global oil market

West Texas Intermediate Crude Priceclick chart to enlarge

As global commodities, oil and petroleum products (including gasoline and diesel) are subject to the price swings in free markets and can be dramatically influenced by perceptions about future supply and demand.

  • Global demand for petroleum products has reached around 86 million barrels per day. ExxonMobil is the largest non-government owned company in the energy industry — yet we produce only about three percent of the world's oil and about two percent of the world's energy.
  • Per the U.S. Department of Energy, crude oil prices averaged about $118 a barrel from July to September 2008, up about 63 percent over the average 2007 price of about $72 per barrel.
  • A weakened dollar contributed to crude oil price increases this year in the U.S. Compared to January 2002, the price of Brent crude oil in September 2008 increased in nominal terms by approximately 400 percent, compared to about 200 percent in euros. The dollar was worth approximately 1.1 euros during 2000 to 2002 versus only about 0.7 euros in September 2008.
  • Since mid-July, prices have been on a sharp downward trend, falling to less than $70 per barrel during late October. This unprecedented fall in prices has left current prices at less than half of their July peak. U.S. gasoline prices, which started the third quarter at over $4 per gallon, have now fallen to less than $3 per gallon.
  • The economic downturn has resulted in declining energy demand in the U.S. and other developed economies. Per the U.S. Energy Information Administration (EIA), U.S. oil demand in September was down over one million barrels per day versus a year ago.

 

world oil consumptionclick chart to enlarge

Despite recent economic weakness, world oil consumption continues to grow, following seven consecutive years of rising prices.

  • The U. S. Energy Information Administration estimates that world oil consumption during 2008 will rise by 300,000 barrels per day compared to 2007. An expected demand increase of 1.4 million barrels per day in non-OECD countries, led by China and the Middle East, will more than offset a 1.1 million barrel per day decline in OECD countries.
  • While the near-term economic environment has dampened world oil demand growth, long-term projections continue to call for increased consumption associated with growing population and improving prosperity, particularly in developing countries.

 

OPED surplus crude oil production capacityclick chart to enlarge

The EIA estimates that global OPEC "surplus capacity" was approximately 1.5 million barrels per day (MBD) in the second quarter of 2008, far less than the 10-year average of 2.9 MBD.

  • As demand slows globally, surplus capacity will grow. The variation in demand and the resulting impact on spare capacity has contributed significantly to market price volatility.