Released on February 6, 2002
(Next Release on February 13, 2002)

Crude Oil Inputs Remain Low While Product Stocks Fall
The story so far this year has followed our expectations. Crude oil inputs to refineries averaged 14.5 million barrels per day in January, a decline of over 300,000 barrels per from December’s level, with the last two weeks averaging less than 14.2 million barrels per day (see U.S. Crude Oil Refinery Demand worksheet). The decline in crude oil inputs has put more reliance on product inventories to supply refined product demand. Both gasoline and distillate fuel inventories fell last week, the first such combined decline since the week ending December 21. However, with stock levels for both products comfortably in the normal range for this time of year, there are ample inventories available, particularly for distillate fuel. With relatively high product inventories and less OPEC crude oil available this quarter, it’s an opportune time for many refineries to perform maintenance and prepare for the upcoming gasoline season. With the winter nearing an end, many people have shifted their focus towards gasoline. If refinery production remains relatively low as a result of lower crude oil throughput at refineries, and gasoline imports remain at or near last week’s level, then any significant increase in gasoline demand will need to be supplied from inventories. While this does not portend any problems at this point, gasoline inventory levels will be an important indicator to watch over the next month or so.

Stock Changes in January Milder Than Normal
Crude oil inventories increased by 8.7 million barrels in January, slightly less than the 9.1 million barrel average build for the month over the previous 5 years (1997 through 2001). The total gasoline build was also less than the 5-year average, increasing by 8.5 million barrels last month, or 4.3 million barrels less. However, the distillate stock draw was also much less than normal, down only 2.9 million barrels in January, as opposed to the 5-year average draw of 10.7 million barrels. With weather across the country about 16 percent warmer than normal last month (17 percent in New England, the region with the highest preponderance for oil as a heating fuel of any region in the country), it was not unexpected that distillate fuel inventories would fall much less than normal. Despite the warmer than normal weather, propane inventories fell 12.2 million barrels last month, about average over the last 5 years. However, as we started the month with propane inventories at 20-year highs, we also ended the month the same way, at the highest level seen for this time of year in the last 20 years. Overall, total product stocks declined by 4.2 million barrels last month. If both crude oil inputs and imports over the first quarter of 2002 remain lower than the last quarter of 2001, it’s possible that crude oil stocks may not increase significantly over this period while, at the same time, product inventories may decline even further.

Crude Oil Imports Decline; Gasoline Imports Remain High
Crude oil imports averaged 8.6 million barrels per day last week, the seventh week out of the last eight that crude oil imports have averaged below 9.0 million barrels per day (see U.S. Crude Oil Imports worksheet). With Iraqi crude oil exports down since early December 2001, and OPEC, along with some major non-OPEC producing countries, agreeing to reduce crude oil production over the first half of the year, it remains unlikely that crude oil imports in the near-term will average above 9 million barrels per day for any significant period. Total product imports averaged 2.2 million barrels per day last week, the same amount as in the previous week, but motor gasoline imports fell below 600,000 barrels per day for the first time since the week ending December 7, 2001. Distillate fuel imports have averaged 261,000 barrels per day last month, much less than the 778,000 barrels per day averaged in January 2001.

U.S. Gasoline Demand in January Shows Growth
While oil demand has averaged below year-ago levels since the attacks in September, year-ago oil demand figures were unusually high, particularly in December 2000 and January 2001. Motor gasoline demand in January averaged about 1.8 percent above year-ago levels. Neither cold weather nor high natural gas prices had much effect on gasoline demand, so this comparison may provide a more accurate picture of underlying demand growth so far this year than looking at total petroleum demand.

National Average Regular Gasoline Price Rises
The national average retail regular gasoline price grew to 111.6 cents per gallon on February 4, 2002, up 1.5 cents per gallon from last week but 32.7 cents per gallon lower than a year ago. The national average retail diesel fuel price was 114.4 cents per gallon on February 4, 2002, remaining unchanged from last week and 37.6 cents per gallon less than a year ago. Even as winter storms moved across the country last week, stretching from parts of the Midwest to New England, heating fuel prices were relatively static. The average residential heating oil price on February 4, 2002 stood at 116.3 cents per gallon, up 0.2 cent from last week’s posting, but 34.3 cents lower than last year. Propane prices also showed very little movement this week, as the residential average on February 4, 2002 was 113.3 cents per gallon, down 0.2 cent from last week and 47.8 cents below last year’s mark.