what drives crude oil prices?
TRANSCRIPT
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www.eia.govU.S. Energy Information Administration Independent Statistics & Analysis
What drives crude oil prices?
January 9, 2018 | Washington, DC
An analysis of 7 factors that influence oil markets, with chart data updated monthly and quarterly
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Crude oil prices react to a variety of geopolitical and economic events
January 9, 2018 2
Low spare capacity
Iraq invades Kuwait
Saudis abandon swing producer role
Iran-Iraq War
Iranian revolution
Arab Oil Embargo
Asian financial crisis
U.S. spare capacity
exhausted
Global financial collapse
9-11 attacks
OPEC cuts targets 1.7 mmbpd
OPEC cuts targets 4.2 mmbpd
Sources: U.S. Energy Information Administration, Thomson Reuters
OPEC production quota unchanged
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World oil prices move together due to arbitrage
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Sources: Bloomberg, Thomson Reuters
January 9, 2018
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Crude oil prices are the primary driver of petroleum product prices
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Sources: EIA Short Term Energy Outlook, Thomson Reuters
January 9, 2018
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Economic growth has a strong impact on oil consumption
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Sources: U.S. Energy Information Administration, IHS Global Insight
January 9, 2018
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Changes in expectations of economic growth in can affect oil prices
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Source: IHS Global Insight
January 9, 2018
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).
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In OECD countries, price increases have coincided with lower consumption
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Sources: EIA Short Term Energy Outlook, Thomson Reuters
January 9, 2018
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Rising oil prices held down global oil consumption growth from 2005-2008, despite high economic growth
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Sources: EIA Short Term Energy Outlook, Thomson Reuters
January 9, 2018
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Changes in non-OPEC production can affect oil prices
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Sources: EIA Short Term Energy Outlook, Thomson Reuters
January 9, 2018
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Non-OPEC supply expectations indicate changes in market sentiment concerning oil supply
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Sources: EIA Short Term Energy Outlook
Note: Starting in January of each year, each line shows the expected forecast of non-OPEC supply for the specified calendar year, which tends to move toward the actual realized supply outcome as the year progresses.
January 9, 2018
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Changes in Saudi Arabia crude oil production can affect oil prices
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Sources: U.S. Energy Information Administration, Thomson Reuters
January 9, 2018
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Sources: U.S. Energy Information Administration
Unplanned supply disruptions tighten world oil markets and push prices higher
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Sources: EIA Short Term Energy Outlook, Thomson Reuters
During 2003-2008, OPEC’s spare production levels were low,limiting its ability to respond to demand and price increases
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The years 2003-2008 experienced periods of very strong economic and oil demand growth, slow supply growth and tight spare capacity
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Sources: EIA Short Term Energy Outlook, Thomson Reuters
January 9, 2018
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Inventory builds go hand-in-hand with increases in future oil prices relative to current prices (and vice versa)
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Sources: EIA Short Term Energy Outlook, Thomson Reuters
January 9, 2018
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Open interest in crude oil futures grew over the last decade as more participants entered the market
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Source: Bloomberg
January 9, 2018
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Physical participants’ (producers, merchants, processors, and end users) U.S. futures market contract positions
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Source: Commodity Futures Trading Commission, Commitments of Traders
January 9, 2018
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Money managers tend to be net long in the U.S. oil futures market
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Source: Commodity Futures Trading Commission, Commitments of Traders
January 9, 2018
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Crude oil plays a major role in commodity investment
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Source: Bloomberg
January 9, 2018
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Commodity index investment flows have tended to move together with commodity prices
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* Note: CFTC discontinued the collection of index investment data in November 2015.
January 9, 2018
Source: Bloomberg, Commodity Futures Trading Commission (CFTC)
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Correlations (+ or -) between daily price changes of crude oil futures and other commodities generally rose in recent years
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Note: Correlations computed quarterly
< -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 > 0.65Negative correlation Positive correlation
January 9, 2018
Natural Gas 0 0 0 1 0 1 0 0 0 1 1 1 0 0 0 0 0 0 0 0 1 1 0 0 0 0 0 0 0 0 # 0 0 0 0 0 0 0 0 0 0 # 0 0 0 0 # 0 0 0 0 0 0 0 0 0 0 0 0 0 Gold 0 0 # 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 1 1 1 0 0 0 0 1 0 1 # 0 1 1 1 0 1 0 0 0 0 0 0 0 0 # 0 0 0 # 0 0 0 # # # 0 0 0 # 0 Copper # 0 # 0 0 0 0 0 # 0 0 # 0 1 0 0 0 0 0 0 1 0 1 1 0 1 1 1 1 1 0 1 0 1 1 1 1 1 1 0 0 1 0 0 0 # 0 1 0 0 0 0 1 0 0 0 0 0 0 0 Silver 0 0 # 0 0 0 0 # 0 0 0 0 0 1 0 0 0 0 0 1 1 1 0 0 0 0 1 1 1 0 0 0 0 1 0 1 0 0 0 0 0 0 0 0 # 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Soy # 0 # 0 # 0 # 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 1 1 0 1 0 0 0 0 0 0 0 0 1 0 0 0 0 0 # 0 0 # 0 0 # 0 0 0 0 0 0 0 0 0 0 0 0 0 Corn # 0 # # 0 0 0 # 0 0 0 0 0 0 0 0 0 # 0 0 1 0 0 1 1 0 0 1 0 0 # 0 0 0 0 0 0 0 0 0 # 0 # 0 0 0 # 0 0 0 0 0 # 0 0 0 0 0 0 0 Wheat 0 0 # 0 0 0 0 # 0 0 0 0 # 0 0 0 1 # # 0 0 0 0 0 1 1 0 1 0 0 0 0 0 0 0 0 0 0 0 # # # # # 0 # 0 # 0 0 0 0 # 0 0 0 0 0 0 0
2018 2019 20202013 2014 2015 2016 20172008 2009 2010 2011 20122003 2004 2005 2006 2007
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Correlations (+ or -) between daily returns on crude oil futures and financial investments have also strengthened
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Note: Correlations computed quarterly
< -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 > 0.65Negative correlation Positive correlation
January 9, 2018
S & P 500 # # # # 0 0 # # # 0 # 0 0 0 # 0 0 0 0 # 0 # 0 0 0 1 1 0 1 1 1 1 # 1 1 1 0 1 1 0 0 1 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 # # 0 U.S. Dollar # # # # # # # # # # # # # # # 0 # # 0 # # # # # # # # # # # # # # # # # # # # # # # 0 # # # # # # # 0 # 0 # # 0 # # 0 # U.S. Bonds 0 0 0 0 # 0 0 0 # 0 0 # 0 0 # # # 0 # 0 # 0 # # # # # # # # # # # # # # # # # # # # # 0 # # 0 # # # # # # # # # 0 # # 0 WTI Implied Volatility 0 # # 0 # 0 0 # 0 0 0 # 0 # 0 # # # # 0 0 0 # # # # # # # # # # 0 # # # # # # # # # 0 # # 0 # # # # # # # # # # # # # # Inflation Expectations 0 0 0 # 0 0 0 0 0 0 0 0 1 1 0 0 0 0 0 0 1 0 1 # 0 0 0 0 0 1 0 0 0 1 1 0 0 1 0 0 # 1 0 0 0 0 0 0 0 1 1 0 1 1 1 0 0 0 0 #
2018 2019 20202013 2014 2015 2016 20172008 2009 2010 2011 20122003 2004 2005 2006 2007
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For more information
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U.S. Energy Information Administration home page | www.eia.gov
Short-Term Energy Outlook | www.eia.gov/steo
Annual Energy Outlook | www.eia.gov/aeo
International Energy Outlook | www.eia.gov/ieo
Monthly Energy Review | www.eia.gov/mer
EIA Information Center(202) 586-8800 | email: [email protected]
January 9, 2018