude Oil Stocks (Days Supply) Days of Forward Consumption 28 OECD Commercial European Crude Oil Inventories 27 2005 26 25 24 2004 23 22 21 20 19 18 Source: International Energy Agency database, August.
OECD Pacific Commercial Crude Oil Stocks (Absolute Levels) Million Barrels 220 OECD Commercial Pacific Crude Oil Inventories 210 200 190 180 2004 170 160 2005 150 140 130 120 Source: International Energy Agency database, August.
OECD Pacific Commercial Crude Oil Stocks (Days Supply) Days of Forward Consumption 32 OECD Commercial Pacific Crude Oil Inventories 30 28 26 2004 24 2005 22 20 18 Source: International Energy Agency database, August.