Crude Oil, Heating Oil, and Propane Outlook

1
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
2
EIAs Preliminary Winter Fuels Outlook

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

3
WTI Crude Oil Price Potential for Volatility
Around Base Case
Sources History EIA Projections Short-Term
Energy Outlook, August 2003.
4
Annual World Oil Demand Growth1998-2005
Sources History EIA Projections Short-Term
Energy Outlook, August 2003.
5
Quarterly World Oil Demand GrowthFrom Previous
Year
2001
2002
2003
2004
2000
2005
Sources History EIA Projections Short-Term
Energy Outlook, August 2003.
6
U.S. Petroleum Demand
Sources History EIA Projections Short-Term
Energy Outlook, August 2003.
7
Will OPEC Keep Markets Adequately Supplied?
Projections
History
Sources History EIA Projections Short-Term
Energy Outlook, August 2003.
8
Will OPEC Keep Markets Adequately Supplied?
Projections
History
Sources History EIA Projections Short-Term
Energy Outlook, August 2003.
9
OECD Commercial Crude Oil Inventories Expected to
Recover to Normal Range
End of Month Inventories
Sources EIA, Short-Term Energy Outlook, August
2003
10
When Will U.S. Crude Inventories Recover?
History
Million Barrels
Sources EIA, Short-Term Energy Outlook, August
2003
11
Crude Oil OutlookConclusions

• 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 years end
• WTI prices expected to ease below 30 by
  year-end, possibly as low as 26 by end of 2004

12
Distillate Prices Generally Follow Crude Oil
East Coast Retail On-Highway Diesel Fuel
East Coast Residential Heating Oil
Spot West Texas Intermediate
13
Distillate Prices Generally Follow Crude Oil
East Coast Retail On-Highway Diesel Fuel
?
East Coast Residential Heating Oil
Spot West Texas Intermediate
14
East Coast Distillate Stocks Starting out Low
1999-00
Normal Range
2002-03
2001-02
2000-01
Source Energy Information Administration
15
Distillate Demand Last Year Was Higher Than
Forecast
Sources History EIA Projections Short-Term
Energy Outlook, August 2002, August 2003.
16
Last Winters Weather Was Close to Average
Sources History EIA Projections Short-Term
Energy Outlook, August 2002.
17
Fuel Oil Demand Influenced by Natural Gas Prices
Sources History EIA Projections Short-Term
Energy Outlook, August 2003.
18
Distillate Demand Expected to be Similar to Last
Winters
Sources History EIA Projections Short-Term
Energy Outlook, August 2003.
19
Distillate Production Likely Higher Than Last
Winter
Sources History EIA Projections Short-Term
Energy Outlook, August 2003.
20
Distillate Imports Were Stronger Last Winter
Sources History EIA Projections Short-Term
Energy Outlook, August 2003.
21
Distillate Supply/Demand Balance Reflected in
Spreads
Spot Heating Oil Price
WTI Price
22
Distillate Stocks Expected to Remain Low
Forecast
Actual
Sources History EIA Projections Short-Term
Energy Outlook, August 2003.
23
Winter Crude Oil and Distillate Price Outlook
Residential Heating Oil
Wholesale Distillate
Crude Oil (WTI)
Sources History EIA Projections Short-Term
Energy Outlook, August 2003.
24
Consumer Prices and Expenditures Heating Oil
(Northeast)
25
Heating Oil OutlookConclusion

• 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

26
Propane Prices Follow Crude Oil
27
Propane Prices Follow Crude Oil and Natural Gas
28
Propane Prices Follow Crude Oil and Natural Gas
29
Total U.S. Propane Production Lower Than Recent
Years
4-Week Average
Source Energy Information Administration
30
Propane Production by Source
Tropical Storms
Refinery Outages Turnarounds
High Natural Gas Prices
Source Energy Information Administration
31
Gas Plant Production by PAD District
Source Energy Information Administration
32
U.S. Propane Imports
4-Week Average
Source Energy Information Administration
33
U.S. Propane Imports
Waterborne
Source Energy Information Administration
34
U.S. Propane Exports
Exports increase from U.S. Gulf Coast due to loss
of supply from Venezuela.
Source Energy Information Administration
35
Propane Demand is Highly Seasonal, But Fresh
Supply is Not
Source Energy Information Administration
36
Propane Stock Build/Draw
As of Aug. 1
Source Energy Information Administration
37
U.S. Propane Stocks
Forecast
Average Range
Actual
Lower Operational Inventory 18.5 Million Barrels
Source Energy Information Administration
38
PAD District I Stocks (East Coast)
Actual
Average Range
Source Energy Information Administration
39
PAD District II Stocks (Midwest)
Actual
Average Range
Source Energy Information Administration
40
PAD District III Stocks (Gulf Coast)
Actual
Average Range
Source Energy Information Administration
41
Consumer Prices and Expenditures Propane
(Midwest)
42
Propane OutlookConclusion

• 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

43
Gasoline Prices Ending Summer on the Upswing