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Next Stop for Oil Prices: $100 or $150?. Macroeconomic Advisers Quarterly Meeting June 2008. $150. $100. John Cook, Director EIA Petroleum Division June 11, 2008. ?. WTI Crude Oil Prices: 2001-2009. Source: EIA Short-Term Energy Outlook , June 2008. .

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Next Stop for Oil Prices:

$100 or $150?

Macroeconomic Advisers

Quarterly Meeting

June 2008

$150

$100

John Cook, Director

EIA Petroleum Division

June 11, 2008

?


WTI Crude Oil Prices: 2001-2009

Source: EIA Short-Term Energy Outlook, June 2008.


WTI Futures Curves: The Deferred Price Has Also Increased in Recent Years

6/2/2008

8/1/2007

8/1/2006

12/1/2005

12/1/2004

12/1/2003

12/2/2002

Source: New York Mercantile Exchange.


World Oil Consumption Growth Expected to Accelerate in 2008-2009.

Source: Energy Information Administration, Short-Term Energy Outlook June 2008.


The Global Oil Market Balance is Expected to Loosen Slightly in 2009.

Source: Energy Information Administration, Short-Term Energy Outlook June 2008.


Estimates of Non-OPEC Supply Growth have been Continually Too Optimistic in Recent Years

Estimate 1 Year Ahead

Estimate End of Current Year

Sources: December editions of IEA’s Oil Market Report.


Brazil, Former Soviet Union countries, and the U.S. Expected to Lead Non-OPEC Supply Growth.

Source: Energy Information Administration, Short-Term Energy Outlook June 2008.


OPEC Spare Capacity has Remained Low, with Most OPEC Countries Producing at Capacity.

Source: Energy Information Administration, Short-Term Energy Outlook June 2008.


OECD Commercial Stocks: from Record Highs to Near-Normal Levels

Source: Energy Information Administration, Short-Term Energy Outlook June 2008.


OECD Total Commercial Oil Stocks:About Average Levels This Year

Source: International Energy Agency database, May 2008.


U.S. Crude Inventories Expected to be in the Middle of the Normal Range

History

Sources: EIA, Short-Term Energy Outlook, June 2008.


OECD European Commercial Crude Oil Stocks: About Average (Absolute Levels)

Source: International Energy Agency database, May 2008.


OECD Pacific Commercial Crude Oil Stocks:Below Average (Absolute Levels)

Source: International Energy Agency database, May 2008.


As Spare Capacity Increases in 2009, OECD Days Supply Will Remain Flat

Sources: WTI: Reuters; OECD Days Supply: International Energy Agency and U.S. Energy Information Administration estimates; World Excess Production Capacity: U.S. Energy Information Administration estimates.


Typical Economic Relationship Between Surplus Production Capacity and Price

Note: MMB/D is million barrels per day

Source: Reuters WTI; EIA Calculations


Modeling Crude Price with Fundamentals

Source: EIA


1980s U.S. Refining Capacity Surplus Disappeared in Last Half of 1990s

Operable Capacity

Gross Inputs

Source: U.S. Energy Information Administration.


Seasonal Crude Use Tight in Early Winter

Source: IEA 10 Year Average Monthly Variations from Annual Average


U.S. Four-Week Average Finished Gasoline Demand Has Shown Negative Growth This Year

Source: EIA Weekly Petroleum Status Report.


U.S. Four-Week Average Total Gasoline Imports Were Lower Than Last Year in March and April

Source: EIA Weekly Petroleum Status Report.


U.S. Gasoline Inventories are in the Average Range for This Time of Year

Source: EIA, Short Term Energy Outlook, June 2008.


Crude Oil and U.S. Gasoline Price Outlook

Regular Gasoline

Wholesale

Gasoline

Crude Oil

(WTI)

Sources: History: EIA; Projections: Short-Term Energy Outlook, June 2008.


U.S. Four-Week Average Total Distillate Demand Growth Has Also Been Negative

Source: EIA Weekly Petroleum Status Report.


U.S. Four-Week Average Total Distillate Imports Are Lower This Year Than the Past 2 Years

Source: EIA Weekly Petroleum Status Report.


Distillate Stocks Are Currently at the Bottom of the Average Range

Forecast

Actual

NOTE: Colored band is the normal inventory range.

Sources: History: EIA; Projections: Short-Term Energy Outlook, June 2008.


New York Heating Oil - Gasoline Price SpreadJanuary 2000-present

NYH No. 2 Heating Oil - NYH Conv. Regular Gasoline

Source: Reuters Weekly Average Spot Prices


European Distillate Demand Continues to Grow

Source: International Energy Agency database, May 2008.


OECD European Commercial Distillate Stocks: Above Average (Absolute Levels)

Source: International Energy Agency database, May 2008.


Europe – New York Heating Oil Price SpreadJanuary 2000-present

ARA Gasoil- NYH Heating Oil

Source: Reuters Weekly Average Spot Prices


Chinese Oil Demand Shows Strong Yearly Growth in Recent Years

Forecast

Source: International Energy Agency database, May 2008.


Much of China’s Oil Demand Growth in Last 2 Years Has Come From Gasoline and Diesel

Source: BP World Statistics 2007.


OECD Pacific Commercial Distillate Stocks:Below Average (Absolute Levels)

Source: International Energy Agency database, May 2008.


Singapore – Gulf Coast Heating Oil Price SpreadJanuary 2000-present

Singapore Gasoil -Gulf Coast No. 2 Heating Oil

Source: Reuters Weekly Average Spot Prices


2008 First Quarter U.S. Distillate Exports Unusually High


U.S. Distillate Price Outlook

On-Highway Diesel

Wholesale

Diesel

Crude Oil

Sources: History: EIA; Projections: Short-Term Energy Outlook, June 2008.


Conclusion: $100 or $150?

  • The crude outlook remains relatively tight with little supply or demand relief in the very short term.

    • Non OPEC supply lagging demand increases – but supplies on the horizon next year

    • OPEC unwillingness to increase production

    • Inventories indicating tight balances currently

    • But demand is shifting

  • While evidence indicates room still exists for more increases, factors are evolving to move prices back some. (Demand slowing in developed countries, price subsidies being lifted)

  • Watch distillate demand...


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