Released on March 5, 2003
(Next Release on March 12, 2003)

Crude Oil Imports From Venezuela Increase Significantly
Although the data are preliminary and thus not published, according to weekly data on the sources of crude oil imports, U.S. imports from Venezuela have been down sharply beginning with the week ending on December 20, 2002. This was, of course, a result from the strikes in Venezuela that significantly curtailed oil production and exports. However, this same preliminary data for last week showed a substantial increase in U.S. crude oil imports from Venezuela, reaching a level much closer to pre-strike levels than we’ve seen in recent weeks. In fact, one refiner that regularly imports crude oil from Venezuela, reported such imports last week for the first time since the week ending December 20, 2002. While one week’s worth of data does not necessarily mean that imports from Venezuela will continue at this higher level, this increase helps explain why crude oil imports rose by nearly 400,000 barrels per day last week. Yet, crude oil imports continue to remain below 9 million barrels per day (averaging 8.7 million barrels per day last week). Although crude oil inventories did increase by 1.7 million barrels, that was partly due to a decline in crude oil refinery inputs, which dropped by nearly 300,000 barrels per day last week. Even with a substantial increase in crude oil imports from Venezuela, there was still not enough crude oil in the petroleum system to build both crude oil inventories, as well as product inventories (through an increase in refinery output). For both crude oil inventories and product inventories to return to more normal levels, crude oil imports will need to continue to rise over the next several months. Should this occur, steep backwardation (i.e., a price premium on immediate deliveries) in both crude oil and product markets would decline, reducing current disincentives refiners face in purchasing and importing additional crude oil.

February Weather Pummels Heating Inventories
Just as Arctic temperatures battered heating fuel inventories during January 2003, near paralyzing snowstorms and frigid weather once again pummeled heating fuel inventories during February 2003. High sulfur distillate fuel inventories (also referred to as heating oil) plunged more than 15 percent over the most recent four-week period to end the week of February 28, at 35.6 million barrels, 32 percent below the level for the same period last year. Even more dramatic was the sharp drop in the East Coast region, where most of the nation’s heating oil consumers reside, with reported inventories of high sulfur distillate fuel down 27 percent during this same period. Frigid weather spilled over from January into February with combined temperatures in the New England and Middle Atlantic regions being reported at about 7 percent below normal during February, only slightly below the nearly 8 percent colder-than-normal-level reported during January 2003. Still, distillate demand during February nosed out January’s level, with average demand over the four week period ending February 28, 2003 totaling 4.4 million barrels per day, compared with January’s nearly 4.2 million-barrel level.

Propane markets, as well, experienced exceptionally strong inventory losses that set a February record with inventories dropping 11.4 million barrels to end the month at an estimated 21.0 million barrels. Although low, February’s level of inventories fell short of the record low of 15.9 million barrels set during February 1970. However, the level, nevertheless does represent one of the lowest in recent years, partly the result of a monthly stockdraw that was more than double the draw averaged over the 5-year period from 1998 through 2002. Despite February temperatures in the Midwest (PAD District II) that were not as cold as those in the East Coast (PAD District I), the Midwest region, which accounts for the highest concentration of propane heating consumers, still reported inventories that were lower by 5.5 million barrels, ending the month at an estimated 7.3 million barrels. Even the Gulf Coast region (PAD District III), where a large amount of the nation’s propane is stored, experienced severe inventory losses during the month. Gulf Coast inventories fell to their lowest level ever with ending February inventories measuring only 10.8 million barrels.

Midwest Crude Oil Stocks Continue Falling
After falling to the lowest level since EIA has kept PADD-specific inventory levels (dating back to August 1989) during the week ending February 21, crude oil inventories in PADD II (Midwest) increased slightly last week. However, they still remain at very low levels. This is important because PADD II includes Cushing, Oklahoma, where physical barrels are traded for West Texas Intermediate (WTI) crude oil, the U.S. benchmark crude oil. If inventories get particularly tight at Cushing then upward pressure on prompt WTI prices could develop, which may lead to higher prompt prices for other crude oils in the United States and elsewhere in the Americas.

Average U.S. Retail Gasoline Price Increases by Almost 3 Cents, California Tops $2 Mark
The U.S. average retail price for regular gasoline rose last week for the eleventh time in twelve weeks, increasing by 2.8 cents per gallon as of March 3 to reach 168.6 cents per gallon, which is 54.2 cents per gallon higher than a year ago. While the outlook could go either way, strong gasoline demand ahead of the normal seasonal increase, extensive refinery maintenance, and still tight crude oil supply, may be pointing to added price pressure in the months ahead. Prices were mixed throughout the country, with the largest increase occurring in California, where prices rose 9.0 cents to end at 201.2 cents per gallon, the highest price ever in our survey, which for California goes back to May 2000. Prices fell on the Gulf Coast, with prices decreasing by 0.3 cent to end at 157.9 cents per gallon.

Retail diesel fuel prices increased for the seventh straight week, rising 4.4 cents per gallon to a national average of 175.3 cents per gallon as of March 3. This was the highest diesel price since EIA began recording this data in March 1994, and the third week in a row that diesel has topped its previous record price. Retail diesel prices were up throughout the country, with the largest price increase occurring in the Rocky Mountains, where prices rose 6.8 cents per gallon to end at 173.6 cents per gallon. Prices in New England rose again, by 6.6 cents, to hit 195.4 cents per gallon, the highest price in the nation.

Residential Heating Fuel Prices Jump This Week
Residential heating oil prices increased 8.3 cents per gallon for the week ending March 3, 2003, averaging 183.5 cents per gallon, and are 67.4 cents per gallon higher than last year at this time. Meanwhile, wholesale heating oil prices increased 8.6 cents per gallon this past week, reaching 129.3 cents per gallon.

Residential propane prices increased 21.7 cents per gallon to reach 172.1 cents per gallon, the highest average residential propane price recorded on EIA’s price survey, which dates back to October 1990. Residential propane prices are 59.6 cents higher than one year ago. Wholesale propane prices increased 33.5 cents per gallon, from 81.3 cents per gallon to 114.8 cents per gallon.

Propane Inventories Report Modest Weekly Decline
U.S. inventories of propane fell a relatively modest 2.0 million barrels last week, ending the week of February 28, 2003 at an estimated 21.0 million barrels. Following a period of sharp declines since the first wave of Arctic temperatures swept the nation, U.S. inventories last week posted the smallest weekly decline since the week ending January 3, 2003. Regional declines were also relatively modest last week with less than a 0.2 million-barrel drop in the East Coast, while during the same period, Midwest and Gulf Coast regions reported respective declines of 1.1 million barrels and 0.6 million barrels. But with several weeks of winter remaining, and with U.S. inventories less than 3 million barrels above the Lower Operational Inventory (LOI), the nation’s propane inventory situation remains somewhat precarious, and any more bouts of extended severe cold weather could potentially cause regional supply disruptions or spot shortages.

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