the world oil market in 2006 tutor2u
DESCRIPTION
Price of Brent Crude in 2006TRANSCRIPT
The World Oil Market in 2006tutor2uwww.tutor2u.net
The world oil market in 2006
• A year of price volatility• Oil prices peaked at almost $80 a barrel • Brent crude ended the year at $60 a barrel• Prices are still at historically high levels• Slowdown in world economy including the
USA will impact on global demand• Oil production has increased – but OPEC is
looking to make production cuts to put a floor on the world price
Price of Brent Crude in 2006
Closing daily price, US dollars per barrel of oilBrent Crude Oil Prices
Source: Reuters EcoWin
Jan06
Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
US
dolla
rs p
er b
arre
l
55.0
57.5
60.0
62.5
65.0
67.5
70.0
72.5
75.0
77.5
80.0
Futures prices have also dipped
Price - US dollars per barrel, closing daily priceFutures Prices for Oil
Light Crude Futures Z06 (Dec 2006), Nymex Light Crude Futures Z07 (Dec 2007), Nymex Light Crude Futures Z08 (Dec 2008), Nymex
Light Crude Futures Z09 (Dec 2009), Nymex Light Crude Futures Z10 (Dec 2010), Nymex Light Crude Futures Z11 (Dec 2011), Nymex
Source: Reuters EcoWin
January06
February March April May June July August September October NovemberDecember
Pric
e
55.0
57.5
60.0
62.5
65.0
67.5
70.0
72.5
75.0
77.5
80.0
Global oil consumption has risen
Millions of barrels per day, annual figureWorld Consumption of Oil
Source: Reuters EcoWin
96 97 98 99 00 01 02 03 04 05
Barr
els/
Day
(mill
ions
)
67
68
69
70
71
72
73
74
75
76
77
78
Driven by China
Million barrels of oil per day, source: International Energy AgencyChina's Consumption of Oil
Source: Reuters EcoWin
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q402 03 04 05 06
Barr
els/
Day
(mill
ions
)
4.5
5.0
5.5
6.0
6.5
7.0
7.5
And other BRICs
Million barrels per dayOil Consumption - Brazil
Source: Reuters EcoWin
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q402 03 04 05 06 07
Barr
els/
Day
(mill
ions
)
1.95
2.00
2.05
2.10
2.15
2.20
2.25
2.30
But Brazil is also raising output
Million barrels per dayOil Consumption and Production - Brazil
Consumption ProductionSource: Reuters EcoWin
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q402 03 04 05 06
Barr
els/
Day
(mill
ions
)
1.7
1.8
1.9
2.0
2.1
2.2
2.3
Oil Production
Oil Consumption
Gas guzzlers in America!
Millions of barrels per day, data for 2006 and 2007 is a forecastUSA Oil Consumption
Source: Reuters EcoWin
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q402 03 04 05 06
Barr
els/
Day
(mill
ions
)
19.50
19.75
20.00
20.25
20.50
20.75
21.00
21.25
OPEC has stabilised production
Million barrels per dayTotal OPEC Crude Oil Production
Source: Reuters EcoWin
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q300 01 02 03 04 05 06
Barr
els/
Day
(mill
ions
)
24
25
26
27
28
29
30
31
Saudi Arabia has squeezed supply
Quarterly oil production in millions of barrels per day, source: International Energy AgencySaudi Arabia Oil Production
Source: Reuters EcoWin
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q302 03 04 05 06
Barr
els/
Day
(mill
ions
)
7.00
7.25
7.50
7.75
8.00
8.25
8.50
8.75
9.00
9.25
9.50
October 2006 – OPEC announces a cut in oil production
• “OPEC Member Countries have decided to reduce their crude oil production in a bid to bring global oil supply more in line with actual demand.
• OPEC has agreed to cut output from the Organization, excluding Iraq, by 1.2 million barrels/day, effective November 1st 2006
• OPEC is concerned that global crude oil supplies were well in excess of demand, as the above average level of crude oil stocks in OECD countries demonstrated.
• They observed that the oversupply situation and imbalance in supply and demand fundamentals had destabilized the market.”
• Source: OPEC Observer
World crude oil stock levels
Billion barrelsStock Levels of Oil
Industry Stocks, Pacific, Crude Industry Stocks, OECD, Crude
Industry Stocks, North America, Crude Industry Stocks, Europe, Crude
Source: Reuters EcoWin
Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul02 03 04 05 06
Barr
els
(bill
ions
)
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
North America
Europe
Pacific countries
All OECD countries
OPEC is now looking for quota cuts
Million barrels per dayOPEC Production Quotas
OPEC production quota, Algeria OPEC production quota, Indonesia OPEC production quota, Iran OPEC production quota, Iraq
OPEC production quota, Kuwait OPEC production quota, Libya OPEC production quota, Nigeria OPEC production quota, Qatar
OPEC production quota, Saudi Arabia OPEC production quota, UAE OPEC production quota, Venezuela
Source: Reuters EcoWin
Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep04 05 06
Barr
els/
Day
(mill
ions
)
0
1
2
3
4
5
6
7
8
9
10
But OPEC output is below capacity
Million barrels per day, source: International Energy AgencyOPEC Crude Oil Production against Capacity
Total OPEC Crude Output OPEC Sustainable Production CapacitySource: Reuters EcoWin
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q302 03 04 05 06
Barr
els/
Day
(mill
ions
)
24
25
26
27
28
29
30
31
32
33
Total Crude Production
Sustainable Production Capacity
OPEC’s share of world production
per centOPEC's percentage of total world oil output
Source: Reuters EcoWin
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05
Perc
ent
37
38
39
40
41
42
43
OPEC
• OPEC is a permanent, intergovernmental Organization, established in 1960
• Its objective is to coordinate and unify petroleum policies among Member Countries, in order to secure fair and stable prices for petroleum producers; an efficient, economic and regular supply of petroleum to consuming nations; and a fair return on capital to those investing in the industry.
• The Organization now comprises 11 Members
High oil prices – little impact on world inflation – yet!
Annual % change in consumer prices, source: International Monetary Fund (IMF)World Consumer Price Inflation and Oil Prices
Energy, Oil, Crude Oil/Petroleum, USD Interest rates prices, production or labour, Consumer prices, CPI % CHANGESource: Reuters EcoWin
00 01 02 03 04 05 06
Perc
ent p
er A
nnum
2.75
3.00
3.25
3.50
3.75
4.00
4.25
4.50
4.75
World Consumer Price Inflation
USD
/Bar
rel
10
30
50
70Average world crude oil price
Suggestions for more research
• OPEC• International Energy Agency• BBC news
– Oil prices rise on Opec cut news (Dec 2006)– Oil up as Opec plans output cut (Oct 2006)– Oil markets explained (March 2003)
• Guardian special reports on oil