Presentation on theme: " CRUDE OIL & FUELS “Outlook for 2013 and Beyond” 7 th Annual Iowa Renewable Fuels Summit - Jan. 30, 2013 Robert Gough - Director of Content Development."— Presentation transcript:
CRUDE OIL & FUELS “Outlook for 2013 and Beyond” 7 th Annual Iowa Renewable Fuels Summit - Jan. 30, 2013 Robert Gough - Director of Content Development Oil Price Information Service
OPIS 2013 Outlook: A Kinder, Gentler, Lower-Price Year for Gasoline Good riddance Welcome 2013! Canada and the Midwest to the rescue! Spring will find prices hopping but just not as high. The West will remain wild. Crudely speaking, we are a diverse nation.
Good riddance 2012! Gasoline prices averaged a record $3.6035/gal last year ($2.348/gal and $2.78/gal in 2010 and 2009). They hit a peak of $3.9357/gal on Apr. 5 and again Apr. 6. The highest gasoline prices in nation were in California - $4.6707/gal in early October. Americans spent ~$479 billion on gasoline last year; more than 2x $183 billion spent just 10 years ago.
Welcome 2013! OPIS predicts 2013 average will be $3.25-$3.50/gal. That’s 10cts lower than 2012’s average. Possible peak of $3.90/gal. The last calendar day the U.S. average price fell below $3/gal was Dec. 22, There’s a good chance this 25- month string will be broken in 2013.
Canada and the Midwest to the rescue! Expect heavy discounts on crudes from Canada and Midwest. Rising rig counts (particularly in the Bakken shale region of N. Dakota, the Eagle Ford shale play of south central Texas and numerous other North American “tight” oil supply points). Sustained world prices above $90/bbl and technological improvements in drilling result in highest domestic crude oil output since spring 1993.
Canada and the Midwest to the rescue! Barring a price collapse, early in the first quarter we should see U.S. crude oil production regularly top 7 million b/d. Domestic crude output could top 8 million b/d in the next 15 months (not seen since 1988). Domestic output could begin regularly exceeding imports. BP’s recently published long-term outlook predicts U.S. 99% energy independent by 2030.
Spring will find prices hopping… As is the norm, retail prices will begin their seasonal run-up to the summer driving season. In the past 28 years, the fall-to-spring “seasonal” run-up boosts prices 58% compared to autumn/winter. Midway through 1Q FY13 there’ll be extensive refinery turnarounds & production cuts + transition from winter to summertime RVP. Usually the spring run-up peak is reached in April, sometimes May.
…but just not as high There’ll be a spike this spring but probably with a lower trajectory. Last spring’s European & Caribbean refinery issues likely won’t repeat nor will threats of East Coast refinery shutdowns (due to poor margins). Look for a 30-35% seasonal ride with RBOB futures in the $3.30-$3.45/gal range.
The West will remain wild Last October, California prices raced above $4.70/gal (locally $5/gal +). Within 60 days, inventories were back up and prices fell off more than $1.50/gal. California’s Low Carbon Fuel Standard continues to put pressure on fossil fuels and, by some estimates, could raise prices there as much as $2.50/gal by 2020.
Crudely speaking, we are a diverse nation Western Canadian Select (WCS) crudes sold several times last year at a $40/bbl discount to WTI - the standard blend for delivery into the NYMEX at Cushing, Okla. Price gap between WTI and Brent (the European crude contract supplying the East Coast) had been $14/bbl. Crude costs may vary as much as $50/bbl between regions. Midwest refiners capable of running heavy, sour crudes from Canada & WTI may be able to undersell coastal refineries by $1/gal.
Questions? Robert (Bob) Gough Director of Content Development Oil Price Information Service