Global oil supplies appear to have been minimally affected by the Sept. 11 terrorist attacks on the World Trade Center and the Pentagon and by continuing military operations.
That's the gist of a situation update reported by the US Energy Information Administration last week.
Price movements
EIA noted that although oil prices rose initially following the attacks-due largely to uncertainty surrounding the impact on oil supplies-prices dropped to levels around $5/bbl less than before the attacks after it became apparent that the US refining, distribution, and storage infrastructure was operating normally.
It said, "Since the beginning of allied military operations on Oct. 7, prices have remained about $20/bbl for the Organization of Petroleum Exporting Countries' [marker] basket of crude and $22-23/bbl for West Texas Intermediate.
"The near-term outlook for oil prices and the economy has been complicated further by added uncertainty over depressed demand, coupled with the risk of supply losses stemming from potential reactions to ongoing allied military actions or possible OPEC quota cutbacks in response to low oil prices."
It said that, although US refined product prices are expected to remain at relatively moderate levels this fall and winter-kept in check by lower world crude oil prices-a tighter supply-demand balance in the Midwest may result in somewhat stronger prices in that region. Distillate fuels, including diesel fuel and heating oil, are likely to be the most strongly affected, as refinery outages, coinciding with peak fall demand, are expected to keep depleted inventories from recovering to seasonal average levels.
Supply-demand
EIA said world oil demand has fallen since Sept. 11, in part due to lower commercial jet fuel demand. Global demand growth of 500,000 b/d now is expected for 2001, less than half of early September's growth projections.
"To date, no oil supply shortages have materialized in connection with terrorist attacks or ongoing military operations. Decreased world oil demand as a result of reduced economic growth, combined with OPEC overproduction, has resulted in building inventories and, in general, reduced tightness in world oil markets."
The agency noted that the US Strategic Petroleum Reserve contains 544.7 million bbl, equal to a 51 day supply of oil imports. The SPR has a maximum drawdown capability of 4.18 million b/d for 90 days, with oil beginning to arrive in the market 15 days after a sale is ordered.
