|Despite abrupt increases during the latter
part of March, international crude oil prices continued to react to high
stock levels and substantial wellhead production. By mid-March, prices
for many key crude oil streams had reached their lowest level since autumn
1988. Growing concern over slumping prices prompted discussions about production
cutbacks by a number of oil producing countries in an effort to stabilize
prices. A meeting between some members of the Organization of Petroleum
Exporting Countries (OPEC) and non-OPEC producer nations yielded an agreement
during the weekend of March 21-22 that would reduce world crude oil production
by as much as 2 million barrels per day. In reaction to the announcement,
crude oil prices surged throughout international markets. Later in the
month, OPEC scheduled an emergency meeting in Vienna, Austria to discuss
production cuts solely within the group. But by the close of March, many
benchmark crude oil streams' prices had retreated from the previous week's
increases. The decreases were attributed to the limited level of proposed
production cuts (1.25 million barrels per day) from the 16-member group
and the ambiguity surrounding how the intended reductions would be calculated.
It was unclear whether promised cuts would be counted from actual production
rates or from quota levels that had yet to be reached by some countries.
OPEC instituted a 10-percent increase for its production quota at the beginning
of January, bringing the group's stated overall quota level to 27.5 million
barrels per day
March proved to be a volatile month for crude oil and refined product prices
in the United States. During the first half of the month, prices continued
to erode as fundamental market conditions remained relatively unchanged
from those observed during the past several months. Stockpiles continued
to be well above year-ago levels and no firm prospects for a reduction
in world crude oil production were in sight. In addition, more refining
facilities came back online after seasonal maintenance which added pressure
on prices, particularly for gasoline. However, by mid-month prices began
to reverse direction. The combination of proposed cuts in global crude
oil production, a spate of refinery problems, and reported reductions in
gasoline stocks prompted prices to rise significantly during the last two
weeks of the month. Additional factors included the beginning of a switch
over to producing and supplying lower-RVP summer grade gasoline under the
new Complex Model regulations and disruptions in the pipeline distribution
system along the East Coast. Data indicate stocks of gasoline and distillate
fuels registered tangible decreases along with solid growth in demand for
the second month in a row. Refiner sales of gasoline are estimated to have
grown 2.3 percent from February's level, and sales of the major finished
petroleum products rose 1.2 percent. Long-term low prices are seen as a
significant factor behind rising rates of consumption, particularly for
||Crude Oil and Wholesale
Petroleum Product Prices
March market and sales activity for crude oil and the principal petroleum
products are summarized in the following sections.
The daily spot price for West Texas Intermediate (WTI) crude oil at Cushing,
Oklahoma followed a wide-ranging path during March. Opening at $15.44 per
barrel, the price fell steadily during the next 2 weeks before reaching
the month's low of $13.41 per barrel on March 16. That price also marked
the lowest price since October 1988. The price began to climb significantly
shortly thereafter based on reports of stock draws and reports of an agreement
to curtail crude oil production between some OPEC and non-OPEC exporters.
The high of $16.92 per barrel was struck on March 26. The price closed
the month at $15.75 per barrel, marginally higher than where it began the
Continuing the trend seen during the past several months, March monthly
average crude oil prices fell in all categories of sales. The average domestic
crude oil first purchase price fell 63 cents (5.2 percent), to $11.53 per
The average free-on-board (f.o.b.) cost of imported crude oil decreased
81 cents (6.9 percent), to $10.93 per barrel. The average landed cost of
foreign crude oil declined 84 cents (6.4 percent), to $12.28 per barrel.
The monthly average refiner acquisition costs for domestic crude oil declined
$1.32 (8.9 percent), to $13.45 per barrel. The average cost of imported
crude oil to U.S. refiners fell $1.09 (8.1 percent), to $12.32 per barrel.
The composite refiner acquisition cost of crude oil dropped $1.22 (8.7
percent), to $12.81 per barrel.
The daily spot price for unleaded regular gasoline at New York Harbor was
very dynamic during March. Opening at 45.1 cents per gallon, the price
dropped precipitously until it reached the month's low of 39.2 cents per
gallon. The price rose sharply due to a number of factors during the coming
weeks, reaching the high of 50.6 cents per gallon on March 23. Closing
the month at 47.0 cents per gallon, the price was nearly 2 cents above
its starting point.
Monthly average gasoline prices decreased in all categories of sales during
March. The average price for retail sales of motor gasoline by refiners
declined 3.4 cents per gallon to 65.6 cents per gallon while the average
wholesale price fell 2.8 cents to 52.3 cents per gallon. Including data
reported by a sample of motor gasoline marketers, the national average
retail price at company-operated retail outlets dropped 2.8 cents to 65.7
cents per gallon. The average wholesale price declined 2.6 cents, to 53.0
cents per gallon. The average dealer tank wagon (DTW) price decreased 3.4
cents to 58.8 cents per gallon. The average rack price subsided 2.5 cents
to 50.7 cents per gallon. The average bulk sales price fell 2.4 cents,
to 46.5 cents per gallon. The margin between reformulated and conventional
gasoline prices shrank to 2.1 cents at retail, and 6.3 cents at wholesale.
The margin between conventional and oxygenated gasoline prices decreased
to 5.9 cents at retail and 7.6 cents at wholesale.
Sales of finished motor gasoline by refiners remained on the upswing during
March. Total sales rose 7.9 million gallons per day (2.3 percent), to an
average of 356.1 million gallons per day. Retail sales increased 2.0 million
gallons per day (3.2 percent), while wholesales rose 5.9 million gallons
per day (2.1 percent). Rack sales explained 60.5 percent of total wholesales,
while DTW and bulk sales made up 26.1 percent and 13.5 percent, respectively.
Reformulated gasoline (RFG) comprised 31.2 percent of total motor gasoline
sales, while oxygenated gasoline made up 2.8 percent of sales.
No. 2 Distillate
Like the trends seen for other major products, the daily spot price for
No. 2 heating oil at New York Harbor experienced a wide range of movement.
After opening at 43.3 cents per gallon, the price slid during the following
few weeks before hitting the low of 38.4 cents per gallon on March 16.
Climbing considerably during the final half of the month, the price reached
the high of 45.8 cents per gallon on March 26. The price closed the month
at almost exactly the same level as where it began March.
No. 2 distillate prices declined in all categories during March. The national
average residential price fell 1.8 cents to 89.7 cents per gallon, while
the average wholesale price dropped 2.6 cents to 47.0 cents per gallon.
The average price for No. 2 diesel fuel at company-operated retail outlets
decreased 2.0 cents, while the average wholesale price fell 2.4 cents.
The margins between low- and high-sulfur diesel fuel prices were 2.2 cents
at retail and 2.4 cents at wholesale.
Refiner sales of No. 2 distillate were mixed during March. Total sales
rose 1.8 million gallons per day (1.3 percent), to 145.4 million gallons
per day. Sales of No. 2 fuel oil fell 3.7 million gallons per day (9.7
percent) while sales of No. 2 diesel fuel rose 5.5 million gallons per
day (5.2 percent). Low-sulfur diesel fuel sales accounted for 79.6 percent
of all refiner diesel fuel sales, and 60.7 percent of all refiner No. 2
Residual Fuel Oil
Monthly average residual fuel oil prices fell in all categories of sales
again during March. Refiner prices for low-sulfur residual fuel declined
4.0 cents to 35.6 cents per gallon at retail and 1.3 cents to 29.4 cents
per gallon at wholesale. Refiner high-sulfur residual fuel prices dropped
4.8 cents to 25.8 cents per gallon at retail and 2.4 cents to 24.2 cents
per gallon at wholesale. Including data reported by the sample of residual
fuel oil marketers, the average low-sulfur price declined 3.1 cents to
36.7 cents per gallon at retail and 1.8 cents to 30.8 cents per gallon
at wholesale. The average price for high-sulfur residual fuel oil dropped
4.2 cents to 26.8 cents per gallon at retail, and 3.3 cents to 24.6 cents
per gallon at wholesale.
In March, sales of residual fuel oil by refiners increased in all categories.
Total sales rose 4.6 million gallons per day (19.4 percent), to 28.3 million
gallons per day. Low-sulfur residual fuel sales climbed 2.5 million gallons
per day (34.7 percent), while high-sulfur residual fuel sales rose 1.8
million gallons per day (10.8 percent).
Prices for other surveyed products fell during March. Refiner propane prices
decreased 0.9 cent per gallon at retail, and 1.8 cents per gallon at wholesale.
Including the sample of propane marketers, the average residential propane
price dropped 2.8 cents per gallon. The average end-user and wholesale
prices for propane decreased 2.3 cent per gallon and 1.6 cents per gallon,
respectively. Retail and wholesale prices fell for aviation gasoline, No.
1 distillate, No. 4 distillate, kerosene, and kerosene-type jet fuel.
Refiner volumes of sales for products included in this section were mixed
during March. Sales of No. 4 distillate and kerosene-type jet fuel fell
at retail but rose at wholesale. Propane, kerosene, and No. 1 distillate
sales declined at both levels, while aviation gasoline rose at both levels.