Released on February 19, 2004
(Next Release on February 25, 2004)

TWIP Trends
At the Energy Information Administration, we call this publication (This Week In Petroleum) by its acronym, TWIP. And as regular readers might know by now, although this is a weekly publication, we often urge readers to look beyond the weekly data to discern the important trends. With the spring equinox just 30 days away, it seems like an appropriate time to see what trends may be imbedded in the last few weeks’ data for crude oil, gasoline, and distillate fuel (which includes both diesel fuel and heating oil).

Crude Oil
Over the last 4 weeks, crude oil imports have averaged 8.6, 10.5, 8.4, and 10.2 million barrels per day. This up-and-down weekly pattern may appear to make it difficult to see an underlying trend, but 4-week moving averages over this same period (9.4, 9.5, 9.3, and 9.4 million barrels per day) have been relatively flat. One might be similarly confused if the weekly change in U.S. commercial crude oil inventories (which exclude the Strategic Petroleum Reserve) was the sole data point being observed. Over the last six weeks, the changes in these inventories have been: down 5.0, up 1.2, down 1.5, up 7.9, down 2.7, and up 4.9 million barrels. This seesaw pattern may appear to be random, but looking at the absolute inventory levels over this period, one can see that crude oil inventories have been fluctuating around 270 million barrels for weeks. With crude oil refinery inputs apparently on the rise again (up 444,000 barrels per day over the last two weeks), U.S. crude oil imports will likely need to average about 10 million barrels per day as we move closer to spring, when U.S. refinery inputs typically increase sharply to levels 500,000 barrels per day or more higher than current levels in order to supply more gasoline, just for crude oil inventories to remain near the current low level.

Gasoline
One trend that has not been difficult to discern is gasoline prices. With gasoline prices in January averaging the highest amount ever for that month (not adjusted for inflation), and with prices continuing to increase in February, it is very apparent that the U.S. gasoline market is tight. A major reason for this is related to the lack of any significant build in gasoline inventories in January. While U.S. gasoline inventories might typically be expected to increase by 12.4 million barrels in January (see Appendix A, Table A1 in the Weekly Petroleum Status Report), they actually dropped by 0.7 million barrels between January 2 and January 30. What many people might be surprised to find out by looking closer at the table showing average inventory levels is that gasoline inventories tend to drop in February and March, as terminals clear out winter-grade gasoline in order to make room for summer-grade gasoline. But with gasoline inventories already below the bottom end of the normal range (see Gasoline Stock chart in the Gasoline section of TWIP), it is difficult to see how gasoline markets will not remain tight, at least through this upcoming summer driving season.

Distillate Fuel
Three weeks ago in TWIP, we analyzed distillate fuel and propane markets and determined that although prices would likely remain relatively high throughout the winter, inventory levels were fairly comfortable and would be able to withstand a sharp drop in inventories. However, we may have been a little premature in that assessment. Again, looking at the trend over the last several weeks, distillate fuel inventories have dropped by 25.8 million barrels over the last 5 weeks, and are now near the bottom end of the normal range. Indeed, cold weather to date, not only has led to the sharp drop in distillate fuel inventories, but is also one of the factors tightening the gasoline outlook. Refiners may have focused their efforts on maintaining distillate fuel production, which in turn may have contributed to the lack of any build in gasoline inventories last month. However, with warmer weather ahead for the Northeast and Middle Atlantic states (the major heating oil consuming regions), how tight distillate fuel markets are may take a back seat to the gasoline situation.

U.S. Retail Average Gasoline Price Up a Penny
The U.S. average retail price for regular gasoline increased last week by 1.0 cent per gallon as of February 16 to reach 164.8 cents per gallon, which is 1.2 cents per gallon lower than a year ago. Retail regular gasoline prices were up throughout the country last week, with the West Coast increasing 3.7 cents to hit 181.3 cents per gallon. California prices averaged 186.8 cents per gallon after gaining 4.7 cents this past week.

Retail diesel fuel prices increased by 1.6 cents per gallon as of February 16 to a national average of 158.4 cents per gallon, which is 12.0 cents per gallon lower than a year ago. Retail diesel prices were mostly up throughout the country last week, with prices on the West Coast continuing to outstrip those of other regions, gaining 4.8 cents to hit 178.9 cents per gallon. California saw an increase of 5.6 cents to reach 186.6 cents per gallon. New England saw a price decrease of 0.8 cent to hit 176.5 cents per gallon, which is 12.0 cents lower than last year.

Residential Heating Fuel Prices Decrease Slightly
Residential heating oil prices decreased for the period ending February 16, 2004. The average residential heating oil price dropped 0.4 cent from last week to reach 161.1 cents per gallon, a decrease of 12.0 cents from this time last year. Wholesale heating oil prices increased 8.7 cents to 101.3 cents per gallon, a decrease of 14.8 cents compared to the same period last year.

The average residential propane price fell 0.1 cent, decreasing to 153.5 cents per gallon. This was an increase of 3.8 cents over the 149.7 cents per gallon average for this same time last year. Wholesale propane prices increased 4.0 cents per gallon, from 71.9 cents to 75.9 cents per gallon. This was a decrease of 0.4 cent from the February 17, 2003 price of 76.3 cents per gallon.

Propane Weekly Draw Continues Sharp Winter Slide
Although last week's nearly 2.7-million-barrel weekly draw on U.S. inventories of propane continued with lower stock draws as the winter heating season slowly moves to a close, last week’s draw, when combined with the prior week’s 3.3-million-barrel draw, implies that February's average draw of about 7.4 million barrels reported over the most recent 5-year period may be exceeded this month. However, the stockdraw is not expected to surpass the record for February, which totaled 11.8 million barrels in February 2003. U.S. inventories remain about 2 million barrels above the same level at this time last year. Regionally, large declines continued in the Midwest last week with a 1.6-million-barrel draw that accounted for most of the weekly drop across the nation, followed with a relatively sharp 0.9-million-barrel draw in the Gulf Coast region. Propane inventories on the East Coast posted a surprisingly small 0.1-million-barrel decline last week that was buoyed in part by a cargo of waterborne imports. Despite the rash of pipeline outages in the region over the course of the heating season, East Coast propane supply levels, particularly in the Northeast region, have been supplemented by a continuous flow of waterborne imports that have acted to help balance supply/demand levels during the period. Propylene non-fuel use inventories rose by 0.3 million barrels last week to 1.4 million barrels, a level that now accounts for 5 percent of total propane/propylene inventories.

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