BP 2010 Annual Report Download - page 18

Businessreview
Ourmarket
Energymarketsin2010continuedtorecoverfrom
theimpactoftheglobaleconomicrecession.
Lookingahead,thelong-termoutlookisoneof
growingdemandforenergya,particularlyinAsia,
andofchallengesfortheindustryinmeetingthis
demand.Risingincomesandexpandingurban
populationsareexpectedtodrivedemand,while
theevolutiontowardsalower-carboneconomywill
requiretechnology,innovationandinvestment.
Worldoilconsumptionreboundedin2010,withcontinuedrobustgrowthin
Chinaandothernon-OECDcountriesandtherstincreaseamongOECD
countriessince2005.Averagecrudeoilpricesin2010werehigherthanin
thepreviousyear.Averagenaturalgaspricesalsoincreasedin2010.
Reningmarginsstabilizedasoilproductdemandrecovered.
Economic context
Theworldeconomycontinuedtorecoverin2010.Weexpectslowerglobal
growthin2011,ledbyemergingeconomies,withdevelopedcountries
laggingbehindbecauseoftheneedtodealwiththeirinternalimbalances.
Energydemand,andinparticularoildemand,followsthisoveralleconomic
pattern,recoveringstronglyin2010butfacingmorechallengingconditions
aswemoveinto2011,especiallyinOECDmarkets.
Concernsaboutthevolatilityofcommodityandnancialmarkets,
combinedwithrenewedfocusonclimatechangeandtheearlyexperiences
witheffortstoreduceCO2emissionsintheEUandelsewhere,haveledto
anincreasedfocusontheappropriateroleformarkets,government
oversightandotherpolicymeasuresrelatingtothesupplyand
consumptionofenergy.Weexpectregulationandtaxationoftheenergy
industryandenergyuserstoincreaseinmanyareasovertheshortto
mediumterm.
DatedBrentoilprice 150
HenryHubgasprice(FirstofMonthIndex)
Globalindicatorrefiningmargin(GIM)b
120
90
60
30
2004 2005 2006 2007 2008 2009 2010
Source:Platts/BP.
Crude oil and gas prices, and refining margins
($perbarrelofoilequivalent)
Crude oil prices
DatedBrentfortheyearaveraged$79.50perbarrel,about29%above
2009’saverageof$61.67perbarrel.Pricestradedinarelativelynarrow
bandof$70-80perbarrelformostoftheyearbeforerisinginthefourth
quarter.Pricesexceeded$90perbarrelinDecember,thehighestlevel
sinceOctober2008.
Globaloilconsumptionreboundedsharply,reectingarecoveryin
theglobaleconomyandseveralone-timefactors,risingbyroughly
2.8millionb/dfortheyear(3.3%)c,thelargestannualincreasesince2004.
Growthwasbroadly-based,withthelargest(volumetric)increasesseenin
ChinaandtheUS.Therelativestabilityincrudeoilpricesformuchofthe
yearreectedthestabilityofOPECcrudeoilsupply,asOPECmembers
sustainedtheproductioncutsimplementedinlate2008throughout2010,
withcrudeproductionaveragingroughly2millionb/dbelowthe2008level.
CommercialoilinventoriesintheOECDremainedhighformuchoftheyear
beforefallingastheglobalsupply-balancebegantotighten–andprices
begantorise–laterintheyear.
Thereboundinoilpricesin2010followedadeclinein2009–the
rstsince2001.Globaloilconsumptionin2009reectedtheeconomic
slowdown,fallingbyroughly1.2millionb/dfortheyear(1.7%)d,thelargest
annualdeclinesince1982.Thebiggestreductionswereearlyintheyear,
withOECDcountriesaccountingfortheentireglobaldecline.Crudeoil
pricesrosesharplyinthesecondquarterinresponsetosustainedOPEC
productioncutsandemergingsignsofstabilizationintheworldeconomy,
despiteveryhighcommercialoilinventoriesintheOECD.OPECmembers
cutcrudeoilproductionbyroughly2.5millionb/dein2009.
Weexpectoilpricemovementsin2011tocontinuetobedrivenby
thepaceofglobaleconomicgrowthanditsresultingimplicationsforoil
consumption,andbyOPECproductiondecisions.
a
BP Energy Outlook 2030.
b
Seefootnoteeonpage56.
c
Oil Market Report 10 February 2011©OECD/IEA2011,page4,rstparagraph.
d
BP Statistical Review of World Energy June 2010.
e   Oil Market Report 10 February 2011©OECD/IEA2011,Table1,page59.
16BPAnnualReportandForm20-F2010