Slide 6 of 6
Notes:
- Crude prices this year at the beginning of the second quarter are likely to be higher -- not lower -- as a result of the current shortfall in crude oil production relative to demand on top of low stocks.
- OECD stocks of crude oil and products plunged steeply in 1999. By year end, they were below the low levels at end December 1996 -- OPEC’s stated target. This does not take into consideration the growth in demand that these stocks must help supply.
- EIA expects OECD stocks to stay very low throughout the year 2000. The projection shows end March levels remain well below those seen at the end of the first quarter 1996. The build during the summer will not be adequate to make up for the draws, resulting in a net draw of over 300 thousand barrels in an already tight market.
- More important -- U.S. crude oil and gasoline inventories are at the lowest levels seen in decades for this time of year. Furthermore, the U.S. will not likely receive any potential OPEC crude oil production increases until May. Refinery use of crude oil in February was very low, and refineries must ramp up production in March and April over 1 million barrels per day to meet the high gasoline demand season. With little inventory, they will have to find this crude oil in a market where demand is exceeding production. Gasoline prices may surge to unprecedented levels before the spring is out. There is a high probability of volatility on top of the high prices as lack of stocks and nearby supply slows resolution of any shortfalls.
- High prices are being forecast for the rest of the summer. Even if OPEC production increases are more generous than expected, U.S. refineries will likely be running at high utilization rates, increasing the chances for volatility.
