Slide 5 of 19
- The most recent data show OECD inventories remaining at very low levels.
- EIA expects inventories to remain low through the coming year. This increases the potential for price volatility through the winter, and even extending to the next gasoline season.
- Inventories are a good measure of the supply/demand balance that effects prices. A large over-supply (production greater than demand) will put downward pressure on prices, while under-supply will push prices upward.
- As global oil production changed relative to demand, the world moved from a period of over-supply in 1998 to one of under-supply in 1999 and 2000.
- OECD inventories illustrate the changes in the world petroleum balance. OECD inventories rose to high levels during 1997 and 1998 when production exceeded demand and prices dropped to around $10 per barrel in December 1998. However, when demand exceeded production in 1999 and early 2000, inventories fell to low levels, and prices rose, reaching almost $35 per barrel on a monthly average basis.