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An analysis of 7 factors that influence oil markets, with chart data updated monthly and quarterly
www.eia.gov
imported refiner acquisition cost of crude oil WTI crude oil price
1975
1980
1985
1990
1995
2000
2005
2010
125
100
75
50
25
0 2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Sources: Bloomberg, Thomson Reuters, monthly average spot price through September 2011
Crude oil prices are the primary driver of petroleum product prices
price per gallon real 2010 dollars, monthly average 5.00
Hurricane Katrina shuts down refineries & pipelines Post-hurricane refinery repairs
price per barrel real 2010 dollars, monthly average 168 Forecast
4.00
126
3.00
84
2.00 U.S. retail price of regular gasoline (left axis) 1.00 2005
42
Sources: EIA Short Term Energy Outlook (October 2011), Thomson Reuters
Forecast
Economic growth in Asian economies surprised to the upside in 2009 and to the downside in 2008
percent GDP growth in Asia, excluding Japan (annual expectations) 12 2008 10 2010 8 6 4 2 0 2008 2009 2010 2011
Note: Starting in January of each year, each line shows the expected forecast of GDP growth for the specified calendar year, which tends to move toward the actual realized growth outcome as the year progresses. Expectations continue to evolve into the next calendar year as revised GDP data become available (e.g., 2008 GDP expectations are revised even during 2009).
2009 2011
45
-2 OECD liquid fuels consumption (left axis) WTI crude oil price (right axis)
-45
-4
-90
-6 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Sources: EIA Short Term Energy Outlook (October 2011), Thomson Reuters
-135
Rising oil prices held down global oil consumption growth from 2005-2008, despite high economic growth
percent change (year-on-year) 6 Forecast 4 90 price per barrel (real 2010 dollars) 135
45
-2 World liquid fuels consumption (left axis) World GDP WTI crude oil price (right axis) 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
-45
-4
-90
Sources: EIA Short Term Energy Outlook (October 2011), Thomson Reuters
Non-OPEC production grew rapidly in 2009-2010. EIA expects these increases to slow in 2011-2012.
million barrels per day change (year-on-year) 2.0 non-OPEC liquid fuels production (left axis) WTI crude oil price (right axis) price per barrel (real 2010 dollars) 140 Forecast 105
1.5
1.0
70
0.5
35
0.0
-0.5
-35
-1.0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Sources: EIA Short Term Energy Outlook (October 2011), Thomson Reuters
-70
Non-OPEC supply expectations were adjusted upward in 20092010 after production decreased during downturn
million barrels per day annual average expectations 53.0 52.5 52.0 51.5 51.0 50.5 50.0 49.5 49.0 48.5 48.0 2008 2009 2010 2011
Sources: EIA Short Term Energy Outlook (October 2011)
Note: Starting in January of each year, each line shows the expected forecast of non-OPEC supply growth for the specified calendar year, which tends to move toward the actual realized growth outcome as the year progresses.
10
OPEC production often acts to balance the oil market. Cuts in OPEC production targets tend to lead to price increases.
million barrels per day change (year-on-year) 5 4 3 2 1 20 0 0 -1 -2 -3 OPEC production targets (left axis) -4 -5 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Sources: U.S. Energy Information Administration, Thomson Reuters
-20 -40 WTI crude oil price (right axis) -60 -80
11
During 2003-2008, OPECs spare production levels were low, limiting its ability to respond to demand and price increases
spare capacity (million barrels per day) 7
spare capacity < 2.5 million barrels per day
price per barrel (real 2010 dollars) 140 Forecast 120 100 80 60 40 20 0
OPEC spare capacity (left axis) WTI crude oil price (right axis)
2004
2005
2006
2007
2008
2009
2010
2011
2012
Sources: EIA Short Term Energy Outlook (October 2011), Thomson Reuters
12
The years 2003-2008 experienced periods of very strong economic and oil demand growth, slow supply growth and tight spare capacity
percent change (year-on-year) 6
spare capacity < 2.5 million barrels per day
45
-2 World liquid fuels production capacity* (left axis) World GDP (left axis) WTI crude oil price (right axis) 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
-45
-4
-90
-6
Sources: EIA Short Term Energy Outlook (October 2011), Thomson Reuters
-135
13
Inventory builds go hand-in-hand with increases in future oil prices relative to current prices (and vice versa)
million barrels change (year-on-year) 200 150 100 50 0 -50 -100 -150 -200 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Sources: EIA Short Term Energy Outlook (October 2011), Thomson Reuters
OECD liquid fuels inventory (left axis) WTI crude 12th-1st futures price spread (right axis)
-15 -20
14
Open interest in crude oil futures grew over the last decade as more participants entered the market
average daily open interest in crude oil futures number of contracts (thousands) 1800 1600 1400 1200 1000 800 600 400 200 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Source: Bloomberg
15
U.S. exchange-traded short positions by physical participants (producers, merchants, processors, and end users) consistently exceed longs
number of contracts (thousands) 400 300 200 100 0 -100 -200 -300 -400 -500 -600 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 producers/merchants long producers/merchants short producers/merchants net
16
Money managers tend to be net long in the U.S. oil futures market
number of contracts (thousands) 350 300 250 200 150 100 50 0 -50 -100 -150 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 money managers long money managers short money managers net
17
Gold 10.4%
Cotton 2.0%
18
Commodity index investment flows have tended to move together with commodity prices
percent changes (year-on-year) 200
Dow Jones UBS Commodity Index Assets under management (five largest public U.S. commodity funds) Commodity index investment reported to CFTC under "special call"
150
100
50
-50
19
Correlations (+ or -) between daily price changes of crude oil futures and other commodities generally rose in recent years
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Energy Natural Gas Gold Metals Copper Silver Soybeans Agriculture Corn Wheat
WTI crude oil price peak < -0.65 -0.65 to -0.4 -0.4 to -0.25 -0.25 to 0.25 0.25 to 0.4 0.4 to 0.65 > 0.65 Negative correlation Positive correlation Note: Correlations computed quarterly 20
Correlations (+ or -) between daily returns on crude oil futures and financial investments have also strengthened
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
S&P 500
U.S. Dollar*
U.S. Treasury**
WTI crude oil price peak < -0.65 -0.65 to -0.4 -0.4 to -0.25 -0.25 to 0.25 0.25 to 0.4 0.4 to 0.65 > 0.65 Negative correlation Positive correlation
* U.S. Dollar Index (DXY), which is a weighted index of a basket of currencies, per U.S. dollar. As the dollar strengthens against other currencies, the value of the index rises. ** U.S. Treasury is based on the negative of the change in yield on 30-year U.S. government bonds because as yields rise, bond prices fall.
Note: Correlations computed quarterly 21
22