Petroleum and Natural Gas Outlook

1
Petroleum and Natural Gas Outlook

• Briefing for the
• National Association of State Energy Officials
• 2005 Energy Outlook Conference
• Washington, DC

Mike Burdette Petroleum Division, Energy
Information Administration February 17, 2005
2
EIAs Petroleum and Natural Gas Outlook

• Crude oil price outlook
• Global oil supply/demand fundamentals
• Global and U.S. petroleum stocks
• U.S. refinery capacity and utilization
• U.S. petroleum product supply, demand, and prices
• Natural gas price and supply outlook
• Residential heating fuel costs

3
WTI Crude Oil Price Potential for Volatility
Around Base Case
Sources History EIA Projections Short-Term
Energy Outlook, February 2005.
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Weighing the Market

• Bulls
• Continued strong economic and oil demand growth
• Little spare capacity available
• Relatively low inventories
• Possible supply disruptions, including Iraq,
  Russia, Venezuela, Saudi Arabia, and Nigeria

• Bears
• Slowing economic and oil demand growth
• More supply
• Inventory recovery
• More capacity growth
• Milder winter weather
• Easing supply risks

5
Low Excess Capacity and Low Days of Supply Are
Fundamentals Supporting High Crude Prices
Sources WTI Reuters OECD Days Supply
International Energy Agency World Excess
Production Capacity U.S. Energy Information
Administration estimates.
6
OPEC Spare Capacity Is Extremely Tight Right Now
Source U.S. Energy Information Administration
estimates.
7
Annual World Oil Demand Growth Was Unexpectedly
Strong in 2004
Forecast
History
Source EIA, Short-Term Energy Outlook, February
2005.
8
OECD Commercial Oil Inventories(Using 5-Year
Average and /- 1 STD)
Source History IEA Forecast EIA Short-Term
Energy Outlook, February 2005.
9
U.S. Crude Inventories Projected to Remain in
Normal Range
Million Barrels
Sources EIA, Short-Term Energy Outlook, February
2005.
10
U.S. Gasoline and Distillate Inventories
Sources History EIA Projections Short-Term
Energy Outlook, February 2005.
11
Capacity Surplus Disappearing, Creating
Short-Term Challenge
Forecast
Operable Capacity
Gross Inputs
Sources History EIA Projections Short-Term
Energy Outlook, February 2005.
12
U.S. Gasoline Supply and Demand
Sources History EIA Projections Short-Term
Energy Outlook, February 2005.
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Gasoline Supply/Demand BalanceReflected in
Spreads
Spot Gasoline Price
WTI Price
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Crude Oil, Gasoline, and Diesel Fuel Prices
Retail Regular Gasoline
Retail Diesel Fuel
Crude Oil (WTI)
Sources EIA Short-Term Energy Outlook, February
2005.
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U.S. Natural Gas Spot Prices Henry Hub
Sources History EIA Projections Short-Term
Energy Outlook, February 2005.
16
Working Gas in Underground Storage
Sources EIA, Short-Term Energy Outlook, February
2005.
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Residential Heating Fuel Costs
Source Short-Term Energy Outlook, February
2005.
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Petroleum and Natural Gas OutlookConclusion

• EIA expects global crude oil prices to decline
  modestly this year and next, but remain over 40
  per barrel (WTI)
• Growth in global oil demand has outstripped that
  in supply in recent years, decreasing spare
  production capacity
• Global production capacity expansion will begin
  to catch up, re-establishing some increment of
  spare capacity
• Global and U.S. petroleum inventories will return
  to/remain near average levels through next year
• U.S. gasoline supplies appear solid to date ahead
  of the driving season, but strong demand, limited
  U.S. refinery capacity, and competition for
  imports could tighten the balance
• U.S. retail gasoline prices will peak near last
  years highs
• Natural gas prices are expected to soften due to
  adequate supplies
• LNG will grow in importance in the U.S. natural
  gas supply picture
• Residential heating fuel costs for this winter
  will total 10-30 more than last year