# Presentation: 448074

## Next Stop for Oil Prices: 

**$100**

**$150**

**?**

**Next Stop for Oil Prices: **
**$100 or $150?**

**Macroeconomic Advisers**
**Quarterly Meeting**
**June 2008**

**John Cook, Director**
**EIA Petroleum Division**
**June 11, 2008**

## WTI Crude Oil Prices: 2001-2009

**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

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

**Source: New York Mercantile Exchange.**** **

**12/2/2002**

**12/1/2003**

**12/1/2004**

**12/1/2005**

**6/2/2008**

**8/1/2006**

**8/1/2007**

## 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

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

**Estimate 1 Year Ahead**

**Estimate End of Current Year**

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

**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

**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

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

**History**

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

**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)

**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

**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

**Source: Reuters WTI; EIA Calculations**

**Note: MMB/D is million barrels per day**

## Modeling Crude Price with Fundamentals

**Source: EIA**

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

**Gross Inputs**

**Operable Capacity**

**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

**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

**Distillate Stocks Are Currently at the Bottom of the Average Range**

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

**Actual**

**Forecast**

***NOTE: Colored band is the normal inventory range.***

## New York Heating Oil - Gasoline Price SpreadJanuary 2000-present

**New York Heating Oil - Gasoline Price Spread****January 2000-present**

**Source: Reuters Weekly Average Spot Prices**

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

## European Distillate Demand Continues to Grow

**European Distillate Demand Continues to Grow**

**Source:  International Energy Agency database, May 2008.**

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

**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

**Europe – New York Heating Oil Price Spread****January 2000-present**

**Source: Reuters Weekly Average Spot Prices**

**ARA Gasoil- NYH Heating Oil**

## Chinese Oil Demand Shows Strong Yearly Growth in Recent Years

**Source:  International Energy Agency database, May 2008.**

**Forecast**

## 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)

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

**Source:  International Energy Agency database, May 2008.**

## Singapore – Gulf Coast Heating Oil Price SpreadJanuary 2000-present

**Singapore – Gulf Coast Heating Oil Price Spread****January 2000-present**

**Source: Reuters Weekly Average Spot Prices**

**Singapore Gasoil -Gulf Coast No. 2 Heating Oil**

## 2008 First Quarter U.S. Distillate Exports Unusually High

## U.S. Distillate Price Outlook 

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

**Crude Oil**

**On-Highway Diesel**

**Wholesale**
**Diesel**

## 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...  **