www.eia.gov U.S. Energy Information Administration Independent Statistics & Analysis
What drives crude oil prices?
September 9, 2015 | Washington, DC
An analysis of 7 factors that influence oil markets,
with chart data updated monthly and quarterly
price per barrel (real 2010 dollars)
imported refiner acquisition cost of crude oil WTI crude oil price
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
0
25
50
75
100
125
150
Crude oil prices react to a variety of geopolitical and economic
events
September 9, 2015 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
World oil prices move together due to arbitrage
3
Sources: Bloomberg, Thomson Reuters
September 9, 2015
$/bbl (real 2010 dollars, monthly average)
WTI Brent Mars Tapis Dubai
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
0
20
40
60
80
100
120
140
160
Crude oil prices are the primary driver of petroleum product
prices
4
Sources: EIA Short Term Energy Outlook, Thomson Reuters
Hurricane Katrina shuts
down refineries & pipelines
Post-hurricane
refinery repairs
Unplanned refinery
down-time
September 9, 2015
Economic growth has a strong impact on oil consumption
5
Sources: U.S. Energy Information Administration, IHS Global Insight
September 9, 2015
Changes in expectations of economic growth in can affect oil
prices
6
Source: IHS Global Insight
September 9, 2015
percent GDP growth in non-OECD countries (annual expectations)
forecast year: 2012 2013 2014 2015 2016
Jan '12 Jul '12 Jan '13 Jul '13 Jan '14 Jul '14 Jan '15 Jul '15
0
2
4
6
8
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).
In OECD countries, price increases have coincided with lower
consumption
7
Sources: EIA Short Term Energy Outlook, Thomson Reuters
September 9, 2015
percent change (year-on-year) price per barrel (real 2010 dollars)
OECD liquid fuels consumption WTI crude oil price
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
2017
-6
-4
-2
0
2
4
6
0
50
100
150
Rising oil prices held down global oil consumption growth from
2005-2008, despite high economic growth
8
Sources: EIA Short Term Energy Outlook, Thomson Reuters
September 9, 2015
Changes in non-OPEC production can affect oil prices
9
Sources: EIA Short Term Energy Outlook, Thomson Reuters
September 9, 2015
million barrels per day (annual expectations)
forecast year: 2012 2013 2014 2015 2016
2011 2012 2013 2014 2015
51.0
51.5
52.0
52.5
53.0
53.5
54.0
54.5
55.0
55.5
56.0
56.5
57.0
57.5
58.0
58.5
59.0
Non-OPEC supply expectations indicate changes in market
sentiment concerning oil supply
10
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.
September 9, 2015
Changes in Saudi Arabia crude oil production can affect oil
prices
11
Sources: U.S. Energy Information Administration, Thomson Reuters
September 9, 2015
million barrels per day (year-on-year) percent change (year-on-year)
Saudi Arabia crude oil production WTI percent change
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
-1.5
-1
-0.5
0
0.5
1
1.5
2
2.5
-60
-40
-20
0
20
40
60
80
100
Sources: U.S. Energy Information Administration
Unplanned supply disruptions tighten world oil markets and
push prices higher
12 September 9, 2015
million barrels per day
OPEC supply disruptions non-OPEC supply disruptions
Jan '11 Jul '11 Jan '12 Jul '12 Jan '13 Jul '13 Jan '14 Jul '14 Jan '15 Jul '15
0
1
2
3
4
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
13 September 9, 2015
The years 2003-2008 experienced periods of very strong economic and oil
demand growth, slow supply growth and tight spare capacity
14
Sources: EIA Short Term Energy Outlook, Thomson Reuters
September 9, 2015
Inventory builds go hand-in-hand with increases in future oil
prices relative to current prices (and vice versa)
15
Sources: EIA Short Term Energy Outlook, Thomson Reuters
September 9, 2015
million barrels change (year-on-year) $/bbl change (year-on-year)
OECD liquid fuels inventory WTI crude 12th - 1st futures price spread
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
-200
-150
-100
-50
0
50
100
150
200
250
-20
-15
-10
-5
0
5
10
15
20
25
Open interest in crude oil futures grew over the last decade as
more participants entered the market
16
Source: Bloomberg
September 9, 2015
number of contracts (thousands)
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
Physical participants’ (producers, merchants, processors, and end users) U.S.
futures market contract positions
17
Source: CFTC Commitment of Traders
September 9, 2015
number of contracts (thousands)
producers/merchants long producers/merchants short producers/merchants net
2008 2009 2010 2011 2012 2013 2014 2015
-600
-500
-400
-300
-200
-100
0
100
200
300
400
500
Money managers tend to be net long in the U.S. oil futures
market
18
Source: CFTC Commitment of Traders
September 9, 2015
number of contracts (thousands)
money managers long money managers short money managers net
2008 2009 2010 2011 2012 2013 2014 2015
-200
-150
-100
-50
0
50
100
150
200
250
300
350
400
Crude oil plays a major role in commodity investment
19
2015 Target Weights of the Bloomberg Commodity Index
Source: Bloomberg
September 9, 2015
Crude Oil: WTI: 7.8 %
Crude Oil: Brent: 7.2 %
Natural Gas: 8.7 %
Heating Oil: 3.8 %
Gasoline: 3.7 %
Corn: 7.2 %
Soybeans: 5.7 %
Wheat: 4.5 %Sugar: 4.0 %
Soybean Oil: 2.8 %
Soy Meal: 2.7 %
Coffee: 2.2 %
Cotton: 1.5 %
Gold: 11.9 %
Copper: 7.5 %
Aluminum: 4.6 %
Silver: 4.3 %
Zinc: 2.4 %
Nickel: 2.1 %
Live Cattle: 3.3 %
Lean Hogs: 1.9 %
Commodity index investment flows have tended to move
together with commodity prices
20
Source: Bloomberg, Commodity Futures Trading Commission (CFTC)
September 9, 2015
percent change (year-on-year)
Bloomberg Commodity Index
assets under management (5 largest public U.S. commodity index funds)
commodity index assets under management reported to CFTC under "special call"
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
-100
-50
0
50
100
150
200
Correlations (+ or -) between daily price changes of crude oil
futures and other commodities generally rose in recent years
21
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 > 0.65
Negative correlation Positive correlation
September 9, 2015
Date
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
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
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
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
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
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
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
2003 2008 201520142007200620052004 2009 2010 2011 2012 2013
Correlations (+ or -) between daily returns on crude oil futures
and financial investments have also strengthened
22
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 > 0.65
Negative correlation Positive correlation
September 9, 2015
Date
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
U.S. Dollar # # # # # # # # # # # # # # # 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 #
WTI Implied Volatility 0 # # 0 # 0 0 # 0 0 0 # 0 # 0 # # # # 0 0 0 # # # # # # # # # # 0 # # # # # # # # # 0 # # 0 -1 # -1 #
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
20152003 2008 20142007200620052004 2009 2010 2011 2012 2013
For more information
23
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Monthly Energy Review | www.eia.gov/mer
EIA Information Center
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September 9, 2015
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