Low Total OECD Oil Stocks* Keep Market Balance Tight
*Total includes commercial and government stocks.
Sources: History: EIA; Projections: Short-Term Energy Outlook, May 2001.
- This chart illustrates why EIA sees crude oil prices staying relatively high. It shows global inventories, as measured by OECD petroleum stocks.
- EIA sees a tenuous supply/demand balance over the remainder of 2001. Global inventories remain low, and need to recover to more adequate levels of forward demand coverage in order to avoid continued price volatility.
- The most recent data show OECD inventories remaining at very low levels. Low inventories increase the potential for price volatility throughout 2001.
- Inventories are a good measure of the supply/demand balance that affects prices. A large over-supply (production greater than demand) will put downward pressure on prices, while under-supply will push prices upward.
- 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, averaging almost $35 per barrel (WTI) in November 2000.
- EIA’s forecast of a continued low stock cushion implies we not only should see continued high prices, but we also could experience price volatility from the crude oil market--apart from volatility stemming from product markets.