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

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

EIA’s Preliminary Winter Fuels Outlook

• World Oil Markets

• U.S. Heating Oil

• U.S. Propane

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

Jan-04

Jul-04

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 2003.

Annual World Oil Demand Growth1998-2005

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

1998 1999 2000 2001 2002 2003 2004 2005

Mil

lio

n B

arre

ls p

er D

ay


Quarterly World Oil Demand GrowthFrom Previous Year

-0.5

0.0

0.5

1.0

1.5

2.0

2.51

Q0

0

3Q

00

1Q

01

3Q

01

1Q

02

3Q

02

1Q

03

3Q

03

1Q

04

3Q

04

1Q

05

3Q

05

Mil

lio

n B

arre

ls p

er D

ay


2001 2002 2003 20042000 2005

U.S. Petroleum Demand

-2,000

-1,500

-1,000

-500

0

500

1,000

1,500

2,000Ja

n-0

1

Ap

r-01

Jul-

01

Oct

-01

Jan

-02

Ap

r-02

Jul-

02

Oct

-02

Jan

-03

Ap

r-03

Jul-

03

Oct

-03

Jan

-04

Ap

r-04

Th

ou

san

d B

arre

ls P

er D

ay

Delta From Previous Year


Will OPEC Keep Markets Adequately Supplied?

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


15

17

19

21

23

25

27

29

31

'98Q1

'98Q3

'99Q1

'99Q3

'00Q1

'00Q3

'01Q1

'01Q3

'01Q2

'02Q3

'03Q1

'03Q3

'04Q1

Mill

ion

Ba

rre

ls p

er

Da

y

OPEC 10 (OPEC excluding Iraq) Iraq OPEC 10 Capacity

History Projections


Will OPEC Keep Markets Adequately Supplied?

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


0

5 0

1 9 9

9 Q 1

2 0 0

1 Q 4


15

17

19

21

23

25

27

29

31

'98Q1

'98Q3

'99Q1

'99Q3

'00Q1

'00Q3

'01Q1

'01Q3

'02Q1

'02Q3

'03Q1

'03Q3

'04Q1

Mill

ion

Ba

rre

ls p

er

Da

y

OPEC 10 (OPEC excluding Iraq) Iraq OPEC 10 Capacity

History Projections


OECD Commercial Crude Oil Inventories Expected to Recover to Normal Range

2.02.12.22.32.42.52.62.72.82.93.0

Jan

-01

Ap

r-01

Jul-

01

Oct

-01

Jan

-02

Ap

r-02

Jul-

02

Oct

-02

Jan

-03

Ap

r-03

Jul-

03

Oct

-03

Jan

-04

Ap

r-04

Jul-

04

Oct

-04

Jan

-05

Ap

r-05

Jul-

05

Oct

-05

Bil

lio

n B

arre

ls

Previous 5-year min/max range

NOTE: Colored band is the normal inventory range.

Projections

Sources: EIA, Short-Term Energy Outlook, August 2003

End of Month Inventories

When Will U.S. Crude Inventories Recover?

250

270

290

310

330

350

370

Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04

Crude Oil Lower Operational Inventory

U.S. Crude Oil Actual

NOTE: Colored band is the normal inventory range.

U.S. Crude Oil Inventory

Proj.

Sources: EIA, Short-Term Energy Outlook, August 2003

History

Mill

ion

Ba

rre

ls

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 year’s end• WTI prices expected to ease below $30 by year-

end, possibly as low as $26 by end of 2004

Distillate Prices Generally Follow Crude Oil

0

20

40

60

80

100

120

140

160

180

Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03

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 Prices Generally Follow Crude Oil

0

20

40

60

80

100

120

140

160

180

Jan-95

Jan-96

Jan-97

Jan-98

Jan-99

Jan-00

Jan-01

Jan-02

Jan-03

Jan-04

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

?

East Coast Distillate Stocks Starting out Low

0

10

20

30

40

50

60

70

80

Jun Sep Dec Mar Jun

Mil

lio

n B

arre

ls

East Coast Total Distillate Stocks

as of 8/1/03

Source: Energy Information Administration

Normal Range

2000-01

1999-00

2002-03

2001-02

Distillate Demand Last Year Was Higher Than Forecast

3,000

3,200

3,400

3,600

3,800

4,000

4,200

4,400Ju

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 2002 Forecast for 2002-2003

2002-2003 Actual Data

U.S. Total Distillate Product Supplied

Sources: History: EIA; Projections: Short-Term Energy Outlook, August 2002, August 2003.

Last Winter’s Weather Was Close to Average

0

100

200

300

400

500

600

700

800

900

1,000

Ma

r-9

7

Se

p-9

7

Ma

r-9

8

Se

p-9

8

Ma

r-9

9

Se

p-9

9

Ma

r-0

0

Se

p-0

0

Ma

r-0

1

Se

p-0

1

Ma

r-0

2

Se

p-0

2

Ma

r-0

3

Se

p-0

3

Ma

r-0

4

Heati

ng

Deg

ree-D

ays


Fuel Oil Demand Influenced by Natural Gas Prices

-1,500

-1,250

-1,000

-750

-500

-250

0

250

500

750

1,000

Jan

-00

May-

00

Sep

-00

Jan

-01

May-

01

Sep

-01

Jan

-02

May-

02

Sep

-02

Jan

-03

May-

03

Ye

ar-

on

-Ye

ar

Ch

an

ge

('0

00

b/d

)

-$10

-$8

-$6

-$4

-$2

$0

$2

$4

$6

$8

Ye

ar-

on

-Ye

ar

Ch

an

ge

($

/Mc

f)

Distillate and Residual Fuel Oil Product Supplied

Natural Gas Wellhead Price


Distillate Demand Expected to be Similar to Last Winter’s

3,000

3,200

3,400

3,600

3,800

4,000

4,200

4,400Ju

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

2001-2002

2002-2003

Forecast

U.S. Total Distillate Product Supplied


Distillate Production Likely Higher Than Last Winter

3,000

3,100

3,200

3,300

3,400

3,500

3,600

3,700

3,800

3,900

4,000Ju

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

2001-2002

2002-2003

Forecast

U.S. Total Distillate Production


Distillate Imports Were Stronger Last Winter

-50

0

50

100

150

200

250

300

350

400

450J

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 97-01

Forecast2002-032001-02

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

Jan-03

Cen

ts P

er G

allo

n

NY Harbor Heating Oil - WTI Crude Oil Price

Source: DRI Platt's Spot Prices

Spot Heating Oil Price

WTI Price

8090

100110120130140150160170180

Dec-98

Jun-99

Dec-99

Jun-00

Dec-00

Jun-01

Dec-01

Jun-02

Dec-02

Jun-03

Dec-03

Jun-04

Dec-04

Mill

ion

Bar

rels

NOTE: Colored Band is Normal Stock Range

U.S. Total Distillate Stocks

Distillate Stocks Expected to Remain Low


Actual Forecast

Winter Crude Oil and Distillate Price Outlook

$0.00

$0.20

$0.40

$0.60

$0.80

$1.00

$1.20

$1.40

$1.60


$/G

allo

n

Forecast


ResidentialHeating Oil Wholesale

Distillate

Crude Oil (WTI)

Consumer Prices and Expenditures – Heating Oil (Northeast)

2000-2001

2001-2002

2002-2003

2003-2004

Actual Actual Actual Forecast (est.)

Consumption (gals.)

731 584 711 692

Average Price $1.37 $1.10 $1.31 $1.29

Expenditures $999 $643 $931 $893

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

Propane Prices Follow Crude Oil

0

20

40

60

80

100

120

140

160

180

Jan-9

4

Jan-9

5

Jan-9

6

Jan-9

7

Jan-9

8

Jan-9

9

Jan-0

0

Jan-0

1

Jan-0

2

Jan-0

3

Cen

ts p

er G

allo

n

WTI Crude Propane (M. Belvieu)

SHOPP Propane PMM Propane


Retail/Spot PricesRetail/Spot Prices

Propane Prices Follow Crude Oil and Natural Gas

0

20

40

60

80

100

120

140

160

180

Cen

ts p

er G

allo

n

0

1

2

3

4

5

6

7

8

9

10WTI Crude

Propane (M. Belvieu)

Natural Gas (Henry Hub)


Spot PricesRetail/Spot Prices

Propane Prices Follow Crude Oil and Natural Gas

0

10

20

30

40

50

60

70

80

Jan-99 Jul-99 Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03

Ce

nts

pe

r G

allo

n

Propane (M. Belvieu)

Crude Oil/Natural Gas Index


Spot PricesRetail/Spot Prices

Total U.S. Propane Production Lower Than Recent Years

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

arr

els

per

Day

Average 98-02200120022003


4-Week Average

Propane Production by Source

300

350

400

450

500

550

600

650

700Ja

n-0

2

Mar

-02

May

-02

Jul-

02

Sep

-02

No

v-02

Jan

-03

Mar

-03

May

-03

Th

ou

san

d B

arre

ls P

er D

ay

Refinery

Gas Plant


Tropical Storms Refinery Outages &Turnarounds

High Natural Gas Prices

Gas Plant Production by PAD District

0

100

200

300

400Th

ousa

nd B

arre

ls P

er D

ay PADD I

PADD II

PADD III

PADD IV

PADD V


U.S. Propane Imports

0

50

100

150

200

250

300

350


Th

ou

san

d B

arre

ls p

er D

ay

Average 98-02200120022003


4-Week Average

U.S. Propane Exports

0

50

100

150

200


Th

ou

san

d B

arre

ls p

er D

ay Average 98-02200120022003


Exports increase from U.S. Gulf Coast due to loss of supply from Venezuela.

Propane Demand is Highly Seasonal, But Fresh Supply is Not

0

200

400

600

800

1000

1200

1400

1600

1800

2000


Th

ou

san

d B

arre

ls P

er D

ay

Demand

Production& NetImports

Propane Supply & Demand

Stock Build

StockDraw


Propane Stock Build/Draw

05

101520253035404550

1995

1996

1997

1998

1999

2000

2001

2002

2003

5-Yr A

vg

Mil

lio

n B

arr

els

Draw

Build


As of Aug. 1

U.S. Propane Stocks

0

10

20

30

40

50

60

70

80

90

Mil

lio

n B

arre

ls

Average Range

Lower Operational Inventory = 18.5 Million Barrels

ActualForecast


PAD District I Stocks (East Coast)

0

1

2

3

4

5

6

7

8

Mil

lio

n B

arre

ls

Average Range


Actual

PAD District II Stocks (Midwest)

0

5

10

15

20

25

30

35

40

Mil

lio

n B

arre

ls

Average Range


Actual

05

10

1520253035

404550

MIl

lio

n B

arre

ls

Average Range


PAD District III Stocks (Gulf Coast)

Actual

Consumer Prices and Expenditures – Propane (Midwest)

2000-2001

2001-2002

2002-2003

2003-2004

Actual Actual Actual Forecast (est.)

Consumption (gals.)

979 803 936 902

Average Price $1.37 $1.11 $1.20 $1.20

Expenditures $1,344 $887 $1,122 $1,082

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

Gasoline Prices Ending Summer on the Upswing

Spot and Retail Gasoline PricesWeekly U.S. Average, Regular

90

100

110

120

130

140

150

160

170

180

1/1

/01

4/1

/01

7/1

/01

10/

1/0

1

1/1

/02

4/1

/02

7/1

/02

10/

1/0

2

1/1

/03

4/1

/03

7/1

/03

Re

tail

Pri

ce

, C

en

ts p

er G

allo

n

40

50

60

70

80

90

100

110

120

130

Sp

ot

Pri

ce, C

en

ts p

er G

allo

n

Retail

Spot

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

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