Supply/Demand Forecasts Leave Little Room for Winter Drawdown

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• During 1999, we saw stock draws during the summer months, when we normally see stock builds, and early estimates indicate we had very large stock draws this past winter.
  • Normally, crude oil production exceeds product demand in the spring and summer, and stocks build.
  • These stocks are subsequently drawn down during the fourth and first quarters (dark blue areas). When the market is in balance, the stock builds equal the draws.

• As we look ahead using EIA’s base case assumptions for OPEC production, non-OPEC production, and demand, we expect near normal stock building during summer 2000 -- about 800 thousand barrels per day second quarter and 500 thousand barrels per day in the third quarter 2000. But since we are beginning the summer with very low stock levels, even a normal build will have us entering the winter with seasonally low stocks.

• While the base case begins the winter 2000/2001 with low stocks, EIA’s assumptions have OPEC increasing production enough to minimize stock draws over the winter months, and support prices in the $25-$30 range.