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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 l.jpg
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 l.jpg
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.


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

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


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

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


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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 l.jpg
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.


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

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


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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 l.jpg
OECD Total Commercial Oil Stocks: LevelsAbout Average Levels This Year

Source: International Energy Agency database, May 2008.


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U.S. Crude Inventories Expected Levelsto 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 l.jpg
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 l.jpg
OECD Pacific Commercial Crude Oil Stocks: (Absolute Levels)Below Average (Absolute Levels)

Source: International Energy Agency database, May 2008.


As spare capacity increases in 2009 oecd days supply will remain flat l.jpg
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.


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Typical Economic Relationship Between Surplus Production Capacity and Price

Note: MMB/D is million barrels per day

Source: Reuters WTI; EIA Calculations


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Modeling Crude Price with Fundamentals Capacity and Price

Source: EIA


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

Operable Capacity

Gross Inputs

Source: U.S. Energy Information Administration.


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Seasonal Crude Use Tight in Early Winter Half of 1990s

Source: IEA 10 Year Average Monthly Variations from Annual Average


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

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


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Crude Oil and U.S. Gasoline Price Outlook Time of Year

Regular Gasoline

Wholesale

Gasoline

Crude Oil

(WTI)

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


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

Source: EIA Weekly Petroleum Status Report.


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

Source: EIA Weekly Petroleum Status Report.


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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.


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New York Heating Oil - Gasoline Price Spread RangeJanuary 2000-present

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

Source: Reuters Weekly Average Spot Prices


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European Distillate Demand Continues to Grow Range

Source: International Energy Agency database, May 2008.


Oecd european commercial distillate stocks above average absolute levels l.jpg
OECD European Commercial Distillate Stocks: Above Average (Absolute Levels)

Source: International Energy Agency database, May 2008.


Europe new york heating oil price spread january 2000 present l.jpg
Europe – New York Heating Oil Price Spread (Absolute Levels)January 2000-present

ARA Gasoil- NYH Heating Oil

Source: Reuters Weekly Average Spot Prices


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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 l.jpg
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 l.jpg
OECD Pacific Commercial Distillate Stocks: From Gasoline and DieselBelow Average (Absolute Levels)

Source: International Energy Agency database, May 2008.


Singapore gulf coast heating oil price spread january 2000 present l.jpg
Singapore – Gulf Coast Heating Oil Price Spread From Gasoline and DieselJanuary 2000-present

Singapore Gasoil -Gulf Coast No. 2 Heating Oil

Source: Reuters Weekly Average Spot Prices



U s distillate price outlook l.jpg
U.S. Distillate Price Outlook From Gasoline and Diesel

On-Highway Diesel

Wholesale

Diesel

Crude Oil

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


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Conclusion: $100 or $150? From Gasoline and Diesel

  • 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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