2  For a survey on the literature on speculators and their impact on price developments in the oil market, see Weiner, R, (2002): “Sheep in wolves’ clothing? Speculators and price volatility in petroleum futures”, Quarterly Review of Economics and Finance, 42 (2), 391-400. 2  BIS Review 69/2004  at 35 USD per barrel for WTI delivery in 5 years (see Figure 7). Moreover, despite the most recent sharp correction in spot prices from 55 to 46 USD per barrel WTI, long-dated futures prices have receded only marginally. Since 2002, prices of oil futures are generally quoted below expected spot prices - a state labeled backwardation. Backwardation implies uncertainty about production and supplies and effectively favors further inventory draw downs (see Figure 8). Price information extracted from the market appears to confirm that at least for the time being, average oil prices are likely to remain elevated compared to historical price ranges. Forecasting market prices is an inherently difficult endeavor. Immense uncertainties on the supply side make oil price forecasts particularly challenging. Reserve figures can be increased rapidly by the discovery of new oil fields or by exploitation at greater margins due to new technologies. Proven oil reserves in the Middle East, for example, increased from 16 billion barrels in 1944 to 116 billion barrels of meanwhile extracted or still available reserves in 1975.
1986:1 -1999.12 ( ex 1990:9) :  17.9 [18.0]  3.60  2000:1 -2004:07  27.7 [27.4]  4.51  O IL  04  Figure 3 Correlation between oil price and GDP R e v e r s e d c a u s a lit y : O il is d e m a n d d r iv e n s in c e 1 9 9 5 40  .0 5  35  .0 4  30  .0 3  25  .0 2  20  .0 1  15  .0 0  10  -.0 1 1985  1990  O IL _ O E F  1995  2000  G DPW O RLD_YY  Correlation: World-GDP (yoy) and Oilprice  6  1980 -1994.4  -0.389  1995.1 -2004.4  +0.330  BIS Review 69/2004  Figure 4 US oil inventories  60  360 340  50  mn barrels  320 40  300  30  280 260  20  240 10  220 200  0 1  4  7  10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 W eek  W eekly Min and Max since 1994  Crude Oil Inventory 2004 (4wk avg.)