Released on August 1, 2007
(Next Release on August 8, 2007)

Cycling
Now that the Tour de France is over (it is over, right?), when cycling is mentioned, many people reading this will think of business cycles. Oil markets are no different from other commodities and industries and go through cycles as well. The U.S. petroleum data released earlier today provide some indication that U.S. oil markets may be shifting cycles.

While total U.S. inventories at the end of July are in the upper half of the average range, crude and product inventories have exhibited different trends recently. Over the last few months, U.S. crude oil inventories have climbed to levels much above the average range, while major refined products, such as gasoline and distillate fuel have declined relative to the average range. However, recently this trend has shifted and the data for the week ending July 27 underscore this shift. Many analysts have been expecting crude oil inputs to refineries to increase as refinery capacity that has been offline returns, and as a result, crude oil inventories were expected to fall, while product inventories were thought likely to begin rebuilding from relatively low levels. With crude oil inputs over 16.2 million barrels per day last week, the highest weekly average since Hurricanes Katrina and Rita in 2005, crude oil inventories dropped 6.5 million barrels last week, while gasoline and distillate fuel inventories rose. While still below the low end of the average range for this time of year, gasoline inventories are now the closest they have been to the average range since March (see Figure 4 in the Weekly Petroleum Status Report). Despite a dip in imports, gasoline inventories rose on record production. Distillate fuel inventories, while not as low as gasoline inventories have been, also rose slightly more than would be expected for this time of year, with distillate fuel production also up significantly last week. While crude oil inventories (excluding those in the Strategic Petroleum Reserve) are still well above the average range at 344.5 million barrels, if crude oil inputs remain at 16.2 million barrels per day, crude oil imports would need to average about 11 million barrels per day to keep inventories from falling further, given that U.S. domestic crude oil production is around 5.2 million barrels per day. Thus, if crude oil imports average about 10.2 million barrels per day, as they have over the last four weeks, crude stocks could fall by more than 5 million barrels each week, if crude oil inputs remain at this week’s level.

Last week’s edition of This Week In Petroleum, talked about how it was important to look at oil markets from a global perspective, as one region could experience tighter (or looser) oil markets than others. Over time, that tightness tends to spread or cycle to other initially amply supplied regions. Today’s data indicate that oil markets can also cycle between crude oil and refined products. How long the new cycle of declining crude oil inventories and rising product inventories lasts will go a long way in determining the strength or weakness of crude oil and refined product markets in the United States. Unlike the Tour de France, which received little attention in the United States this year, the cycling occurring in oil markets is very visible and will be closely watched by oil analysts over the remaining weeks before OPEC’s next ministerial meeting scheduled for September 11.

EIA Statement on Premature Public Release of Weekly Petroleum Data
The Energy Information Administration (EIA) is aware that petroleum data for the week ending July 27, scheduled for release at 10:30 AM Eastern Time today, was available on the public EIA website before the scheduled release time. Initial indications suggest a malfunction in the system used by EIA to load the data while keeping it from public release prior to the scheduled release time. EIA is actively investigating this event and its possible causes. Once the problem is fully understood, EIA will make whatever changes in its systems or procedures that may be required to avoid a recurrence.

Gasoline Price Falls 8 Cents
The U.S. average retail price for regular gasoline dropped 8.2 cents last week to hit 287.6 cents per gallon as of July 30, 2007, which is 12.8 cents lower than last year. Prices fell for the second week in a row, reaching the lowest national average price since April 23, 2007. All regions recorded price declines and all major regions were under the $3 mark for the first time since March 19. East Coast prices fell 5.4 cents to 287.0 cents per gallon. Midwest region prices decreased 13.6 cents this week to 284.8 cents per gallon, for a total drop of 32.4 cents per gallon in the last two weeks. Prices for the Gulf Coast were 7.5 cents less, settling at 279.2 cents per gallon, the lowest in the country. In the Rocky Mountain region, prices were 298.4 cents per gallon, down 5.4 cents this week but 4.5 cents per gallon above last year. West Coast prices, highest in the Nation, decreased 5.4 cents to 299.7 cents per gallon. The average price for regular grade in California was 5.8 cents lower at 306.0 cents per gallon.

Retail diesel prices were slightly lower at 288.6 cents per gallon, 0.3 cent under last week. Prices are 9.4 cents per gallon lower than at this time last year. Regional prices were mixed with East Coast prices dropping by 1.3 cents to 284.7 cents per gallon. In the Midwest, prices rose 0.3 cent to 288.5 cents per gallon, while the Gulf Coast saw a decline of 0.7 cent to 280.8 cents per gallon. The Rocky Mountain region gained 1.5 cents, to settle at 300.3 cents per gallon. The West Coast price dropped 0.3 cent to 305.8 cents per gallon. California prices also fell, by 0.6 cent, to 315.2 cents per gallon, 5.9 cents per gallon higher than at this time last year.

Propane Inventories Increased
Propane inventories moved higher last week with a 2.0-million-barrel stock build that positioned the nation’s primary propane inventories at an estimated 49.9 million barrels as of July 27, 2007. East Coast inventories dropped by 0.1 million barrels, while Midwest inventories moved up by 1.4 million barrels last week. The Gulf Coast region rose by 0.5 million barrels, while the combined Rocky Mountain/West Coast regions gained 0.2 million barrels during this same time. Propylene non-fuel use inventories increased by 0.4 million barrels and accounted for 5.5 percent of total propane/propylene inventories, compared with the prior week’s 5.0 percent share.

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