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EIA expects world price of crude to remain above $20 through 2000 OPEC compliance with production quotas expected to continue strong through end of present agreement next March Petroleum News Alaska
The U.S. Department of Energy’s Energy Information Administration said Nov. 4 that it expects the world price of crude oil to remain above $20 a barrel through 2000. The agency said it believes that prices will rise from average October levels (an estimated $21.50 per barrel for the price paid by U.S. refiners for imported crude) by $2 per barrel by December. The world oil price is then expected to remain at an average of $23.50 per barrel in January 2000 due to increased demand in the winter and Y2K precautionary building of end-user inventories before gradually declining to $20 per barrel by December 2000. This forecast assumes that OPEC compliance remains relatively strong through the winter, but that OPEC production increases after March 2000, either by an increase in quotas or a decrease in compliance to current quotas.
Stocks should be drawn down by end of winter Even with increased oil supplies from OPEC and non-OPEC countries this production profile should draw down world oil stocks to well below normal levels by the end of the winter period. Since world oil demand exceeded world oil supply by over 1 million barrels per day, even a large increase in supply may not be enough to have world oil supply greater than world oil demand in 2000. However, increases in OPEC crude oil production after March 2000 are not expected to be large enough to allow the world oil price to slip below $20 per barrel (equivalent to a West Texas Intermediate crude oil price of about $22 per barrel).
This analysis of OPEC production and global oil inventories is a major reason why EIA is forecasting increasing oil prices for the remainder of 1999 and remaining at relatively high levels throughout 2000.
EIA forecasts OPEC compliance through March EIA is currently forecasting OPEC compliance with agreed upon production cuts beginning this April to remain relatively strong through the end of the current agreement, which expires at the end of March 2000.
Although OPEC compliance is expected to decline during the winter period, adherence to the current agreement is expected to remain relatively strong compared to previous agreements. OPEC has tentatively scheduled another ministerial meeting for March 27, 2000, but it is unclear what OPEC will decide to do in relation to their quotas at that meeting. Given our world demand and non-OPEC production forecasts, EIA is assuming that OPEC production will continue to increase in 2000, whether from an increased quota or a decrease in compliance. Our forecast assumes that OPEC production in 2000 will average about 1.2 million barrels per day higher than average 1999 OPEC oil production levels.
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