# Presentation: 786545

## Crude Oil, Heating Oil, and Propane Outlook

- Briefing for the
- State Heating Oil and Propane Program Conference
- Asheville, NC

- Mike Burdette
**Petroleum Division,** **Energy Information Administration**
- August 11, 2003

## EIA’s Preliminary Winter Fuels Outlook

**World Oil Markets**
**U.S. Heating Oil**
**U.S. Propane**

## WTI Crude Oil Price: Potential for Volatility Around Base Case

**WTI Crude Oil Price: Potential for Volatility Around Base Case**

**Sources: History:  EIA;  Projections: Short-Term Energy Outlook, August 2003.**

## Annual World Oil Demand Growth1998-2005

**Sources: History:  EIA;  Projections: Short-Term Energy Outlook, August 2003.**

## Quarterly World Oil Demand GrowthFrom Previous Year

**Sources: History:  EIA;  Projections: Short-Term Energy Outlook, August 2003.**

**2001**

**2002**

**2003**

**2004**

**2000**

**2005**

## U.S. Petroleum Demand

**Sources: History:  EIA;  Projections: Short-Term Energy Outlook, August 2003.**

## Will OPEC Keep Markets Adequately Supplied?

**History**

**Projections**

**Sources: History:  EIA;  Projections: Short-Term Energy Outlook, August 2003.**

## Will OPEC Keep Markets Adequately Supplied?

**History**

**Projections**

**Sources: History:  EIA;  Projections: Short-Term Energy Outlook, August 2003.**

## OECD Commercial Crude Oil Inventories Expected to Recover to Normal Range

**Sources: EIA, Short-Term Energy Outlook, August 2003**

**End of Month Inventories**

## When Will U.S. Crude Inventories Recover?

**Sources: EIA, Short-Term Energy Outlook, August 2003**

**History**

**Million Barrels**

## Crude Oil OutlookConclusions

**U.S. and global oil demand continues to recover**
**Iraqi and non-OPEC production is expected to rise**
**OPEC intends to adjust as necessary to maintain prices near current levels**
**OECD inventories should return to low end of normal range by year’s end**
**WTI prices expected to ease below $30 by year-end, possibly as low as $26 by end of 2004**

## Distillate Prices Generally Follow Crude Oil

**Spot West Texas Intermediate**

**East Coast Retail On-Highway Diesel Fuel**

**East Coast Residential Heating Oil**

## Distillate Prices Generally Follow Crude Oil

**Spot West Texas Intermediate**

**East Coast Retail On-Highway Diesel Fuel**

**East Coast Residential Heating Oil**

**?**

## East Coast Distillate Stocks Starting out Low

**Source: Energy Information Administration**

**Normal Range**

**2000-01**

**1999-00**

**2002-03**

**2001-02**

## Distillate Demand Last Year Was Higher Than Forecast

**Sources: History:  EIA;  Projections: Short-Term Energy Outlook, August 2002, **
**August 2003.**

## Last Winter’s Weather Was Close to Average

**Sources: History:  EIA;  Projections: Short-Term Energy Outlook, August 2002.**

## Fuel Oil Demand Influenced by Natural Gas Prices

**Sources: History:  EIA;  Projections: Short-Term Energy Outlook, August 2003.**

## Distillate Demand Expected to be Similar to Last Winter’s

**Sources: History:  EIA;  Projections: Short-Term Energy Outlook, August 2003.**

## Distillate Production Likely Higher Than Last Winter

**Sources: History:  EIA;  Projections: Short-Term Energy Outlook, August 2003.**

## Distillate Imports Were Stronger Last Winter

**Sources: History:  EIA;  Projections: Short-Term Energy Outlook, August 2003.**

## Distillate Supply/Demand Balance Reflected in Spreads

**Spot Heating Oil Price**

**WTI Price**

## Distillate Stocks Expected to Remain Low

**Distillate Stocks Expected to Remain Low**

**Sources: History:  EIA;  Projections: Short-Term Energy Outlook, August 2003.**

**Actual**

**Forecast**

## Winter Crude Oil and Distillate Price Outlook 

**Sources: History:  EIA;  Projections: Short-Term Energy Outlook, August 2003.**

**Residential**
**Heating Oil**

**Wholesale**
**Distillate**

**Crude Oil **
**(WTI)**

## Consumer Prices and Expenditures – Heating Oil (Northeast)

|  | 2000-2001 | 2001-2002 | 2002-2003 | 2003-2004 |
| --- | --- | --- | --- | --- |
|  | Actual | Actual
 | Actual
 | Forecast (est.) |
| Consumption (gals.) | 731 | 584 | 711 | 692 |
| Average Price | $1.37 | $1.10 | $1.31 | $1.29 |
| Expenditures | $999 | $643 | $931 | $893 |

## Heating Oil OutlookConclusion

- Distillate stocks are likely to be low going into the winter
- Prices likely to average similar or less than last winter, given current crude oil price forecast
- Residential customers’ fuel requirements should be similar to last winter, if weather is normal
- Slightly lower prices and volumes could yield savings compared to last year

## Propane Prices Follow Crude Oil

## Propane Prices Follow Crude Oil and Natural Gas

## Propane Prices Follow Crude Oil and Natural Gas

## Total U.S. Propane Production Lower Than Recent Years

**Source: Energy Information Administration**

**4-Week Average**

## Propane Production by Source

**Source: Energy Information Administration**

**Tropical Storms**

**Refinery Outages &Turnarounds**

**High Natural Gas Prices**

## Gas Plant Production by PAD District 

**Source: Energy Information Administration**

## U.S. Propane Imports

**Source: Energy Information Administration**

**4-Week Average**

## U.S. Propane Imports

**Source: Energy Information Administration**

**Waterborne**

## U.S. Propane Exports

**Source: Energy Information Administration**

**Exports increase from U.S. Gulf Coast due to loss of supply from Venezuela.**

## Propane Demand is Highly Seasonal, But Fresh Supply is Not

**Source: Energy Information Administration**

## Propane Stock Build/Draw

**Source: Energy Information Administration**

** ****As of Aug. 1**

## U.S. Propane Stocks

**  ****Average Range**

**Lower Operational Inventory = 18.5 Million Barrels**

**Actual**

**Forecast**

**Source: Energy Information Administration**

## PAD District I Stocks (East Coast)

**   ****Average Range**

**Source: Energy Information Administration**

**Actual**

## PAD District II Stocks (Midwest)

**   ****Average Range**

**Source: Energy Information Administration**

**Actual**

## PAD District III Stocks (Gulf Coast)

** ****Average Range**

**Source: Energy Information Administration**

**PAD District III Stocks ****(Gulf Coast)**

**Actual**

## Consumer Prices and Expenditures – Propane (Midwest)

|  | 2000-2001 | 2001-2002 | 2002-2003 | 2003-2004 |
| --- | --- | --- | --- | --- |
|  | Actual | Actual
 | Actual
 | Forecast (est.) |
| Consumption (gals.) | 979 | 803 | 936 | 902 |
| Average Price | $1.37 | $1.11 | $1.20 | $1.20 |
| Expenditures | $1,344 | $887 | $1,122 | $1,082 |

## Propane OutlookConclusion

- U.S. inventories likely to remain at low end of historic average range
- Propane prices should remain stable this winter -- but natural gas prices are the wild card
- Residential customers’ fuel requirements should be similar to last winter, if weather is normal
- Slightly lower prices and volumes could yield savings compared to last year

## Gasoline Prices Ending Summer on the Upswing