|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.† OPECís 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, EIAís forecast has the
general supply/demand balance remaining tight and crude oil prices staying
above $40 per barrel for the next 2 years.