petroleum outlook 2002: on the road to pamplona john cook energy information administration npra...
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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
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
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.
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.
• 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
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.
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.
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.
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
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.
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.
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.
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.
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
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.
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.
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.
$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.
-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.
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.
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)
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
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.
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
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.
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.
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.
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.
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
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.
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.
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