Released on February 13, 2002
(Next Release on February 21, 2002)

Last Week’s Petroleum Supply Data: Continuation of a Trend?
Last week’s data reflect the mixed signals not uncommon to weekly series. Such data can highlight trends or identify turning points in oil markets on a timely basis, especially compared to monthly data, which are unavailable for about 50 days or so after the end of the month in question. However, often the weekly data can unduly influence oil markets, so it is important to realize that a single week’s data does not make a trend. For example, data for last week show that crude oil imports into the United States reached 9.3 million barrels per day. As a result, crude oil inventories increased by 2.5 million barrels. However, the trend in recent weeks has clearly been toward lower crude oil import levels, as seven out of the last nine weeks have had crude oil imports average below 9.0 million barrels per day, with most of those weeks in the 8.5 to 8.6 million barrel per day range. If crude oil imports stay above 9.0 million barrels over the next couple of weeks, then a trend could be identified. But, it is more likely that crude oil imports will trend lower in coming weeks, as OPEC production cuts begun last month work their way through the system via lower crude oil imports in consuming countries, including the United States.

Crude Oil Inputs to Refineries Remain Lower Than Last Year, But …
U.S. crude oil refinery inputs have averaged 14.3 million barrels per day over the last 4 weeks, or 0.5 million barrels per day less than for the same period last year. So at a quick glance, it appears that crude oil inputs are low for this time of year, signaling, perhaps to some, weak crude oil demand. However, over the last 4 years (1998-2001), they have averaged 14.3 million barrels per day for January and February, and were even considerably lower in January and February 2000. Thus, current levels are in line with the average for this time of year and above early 2000 levels when refinery margins were similarly depressed. It will be interesting to follow this statistic over the next few weeks to see which direction this trend is heading.

Petroleum Inventories Are Both Up and Down
Total petroleum product inventories (excluding crude oil inventories) have consistently declined in recent weeks, falling a total of 9 million barrels in the last 5 weeks. However, over the same period, crude oil inventories have risen by 17.6 million barrels, with 10.8 million barrels going into commercial inventories and 6.8 million barrels going into the Strategic Petroleum Reserve. Last week, not only did crude oil inventories increase, but so did gasoline inventories (1.0 million barrels) and distillate fuel inventories (0.2 million barrels). While the increase in gasoline inventories is not unusual for this time of year, the increase in distillate fuel inventories, although small, is still counterseasonal. But again, before reading too much into the distillate fuel inventory increase, it will be important to see if increases continue in upcoming weeks, or if the seasonal trend of declining inventories returns. The current high levels of distillate fuel inventories are partly the result of the recent increase in diesel fuel inventories. Distillate fuel includes diesel fuel (low-sulfur) and heating oil (high-sulfur). While heating oil inventories have declined some in recent weeks, diesel fuel inventories have remained relatively constant at historically high levels, thus reducing the decline in distillate fuel inventories that is expected at this time of year. Last week’s data showed signs that refiners may be beginning to respond by decreasing diesel fuel production. Meanwhile, cold weather contributed to the 3.3 million barrel drop in U.S. inventories of propane last week, forcing stocks slightly below the 50 million barrel level for the first time this heating season. Despite the sharp draws in propane inventories over the past several weeks, U.S. inventories are at their highest level in 15 years for this time of year.

U.S. Oil Demand Appears In Line With Growth Pattern in Recent Years
Much has been made in various petroleum industry trade press about how weak oil demand has been this winter. Certainly, the warm weather much of the country has experienced has reduced demand to some extent. However, most of the analysis has compared this season’s demand to last season’s, when demand was extremely high due to cold winter weather, at least in November and December 2000, and high natural gas prices that encouraged many users to consume oil rather than natural gas. But our analysis indicates that perhaps a more accurate depiction of current U.S. oil demand may not be that oil demand over the last 4 weeks is down 4 percent versus the same period last year, but is in line with the demand patterns seen for this time of year compared to previous year’s data. For example, while December 2001 oil demand was much lower than December 2000 (cold weather and high natural gas prices) and even December 1999 (Y2K build-up in secondary and tertiary inventories), it is in line with the demand growth trend evident since December 1997. January 2002 demand also shows a similar increasing trend relative to January 1998 and January 1999 data. Thus, depending on the comparisons, demand either appears “weak” or in line with what might be expected based on the trend from recent years.

Most Petroleum Product Prices Fell Last Week
The national average retail regular gasoline price fell to 110.7 cents per gallon on February 11, 2002, down 0.9 cent per gallon from last week and 36.9 cents per gallon lower than a year ago. The national average retail diesel fuel price was 115.3 cents per gallon on February 11, 2002, rising 0.9 cent from last week but 36.5 cents per gallon less than a year ago. Even though parts of the Northeast and Midwest experienced high winds and cold weather at the start of the week, weather did little to influence residential heating fuels prices for the reference period ending February 11. The average residential heating oil price on February 11, 2002, stood at 116.0 cents per gallon, down 0.3 cent from last week’s mark and 33.9 cents below last year’s posting for the same period. The propane residential average also declined this week, as the average on February 11, 2002 was 113.0 cents per gallon, a 0.3-cent drop from last week and 43.8 cents per gallon less than a year ago.