Crude Oil, Heating Oil, and Propane Market Outlook Briefing for the State Heating Oil and Propane...

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


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


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


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


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


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


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


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

)


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)


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


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


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


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


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


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


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


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


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


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


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

Crude Oil, Heating Oil, and Propane Market Outlook Briefing for the State Heating Oil and Propane...

Documents

Transcript of Crude Oil, Heating Oil, and Propane Market Outlook Briefing for the State Heating Oil and Propane...