Released on March 27, 2002 (from EIA)
(Next Release on April 3, 2002)
It’s All In the Timing
Petroleum inventories fell sharply last week, with declines seen for both crude oil and refined products. As petroleum markets continue their current cycle (as outlined in last week’s text), timing will be a key factor in determining the near-term future.
To briefly summarize the current cycle, beginning with the end of 2001, U.S. petroleum markets were flush with inventories, and prices, both for crude oil and refined products, were relatively low. With ample supplies of product on hand, refinery margins were relatively low, especially once crude oil prices started to slowly rise beginning in late January. As a result, refiners began to cut back on the amount of crude oil being run through refineries in late January, which carried through the rest of winter, until last week, when we saw a substantial increase. With less refined product being produced this winter, product inventories began to fall. For example, in the last six weeks, gasoline inventories have fallen by 10.2 million barrels, and distillate fuel inventories have dropped by 15 million barrels. But with less crude oil being refined, crude oil inventories (excluding those in the Strategic Petroleum Reserve) were rising, again until last week. (It should be noted though, that even here crude oil inventories were dropping relative to normal levels, since typically inventories build at a faster pace than seen during this year’s maintenance season.) With less crude oil available in the global market due to cuts in production by OPEC and some major non-OPEC producing countries, crude oil imports into the United States have remained much lower over the last several weeks. Over the last four weeks, crude oil imports have averaged slightly less than 8.2 million barrels per day, a drop of over 1 million barrels per day from the same period a year ago. But with crude oil inputs down, the impact of declining imports was muted.
However, last week saw crude oil refinery inputs increase to 14.5 million barrels per day, the second highest level since mid-January. With crude oil imports last week at the lowest level in more than a year (partly due to significant fog-related closures in the Houston Ship Channel) and refinery runs increasing, we saw a drop in crude oil stocks (4.5 million barrels) not seen since the week ending October 12, 2001. If crude oil imports continue to remain low, while inputs into refineries increase, crude oil stocks would continue to fall. Without more oil production from OPEC, this is likely to happen. And if refinery production does not increase fast enough to keep up with increasing product demand due to the beginning of the gasoline season and a recovering economy, product stocks would also continue to fall. So depending on the timing of events, drops in crude oil and refined product inventories could be on the horizon, thus leading to increased price pressures, particularly for gasoline.
Retail Gasoline Prices Rise Sharply for the Fourth Straight Week
EIA’s latest weekly gasoline price survey, released on March 25, showed the average U.S. retail price for regular gasoline increasing 5.4 cents per gallon to 134.2 cents per gallon, the highest price since October 8, 2001. The national average price has now risen 22.6 cents per gallon in the past 4 weeks, the largest increase over a 4-week period since the survey began in August 1990, but stands 6.2 cents lower than a year ago.
Average retail gasoline prices were relatively flat nationally through January and February, and actually declined slightly in the Midwest, but prices in California rose more than 20 cents per gallon during that period. During the past 4 weeks, the strongest gains have been in the Midwest (25.8 cents) and California (25.7 cents), while prices on the East Coast have risen 20.3 cents per gallon. The increases appear to reflect a variety of factors, including rising crude oil prices, seasonal pressures, and declining inventories. While EIA does not forecast a return to gasoline prices as high as those seen the last two years, the seasonal increase has begun somewhat earlier than usual, and is expected to continue over the coming weeks.
Retail diesel fuel prices rose by 3.0 cents per gallon last week, to a national average of 128.1 cents per gallon as of March 25. The increase in diesel fuel prices over the past 4 weeks (12.7 cents per gallon) has been much less than that for gasoline, reflecting higher inventories and a different seasonal demand pattern.
Propane Inventories Mixed as Winter Ends
The last vestiges of winter finally vanished last week as U.S. inventories of propane reported a nearly 0.2 million barrel gain and ended the week of March 22, 2002, at an estimated 39.9 million barrels. Although March temperatures have stayed close to normal levels for the month, several blasts of artic weather caused what appeared to be a late season draw on inventories during the early weeks of March. U.S. inventories of propane dropped by 2.7 million barrels for the first three weeks of March, a stock draw that was 47 percent above the 5-year average of 1.8 million barrels for the entire month. However, this level was far below the record 7.4 million barrel draw recorded during March 1999. Moreover, nearly all of the March draw occurred in the Midwest region, further indicating increased heating demand since most of the Nation’s households that heat with propane are located in this area.
Residential Heating Prices Not Available Again Until October 2002
Some of the data presented in “This Week In Petroleum” are only collected during the winter heating season (October-March). Beginning this week, we are no longer collecting residential heating oil prices, residential propane prices, and wholesale propane prices. Those products will be shown again at the beginning of the next heating season. |
