Petroleum Outlook 2002: On the Road to Pamplona

1
Petroleum Outlook 2002On the Road to Pamplona

• John Cook
• Energy Information Administration
• NPRA Annual Meeting
• San Antonio, Texas
• March 18, 2002

2
Introduction

• 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

3
Crude Price Cycles Where is the Next Turn?
Sources History EIA Projections Short-Term
Energy Outlook, March 2002.
4
Crude Oil Prices Expected to Rise Through 2002
Sources History EIA Projections Short-Term
Energy Outlook, March 2002.
5
Uncertainties

• 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
  barrel
• and higher

6
What Is Global Demand or Supply?
Assumes OPEC 10 production remains 1 MMBD
below Dec. 2001 for all 2002.
7
WTI Crude Oil Price Potential for Volatility
Around Base Case
Sources History EIA Projections Short-Term
Energy Outlook, March 2002.
8
Annual World Oil Demand Growth1991-2002
Sources History EIA Projections Short-Term
Energy Outlook, March 2002.
9
Quarterly World Oil Demand GrowthFrom Previous
Year
2000
2001
2002
Sources History EIA Projections Short-Term
Energy Outlook, March 2002.
10
Annual World Oil Demand Growthby Region,
1991-2002
Other includes Australia, New Zealand, the
Middle East, and Africa.
Sources History EIA Projections Short-Term
Energy Outlook, March 2002.
11
U.S. Petroleum Demand in 2nd Half of 2002
Expected to be Higher than in 2001
Sources History EIA Projections Short-Term
Energy Outlook, March 2002.
12
Distillate Fuel and Residual Fuel Demand vs. Spot
Natural Gas Wellhead Price
Sources History EIA Projections Short-Term
Energy Outlook, March 2002.
13
Will OPEC Keep Production Down in 2002?
History
Projections
Sources History EIA Projections Short-Term
Energy Outlook, March 2002.
14
Changes in Demand and Supplyfrom 1992 to 2002
Demand
Other
Iraq
OPEC 10
Other includes all non-OPEC supply and OPEC
non-crude production.
Sources History EIA Projections Short-Term
Energy Outlook, March 2002.
15
EIAs World Petroleum Balance
Source Energy Information Administration, March
2002.
16
Implied Global Stock ChangeFrom End-1999 Through
End-2002
Source Energy Information Administration, March
2002.
17
OPEC Discipline Economic Recovery Tighten World
Balance in 2002
Total includes commercial and government stocks.
Source Energy Information Administration, March
2002.
18
Fundamentals Support Cycle Turning in 2002
Source Energy Information Administration, March
2002 International Energy Agency.
19
U.S. Commercial Petroleum InventoriesBuilt More
Than In Other Regions in 2001
Source International Energy Agency, Oil Market
Report database, February 2002.
20
U.S. Crude Oil and Gasoline Market Cycles
Sources History EIA Projections Short-Term
Energy Outlook, March 2002.
21
The Cycle of Refinery Inputs, Inventory Balance,
and Margins
Crude Inputs High Stocks Low (Summer 2001)
Product Stocks Increasing (Fall 2001)
Refinery Margins Increasing (Late Summer 2002)
Excess Stocks Diminishing (Spring 2002)
Refinery Margins Weakening (Early Winter 2001/02)
Crude Inputs Decreasing (Late Winter 2001/02)
22
Margins Have Begun Their Seasonal Climb
Source Reuters, EIA
23
Crude Oil Inputs Ended 2001 at Normal Levels
Dec. 2000 Was Unusually High
Sources History EIA Projections Short-Term
Energy Outlook, March 2002.
24
Gasoline Yields Much HigherThan Usual in 2002
Source Reuters
25
Record Gasoline Production Likely Throughout 2002
Sources History EIA Projections Short-Term
Energy Outlook, March 2002.
26
Finished Gasoline Net ImportsThis Spring/Summer
Less Than 1 Year Ago
Sources History EIA Projections Short-Term
Energy Outlook, March 2002.
27
Gasoline Demand Growth Continues
Sources History EIA Projections Short-Term
Energy Outlook, March 2002.
28
With Precarious Balance, Higher Demand Would
Rapidly Draw Stocks
Sources History EIA Projections Short-Term
Energy Outlook, March 2002.
29
Retail Motor Gasoline Prices Will Rise, But
Should Remain Below Recent Summers
Regular self-service
Sources History EIA Projections Short-Term
Energy Outlook, March 2002.
30
U.S. Distillate Inventories Will Remain High
Sources History EIA Projections Short-Term
Energy Outlook, March 2002.
31
Jet Fuel Demand Recovering Slowly
Sources History EIA Projections Short-Term
Energy Outlook, March 2002, and September 2001.
32
Conclusions

• 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