World Crude Market Future – Timing is the Key
•2004 high demand growth unexpected,
–Growth ahead, but
–How much?
•Limited surplus crude  production capacity & geopolitical  unrest (e.g., Iraq, Russia) added price pressure. 
–How fast will extra capacity emerge? 
–When will instability decline?
•
SAs we look ahead, the issue is timing.

SWe have continued demand growth expected – but how much?

SExtra crude oil production capacity will eventually emerge – but how fast will extra  capacity emerge?

SAnd geopolitical risk remains.  In 2004, I argue that the geopolitical uncertainties affecting supply have been greater than they were in the middle of 2003.  After the strike in Venezuela, many people initially felt the country would return to normal operations faster than occurred.  After the war in Iraq, many felt that the country would return to producing oil on a regular basis faster than has occurred. And last, Russian oil supply security was not an issue.

SThe balance can swing to where prices relax back somewhat, but with current world demand growth and production expectations, it  is unlikely we would see prices drop into the $20-$30 range again soon.  Will they stay at $40 or higher? Or will they drop closer to $35?  That is outside of our crystal ball accuracy.