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Crude Oil, Heating Oil, and Propane Market Outlook
Briefing for the
State Heating Oil and Propane Program Conference
Kennebunkport, ME
by Douglas MacIntyre
Petroleum Division, Energy Information Administration
August 12, 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
Jan-03
Jul-03
Do
llar
s p
er B
arre
l
Forecast
WTI Crude Oil Price: Potential for Volatility Around Base Case
Sources: History: EIA; Projections: Short-Term Energy Outlook, August 2002.
Annual World Oil Demand Growth1991-2002
-0.2
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1991-1997
Average
1998 1999 2000 2001 2002 2003
Mil
lio
n B
arre
ls p
er D
ay
Sources: History: EIA; Projections: Short-Term Energy Outlook, August 2002.
Quarterly World Oil Demand GrowthFrom Previous Year
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
1Q00 3Q00 1Q01 3Q01 1Q02 3Q02 1Q03 3Q03
Mil
lio
n B
arre
ls p
er D
ay
Sources: History: EIA; Projections: Short-Term Energy Outlook, August 2002.
2000 2001 2002 2003
U.S. Petroleum Demand in 2nd Half of 2002 Expected to be Higher than in 2001
-2,000
-1,500
-1,000
-500
0
500
1,000
1,500
2,000Ja
n-0
1F
eb-0
1M
ar-0
1A
pr-
01M
ay-0
1Ju
n-0
1Ju
l-01
Au
g-0
1S
ep-0
1O
ct-0
1N
ov-
01D
ec-0
1Ja
n-0
2F
eb-0
2M
ar-0
2A
pr-
02M
ay-0
2Ju
n-0
2Ju
l-02
Au
g-0
2S
ep-0
2O
ct-0
2N
ov-
02D
ec-0
2Ja
n-0
3F
eb-0
3M
ar-0
3
Th
ou
sa
nd
Ba
rre
ls P
er
Da
y
Delta From Previous Year
Sources: History: EIA; Projections: Short-Term Energy Outlook, August 2002.
Will OPEC Continue to Keep Production Low?
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
'98Q1
'98Q3
'99Q1
'99Q3
'00Q1
'00Q3
'01Q1
'01Q3
'01Q2
'02Q3
'03Q1
Mill
ion
Ba
rre
ls p
er
Da
y
OPEC 10 (OPEC excluding Iraq) Iraq OPEC 10 Capacity
History Projections
Sources: History: EIA; Projections: Short-Term Energy Outlook, August 2002.
Will OPEC Continue to Keep Production Low?
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
'98Q1
'98Q3
'99Q1
'99Q3
'00Q1
'00Q3
'01Q1
'01Q3
'01Q2
'02Q3
'03Q1
Mill
ion
Ba
rre
ls p
er
Da
y
OPEC 10 (OPEC excluding Iraq) Iraq OPEC 10 Capacity
History Projections
Sources: History: EIA; Projections: Short-Term Energy Outlook, August 2002.
Crude Oil OutlookConclusions
• U.S. and global oil demand is recovering
• OPEC crude oil production could make for a tight crude oil situation this winter
• WTI prices could be close to $30 per barrel this winter; perhaps higher if OPEC doesn’t increase production after September meeting
Distillate Prices Generally Follow Crude Oil
0
20
40
60
80
100
120
140
160
180
Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02
Cen
ts P
er G
allo
n
Source: Spot Prices, S&P DRI Platt's; Retail, EIA
Monthly Average Prices
Spot West Texas Intermediate
East Coast Retail On-Highway Diesel Fuel
East Coast Residential Heating Oil
Distillate Stocks on the East Coast Built Through December Last Winter
0
10
20
30
40
50
60
70
80
90
100
Jul Oct Jan Apr
Mil
lio
n B
arre
ls
East Coast Total Distillate Stocks
Source: Energy Information Administration
Normal Range
2000-01
1999-001998-99
2001-02
Distillate Demand Forecast Last Year Right On Target Assuming Normal Weather
3000
3200
3400
3600
3800
4000
4200
4400Ju
l
Au
g
Sep Oct
No
v
Dec
Jan
Feb
Mar
Ap
r
May
Jun
e
Th
ou
san
d B
arre
ls P
er D
ay
August 2001 Forecast for 2001-2002
2001-2002 Actual Data
U.S. Total Distillate Product Supplied
Sources: History: EIA; Projections: Short-Term Energy Outlook, August 2001.
Heating Degree Days Deviation from NormalSince '95-'96 Winter
-300
-200
-100
0
100
200
300O
ct-
95
Ap
r-9
6
Oc
t-96
Ap
r-9
7
Oc
t-97
Ap
r-9
8
Oc
t-98
Ap
r-9
9
Oc
t-99
Ap
r-0
0
Oc
t-00
Ap
r-0
1
Oc
t-01H
eati
ng
Deg
ree D
ay D
elt
a f
rom
No
rmal
Sources: History: EIA; Projections: Short-Term Energy Outlook, August 2002.
Distillate Demand Should Be Higher This Winter If Weather Is Normal
3000
3200
3400
3600
3800
4000
4200
4400Ju
l
Au
g
Sep Oct
No
v
Dec
Jan
Feb
Mar
Ap
r
May
Jun
e
Th
ou
san
d B
arre
ls P
er D
ay
2000-01
2001-2002
Forecast
U.S. Total Distillate Product Supplied
Sources: History: EIA; Projections: Short-Term Energy Outlook, August 2002.
Distillate Fuel and Residual Fuel Demand vs. Spot Natural Gas Wellhead Price
-1,500
-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
Jan
-03
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, August 2002.
Less Supply Likely This Fall Due to Increase in Jet Fuel Production
20%
21%
22%
23%
24%
25%
26%
27%J
an
-92
Ja
n-9
3
Ja
n-9
4
Ja
n-9
5
Ja
n-9
6
Ja
n-9
7
Ja
n-9
8
Ja
n-9
9
Ja
n-0
0
Ja
n-0
1
Ja
n-0
2
Ja
n-0
3
Distillate Yields (Production/Crude Inputs)
Sources: History: EIA; Projections: Short-Term Energy Outlook, August 2002.
Forecast
Distillate Fuel Oil ImportsWeren’t Needed This Past Winter!
-100
0
100
200
300
400
500
600
700
800J
ul
Au
g
Se
p
Oc
t
No
v
De
c
Ja
n
Fe
b
Ma
r
Ap
r
Ma
y
Ju
ne
Th
ou
san
d B
arr
els
Per
Day Average 96-00
Forecast
2001-022000-01
U.S. Distillate Net Imports
Sources: History: EIA; Projections: Short-Term Energy Outlook, August 2002.
Distillate Supply/Demand Balance Reflected in Spreads
0
20
40
60
80
100
120
Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02
Cen
ts P
er G
allo
n
NY Harbor Distillate - WTI Crude Oil Price
Source: DRI Platt's Spot Prices
Spot Heating Oil Price
WTI Price
8090
100110120130140150160170180
Dec-97
Jun-98
Dec-98
Jun-99
Dec-99
Jun-00
Dec-00
Jun-01
Dec-01
Jun-02
Dec-02
Jun-03
Mil
lio
n B
arre
ls
NOTE: Colored Band is Normal Stock Range
U.S. Total Distillate Stocks
Distillate Stocks Expectedto Remain Low
Sources: History: EIA; Projections: Short-Term Energy Outlook, August 2002.
Actual Forecast
Winter Crude Oil andDistillate Price Outlook
$0.00
$0.20
$0.40
$0.60
$0.80
$1.00
$1.20
$1.40
$1.60
Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03
$/G
allo
n
Forecast
Sources: History: EIA; Projections: Short-Term Energy Outlook, August 2002.
ResidentialHeating Oil
WholesaleDistillate
Crude Oil (WTI)
Heating Oil OutlookConclusion
• Distillate stocks should be comfortable going into the winter
• Prices likely to average higher than last winter given current crude oil price forecast
• Residential customers will likely need more fuel this winter, especially if weather is normal
• Higher price times greater volumes equals higher bills this winter than the low ones from last year
Propane Prices Follow Crude Oil
0
20
40
60
80
100
120
140
160
180Ja
n-8
6
Jan
-87
Jan
-88
Jan
-89
Jan
-90
Jan
-91
Jan
-92
Jan
-93
Jan
-94
Jan
-95
Jan
-96
Jan
-97
Jan
-98
Jan
-99
Jan
-00
Jan
-01
Jan
-02
Cen
ts p
er G
allo
n
WTI Crude Propane (M. Belvieu)
SHOPP Propane PMM Propane
Source: DRI Platt's Spot Prices
Retail/Spot PricesRetail/Spot Prices
U.S. Propane Production
900
950
1,000
1,050
1,100
1,150
1,200
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Th
ou
san
d B
arre
ls p
er D
ay
Source: Energy Information Administration
Average 1997-2001
20002001
2002
Propane Production by Source
300
350
400
450
500
550
600
650
700Ja
n-0
1
Mar
-01
May
-01
Jul-
01
Sep
-01
No
v-01
Jan
-02
Mar
-02
May
-02
Th
ou
san
d B
arre
ls P
er D
ay
Refinery
Gas Plant
Source: Energy Information Administration
U.S. Propane Imports
0
50
100
150
200
250
300
350
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Th
ou
san
d B
arre
ls p
er D
ay
Source: Energy Information Administration
Average 1997-2001
2000
2001
2002
Propane Demand is Highly Seasonal, But Fresh Supply is Not
0
200
400
600
800
1000
1200
1400
1600
1800
2000
Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02
Th
ou
san
d B
arre
ls P
er D
ay
Demand
Production& NetImports
Propane Supply & Demand
Source: Energy Information Administration
Stock Build
Stock Draw
U.S. Propane Stocks
0
10
20
30
40
50
60
70
80Ja
n-9
9
May
-99
Sep
-99
Jan
-00
May
-00
Sep
-00
Jan
-01
May
-01
Sep
-01
Jan
-02
May
-02
Sep
-02
Jan
-03
Mil
lio
n B
arre
ls
Average Range
Lower Operational Inventory = 18.5 Million Barrels
ActualForecast
Source: Energy Information Administration
PAD District II Stocks (Midwest)
0
5
10
15
20
25
30
35
40
Jan
-99
Jul-
99
Jan
-00
Jul-
00
Jan
-01
Jul-
01
Jan
-02
Jul-
02
Jan
-03
Mil
lio
n B
arre
ls
Average Range
Source: Energy Information Administration
05
1015
2025
3035
4045
50Ja
n-9
9
Ju
l 99
Jan
-00
Jul-
00
Jan
-01
Jul-
01
Jan
-02
Jul-
02
Jan
-03
MIll
ion
Bar
rels
Average Range
Source: Energy Information Administration
PAD District III Stocks (Gulf Coast)
Propane OutlookConclusion
• Residential prices should remain stable this winter with possibility for lower prices than last year
• U.S. inventories more than ample prior to the heating season - but Midwest inventories are at low end of normal range
• Demand uncertain due to weather and economy.
• But, temporary supply shortages may still occur due to possible bottlenecks in delivery system