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Petroleum Outlook Petroleum Outlook 2002: 2002: On the Road to On the Road to Pamplona Pamplona John Cook Energy Information Administration NPRA Annual Meeting San Antonio, Texas March 18, 2002

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Page 1: Petroleum Outlook 2002: On the Road to Pamplona John Cook Energy Information Administration NPRA Annual Meeting San Antonio, Texas March 18, 2002

Petroleum Outlook 2002:Petroleum Outlook 2002:On the Road to PamplonaOn the Road to Pamplona

John Cook

Energy Information Administration

NPRA Annual Meeting

San Antonio, Texas

March 18, 2002

Page 2: Petroleum Outlook 2002: On the Road to Pamplona John Cook Energy Information Administration NPRA Annual Meeting San Antonio, Texas March 18, 2002

IntroductionIntroduction• Global Demand (How Much Oil Are We Using?)• Global Supply

– OPEC 10 vs. Iraq vs. non-OPEC

• Inventories: The Intersection of Demand and Supply– Implied Global Inventory Change– Observed OECD Inventories– U.S. Inventories

• WTI Price Outlook• U.S. Gasoline Outlook• U.S. Distillate Fuel Outlook• U.S. Jet Fuel Outlook

Page 3: Petroleum Outlook 2002: On the Road to Pamplona John Cook Energy Information Administration NPRA Annual Meeting San Antonio, Texas March 18, 2002

0

5

10

15

20

25

30

35

40

Jan-91

Jan-92

Jan-93

Jan-94

Jan-95

Jan-96

Jan-97

Jan-98

Jan-99

Jan-00

Jan-01

Jan-02

Jan-03

Do

llar

s p

er B

arre

l

West Texas Intermediate Crude Oil Price

Crude Price Cycles: Where is the Next Turn?Crude Price Cycles: Where is the Next Turn?

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

Page 4: Petroleum Outlook 2002: On the Road to Pamplona John Cook Energy Information Administration NPRA Annual Meeting San Antonio, Texas March 18, 2002

0

5

10

15

20

25

30

35

40

Jan-98

Jul-98

Jan-99

Jul-99

Jan-00

Jul-00

Jan-01

Jul-01

Jan-02

Jul-02

Do

llar

s p

er B

arre

l

Forecast

WTI Crude Oil Price

Crude Oil Prices Expected to Rise Through 2002Crude Oil Prices Expected to Rise Through 2002

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

Page 5: Petroleum Outlook 2002: On the Road to Pamplona John Cook Energy Information Administration NPRA Annual Meeting San Antonio, Texas March 18, 2002

• Supply– Non-OPEC Supply– OPEC 10 Crude Oil Production Volumes– Iraq

• Retroactive Pricing• UN Revisions to Oil-for-Food Program• Upcoming Confrontation?

– Nigeria– Venezuela

• Demand– Weather– Global Economic Recovery– Lingering Impacts from 9/11

• When, Not If, Crude Oil Prices Will Reach $25 per barreland higher

UncertaintiesUncertainties

Page 6: Petroleum Outlook 2002: On the Road to Pamplona John Cook Energy Information Administration NPRA Annual Meeting San Antonio, Texas March 18, 2002

What Is Global Demand or Supply?What Is Global Demand or Supply?Demand 2000 2001 2002

PEL 76.2 76.1 76.2

PIRA 76.6 76.8 77.6

Argus 76.3 76.3 76.6

Deutsche Bank 76.0 75.9 76.5

Supply 2000 2001 2002

PEL 76.8 76.7 76.4

PIRA 77.4 77.2 77.2

Argus 76.6 76.4 74.9*

Deutsche Bank 76.8 76.8 77.2

* Assumes OPEC 10 production remains 1 MMBD below Dec. 2001 for all 2002.

Page 7: Petroleum Outlook 2002: On the Road to Pamplona John Cook Energy Information Administration NPRA Annual Meeting San Antonio, Texas March 18, 2002

0

5

10

15

20

25

30

35

40

Jan-98

Jul-98

Jan-99

Jul-99

Jan-00

Jul-00

Jan-01

Jul-01

Jan-02

Jul-02

Do

llar

s p

er B

arre

l

Forecast

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

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

Page 8: Petroleum Outlook 2002: On the Road to Pamplona John Cook Energy Information Administration NPRA Annual Meeting San Antonio, Texas March 18, 2002

Annual World Oil Demand GrowthAnnual World Oil Demand Growth1991-20021991-2002

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1991-1997Average

1998 1999 2000 2001 2002

Mil

lio

n B

arre

ls p

er D

ay

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

Page 9: Petroleum Outlook 2002: On the Road to Pamplona John Cook Energy Information Administration NPRA Annual Meeting San Antonio, Texas March 18, 2002

Quarterly World Oil Demand GrowthQuarterly World Oil Demand GrowthFrom Previous YearFrom Previous Year

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

1Q00 3Q00 1Q01 3Q01 1Q02 3Q02

Mil

lio

n B

arre

ls p

er D

ay

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

2000 2001 2002

Page 10: Petroleum Outlook 2002: On the Road to Pamplona John Cook Energy Information Administration NPRA Annual Meeting San Antonio, Texas March 18, 2002

Annual World Oil Demand GrowthAnnual World Oil Demand Growthby Region, 1991-2002by Region, 1991-2002

-1.0

-0.8

-0.6

-0.4

-0.2

0.0

0.2

0.4

0.6

0.8

1.0

1991-1997Average

1998 1999 2000 2001 2002

Mil

lio

n B

arre

ls p

er D

ay

Americas Europe Former Soviet Union Asia Other

* Other includes Australia, New Zealand, the Middle East, and Africa.

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

Page 11: Petroleum Outlook 2002: On the Road to Pamplona John Cook Energy Information Administration NPRA Annual Meeting San Antonio, Texas March 18, 2002

U.S. Petroleum Demand in 2U.S. Petroleum Demand in 2ndnd Half of 2002 Half of 2002 Expected to be Higher than in 2001Expected to be Higher than in 2001

-2,000

-1,500

-1,000

-500

0

500

1,000

1,500

2,000

Jan

-01

Feb

-01

Mar-

01

Ap

r-01

May-0

1Ju

n-0

1Ju

l-01

Au

g-0

1S

ep

-01

Oct-

01

No

v-0

1D

ec-0

1Jan

-02

Feb

-02

Mar-

02

Ap

r-02

May-0

2Ju

n-0

2Ju

l-02

Au

g-0

2S

ep

-02

Oct-

02

No

v-0

2D

ec-0

2

Th

ou

san

d B

arr

els

Per

Day

Delta From Previous Year

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

Page 12: Petroleum Outlook 2002: On the Road to Pamplona John Cook Energy Information Administration NPRA Annual Meeting San Antonio, Texas March 18, 2002

Distillate Fuel and Residual Fuel Demand vs. Distillate Fuel and Residual Fuel Demand vs. Spot Natural Gas Wellhead PriceSpot Natural Gas Wellhead Price

-1,250

-1,000

-750

-500

-250

0

250

500

750

1,000

Jan

-00

Ap

r-00

Jul-

00

Oct

-00

Jan

-01

Ap

r-01

Jul-

01

Oct

-01

Jan

-02

Ap

r-02

Jul-

02

Oct

-02

Yea

r-o

n-Y

ear

Ch

ang

e ('0

00 b

/d)

-$10

-$8

-$6

-$4

-$2

$0

$2

$4

$6

$8

Yea

r-o

n-Y

ear

Ch

ang

e ($

/Mcf

)

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

Page 13: Petroleum Outlook 2002: On the Road to Pamplona John Cook Energy Information Administration NPRA Annual Meeting San Antonio, Texas March 18, 2002

Will OPEC Keep Production Down in 2002?Will OPEC Keep Production Down in 2002?

0

5 0

1 9 9

9 Q 1

2 0 0

1 Q 4

OPEC 10 (OPEC excluding Iraq) Iraq0

5 0

1 9 9 9 Q 1 2 0 0 1 Q 3

OPEC 10 (OPEC excluding Iraq) Iraq

0

5 0

1 9 9

9 Q 1

2 0 0

1 Q 4

OPEC 10 (OPEC excluding Iraq) Iraq

15

17

19

21

23

25

27

29

31

1998Q1

1998Q3

1999Q1

1999Q3

2000Q1

2000Q3

2001Q1

2001Q3

2002Q1

2002Q3

Mil

lio

n B

arr

els

pe

r D

ay

OPEC 10 (OPEC excluding Iraq) Iraq OPEC 10 Capacity

History Projections

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

Page 14: Petroleum Outlook 2002: On the Road to Pamplona John Cook Energy Information Administration NPRA Annual Meeting San Antonio, Texas March 18, 2002

Changes in Demand and SupplyChanges in Demand and Supplyfrom 1992 to 2002from 1992 to 2002

-1

0

1

2

3

4

5

6

7

8

9

10

Supply Demand

Mill

ion

Ba

rre

ls p

er

Da

y

* Other includes all non-OPEC supply and OPEC non-crude production.

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

OPEC 10

Iraq

Other Demand

Page 15: Petroleum Outlook 2002: On the Road to Pamplona John Cook Energy Information Administration NPRA Annual Meeting San Antonio, Texas March 18, 2002

EIA’s World Petroleum Balance EIA’s World Petroleum Balance

60

62

64

66

68

70

72

74

76

78

80

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Mil

lio

n B

arr

els

Pe

r D

ay

Production

Demand Stock Build

Stock Draw

Fo

rec

as

t

Source: Energy Information Administration, March 2002.

Page 16: Petroleum Outlook 2002: On the Road to Pamplona John Cook Energy Information Administration NPRA Annual Meeting San Antonio, Texas March 18, 2002

Implied Global Stock ChangeImplied Global Stock ChangeFrom End-1999 Through End-2002From End-1999 Through End-2002

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

4Q99 2Q00 4Q00 2Q01 4Q01 2Q02 4Q02

Mil

lio

n B

arre

ls p

er D

ay

Normal Actual or Estimated

Source: Energy Information Administration, March 2002.

Page 17: Petroleum Outlook 2002: On the Road to Pamplona John Cook Energy Information Administration NPRA Annual Meeting San Antonio, Texas March 18, 2002

OPEC Discipline & Economic Recovery OPEC Discipline & Economic Recovery Tighten World Balance in 2002Tighten World Balance in 2002

*Total includes commercial and government stocks.

3,400

3,500

3,600

3,700

3,800

3,900

4,000

4,100

Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02

Mil

lio

n B

arre

ls

Normal ActualForecast Alt. Forecast

OECD Total Petroleum Inventories

Source: Energy Information Administration, March 2002.

Page 18: Petroleum Outlook 2002: On the Road to Pamplona John Cook Energy Information Administration NPRA Annual Meeting San Antonio, Texas March 18, 2002

$10

$15

$20

$25

$30

$35Ja

n-9

2

Jan

-93

Jan

-94

Jan

-95

Jan

-96

Jan

-97

Jan

-98

Jan

-99

Jan

-00

Jan

-01

Jan

-02

Do

llar

s p

er B

arre

l

WTI Actual and Forecast Based on OECD Stocks

Actual

Forecast

Fundamentals Support Cycle Turning in 2002Fundamentals Support Cycle Turning in 2002

Source: Energy Information Administration, March 2002; International Energy Agency.

Page 19: Petroleum Outlook 2002: On the Road to Pamplona John Cook Energy Information Administration NPRA Annual Meeting San Antonio, Texas March 18, 2002

-20

0

20

40

60

80

100

Jan

-01

Feb

-01

Mar

-01

Ap

r-01

May

-01

Jun

-01

Jul-

01

Au

g-0

1

Sep

-01

Oct

-01

No

v-01

Dec

-01

Ch

an

ge

Fro

m Y

ea

r A

go

Le

ve

ls(M

illio

n B

arr

els

)

N America Europe Pacific

U.S. Commercial Petroleum InventoriesU.S. Commercial Petroleum InventoriesBuilt More Than In Other Regions in 2001Built More Than In Other Regions in 2001

Source: International Energy Agency, Oil Market Report database, February 2002.

Page 20: Petroleum Outlook 2002: On the Road to Pamplona John Cook Energy Information Administration NPRA Annual Meeting San Antonio, Texas March 18, 2002

U.S. Crude Oil and Gasoline Market CyclesU.S. Crude Oil and Gasoline Market Cycles

160

200

240

280

320

360

Dec-97 Dec-98 Dec-99 Dec-00 Dec-01 Dec-02

Mil

lio

n B

arr

els

Crude Oil Lower Operational Inventory

Gasoline Lower Operational Inventory

Gasoline Actual

Crude Oil Actual

NOTE: Colored Bands are Normal Stock Ranges

Forecast

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

Page 21: Petroleum Outlook 2002: On the Road to Pamplona John Cook Energy Information Administration NPRA Annual Meeting San Antonio, Texas March 18, 2002

The Cycle of Refinery Inputs, Inventory The Cycle of Refinery Inputs, Inventory Balance, and MarginsBalance, and Margins

Crude Inputs High Stocks Low

(Summer 2001)

Crude Inputs Decreasing

(Late Winter 2001/02)

Product Stocks Increasing

(Fall 2001)

Refinery Margins Weakening

(Early Winter 2001/02)

Refinery Margins Increasing

(Late Summer 2002)

Excess Stocks Diminishing

(Spring 2002)

Page 22: Petroleum Outlook 2002: On the Road to Pamplona John Cook Energy Information Administration NPRA Annual Meeting San Antonio, Texas March 18, 2002

Margins Have Begun Their Seasonal ClimbMargins Have Begun Their Seasonal Climb

0

10

20

30

40

50

60

Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02

Cen

ts P

er G

allo

n

Average 1997-2001

Actual Monthly Average

Monthly Average Gasoline Price Spread (U.S. Avg. Spot Regular - Average Crude Cost)

April 2001

June 2000

March est.

Source: Reuters, EIA

Page 23: Petroleum Outlook 2002: On the Road to Pamplona John Cook Energy Information Administration NPRA Annual Meeting San Antonio, Texas March 18, 2002

Crude Oil Inputs Ended 2001 at “Normal” Crude Oil Inputs Ended 2001 at “Normal” Levels; Dec. 2000 Was Unusually HighLevels; Dec. 2000 Was Unusually High

13,000

13,500

14,000

14,500

15,000

15,500

16,000Ja

n

Feb

Mar

Ap

r

May

Jun

Jul

Au

g

Sep Oct

No

v

Dec

Th

ou

san

d B

arre

ls P

er D

ay

1998-1999 Avg

2000

2001

2002

U.S. Crude Oil Input to Refineries

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

Page 24: Petroleum Outlook 2002: On the Road to Pamplona John Cook Energy Information Administration NPRA Annual Meeting San Antonio, Texas March 18, 2002

Gasoline Yields Much HigherGasoline Yields Much HigherThan Usual in 2002Than Usual in 2002

48%

50%

52%

54%

56%

58%

60%

Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02

Pe

rce

nt

Yie

ld

Average 1997-2001

Forecast

Actual

Monthly Average U.S. Gasoline Yield

Source: Reuters

Page 25: Petroleum Outlook 2002: On the Road to Pamplona John Cook Energy Information Administration NPRA Annual Meeting San Antonio, Texas March 18, 2002

Record Gasoline Production Likely Record Gasoline Production Likely Throughout 2002Throughout 2002

7,500

7,750

8,000

8,250

8,500

8,750

9,000

Jan

Feb Mar

Ap

r

May

Jun

Jul

Au

g

Sep Oct

No

v

Dec

Th

ou

san

d B

arre

ls P

er D

ay

2000

2001

2002

U.S. Finished Gasoline Production

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

Page 26: Petroleum Outlook 2002: On the Road to Pamplona John Cook Energy Information Administration NPRA Annual Meeting San Antonio, Texas March 18, 2002

Finished Gasoline Net ImportsFinished Gasoline Net ImportsThis Spring/Summer Less Than 1 Year AgoThis Spring/Summer Less Than 1 Year Ago

0

50

100

150

200

250

300

350

400

450

500Ja

n

Feb Mar

Ap

r

May

Jun

Jul

Au

g

Sep Oct

No

v

Dec

Th

ou

san

d B

arre

ls P

er D

ay

2000

2001

2002

U.S. Finished Gasoline Net Imports

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

Page 27: Petroleum Outlook 2002: On the Road to Pamplona John Cook Energy Information Administration NPRA Annual Meeting San Antonio, Texas March 18, 2002

Gasoline Demand Growth ContinuesGasoline Demand Growth Continues

7,500

7,750

8,000

8,250

8,500

8,750

9,000

9,250

9,500

Jan

Feb Mar

Ap

r

May

Jun

Jul

Au

g

Sep Oct

No

v

Dec

Th

ou

san

d B

arre

ls P

er D

ay

2000

2001

2002

U.S. Finished Gasoline Product Supplied

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

Page 28: Petroleum Outlook 2002: On the Road to Pamplona John Cook Energy Information Administration NPRA Annual Meeting San Antonio, Texas March 18, 2002

6,000

6,500

7,000

7,500

8,000

8,500

9,000

9,500

10,000Ja

n-0

0

Ap

r-00

Jul-

00

Oct

-00

Jan

-01

Ap

r-01

Jul-

01

Oct

-01

Jan

-02

Ap

r-02

Jul-

02

Oct

-02

Th

ou

san

d B

arre

ls p

er D

ay

0

50

100

150

200

250

300

350

400

450

500

Sto

cks

(Mil

lio

n B

arre

ls)

Production Net Imports

Demand Alt. Demand

Stocks Alt. Stocks

U.S. Finished Gasoline

Actual Forecast

With Precarious Balance, Higher Demand Would With Precarious Balance, Higher Demand Would Rapidly Draw StocksRapidly Draw Stocks

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

Page 29: Petroleum Outlook 2002: On the Road to Pamplona John Cook Energy Information Administration NPRA Annual Meeting San Antonio, Texas March 18, 2002

Retail Motor Gasoline Prices Will Rise, But Retail Motor Gasoline Prices Will Rise, But Should Remain Below Recent SummersShould Remain Below Recent Summers

* Regular self-service

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

$0.00

$0.20

$0.40

$0.60

$0.80

$1.00

$1.20

$1.40

$1.60

$1.80

$2.00

Jan-98 Jan-99 Jan-00 Jan-01 Jan-02

Pri

ce

pe

r G

allo

n

ForecastHistory

Page 30: Petroleum Outlook 2002: On the Road to Pamplona John Cook Energy Information Administration NPRA Annual Meeting San Antonio, Texas March 18, 2002

90

100

110

120

130

140

150

160

Dec-97

Jun-98

Dec-98

Jun-99

Dec-99

Jun-00

Dec-00

Jun-01

Dec-01

Jun-02

Dec-02

Mil

lio

n B

arre

ls

Actual

Normal Range

Forecast

U.S. Distillate Inventories Will Remain High U.S. Distillate Inventories Will Remain High

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

Page 31: Petroleum Outlook 2002: On the Road to Pamplona John Cook Energy Information Administration NPRA Annual Meeting San Antonio, Texas March 18, 2002

800

1,000

1,200

1,400

1,600

1,800

2,000

Jan

-00

Ap

r-00

Jul-

00

Oct

-00

Jan

-01

Ap

r-01

Jul-

01

Oct

-01

Jan

-02

Ap

r-02

Jul-

02

Oct

-02

Jan

-03

Ap

r-03

Jul-

03

Oct

-03

Th

ou

san

d B

arre

ls p

er D

ay

Net ImportsProduction

Pre-9/11 Demand ForecastDemand

U.S. Jet Fuel Production, Net Imports, and Demand

Actual Forecast

Jet Fuel Demand Recovering SlowlyJet Fuel Demand Recovering Slowly

Sources: History: EIA; Projections: Short-Term Energy Outlook, March 2002, and September 2001.

Page 32: Petroleum Outlook 2002: On the Road to Pamplona John Cook Energy Information Administration NPRA Annual Meeting San Antonio, Texas March 18, 2002

ConclusionsConclusions

• World oil prices are expected to continue upward through 2002– Global economic recovery– OPEC output cuts– Declining inventories

• U.S. market conditions likely to vary by product– Gasoline supply balance will be tight, prices strong– Distillate and jet fuel supplies will be adequate

• However, there are a number of uncertainties– Speed of demand recovery– OPEC response to rising prices