SEIA took a more rigorous look at the relationship among inventories, surplus capacity, and crude oil price.
	SWhen surplus crude oil production capacity is taken into account along with inventories, the model explains most of the variation in crude oil prices (to within $3-$5).
	SThus, very little is left to be explained by other factors.  It is interesting to note that statistical shifts can be detected at two points, April 1999 and December 2003, which correspond to the general time periods when we visually see crude price levels shifting first from $20 to $30, and perhaps now to the next level.  OPEC’s change in behavior following the very low crude prices in 1998 can explain the first shift, but it is too early to tell how stable the second shift may be.
	SAs we look ahead, EIA’s forecast has the general supply/demand balance remaining tight and crude oil prices staying above $40 per barrel for the next 2 years.