Warmer-Than-Normal Winters Built Inventories
Notes:
Red shaded areas are when demand exceeds supply and draws from inventories are needed. When the red line is below the green shaded area, supply is greater than demand and inventories are built. The 3 red areas on the left show a typical winter pattern.
However, compare it to the winters of ‘96-’97, ‘97-’98, and to a lesser extent, ‘98-’99. The increased production from Iraq and elsewhere, decreased demand from Asia, and warmer-than-normal winters in those years, all combined to put more oil supply out than was demanded in a period when the reverse is usually true. This scenario puts downward pressure on prices.