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This Week In Petroleum
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Released on June 5, 2002
(Next Release on June 12, 2002)

Surprised?
Just as the United States men’s soccer team surprised the world by beating Portugal in the World Cup, so has gasoline demand surprised many analysts by its apparent weakness. However, upon closer inspection it seems that gasoline demand may not be as weak as perceived, just as the United States men’s soccer team may be better than many thought.

When the data for the week ending May 24 (the week before the Memorial Day weekend) was released showing gasoline demand (defined as the amount of gasoline supplied into the system) was less than 8.7 million barrels per day, many analysts were surprised at how low the figure was. There was a belief that this week is typically inflated as retail stations stock up their supplies ahead of the first major holiday driving weekend of the summer. An inspection of weekly data prior to Memorial Day weekend in previous years does show that gasoline demand sometimes surges a week or two prior to the holiday, but not necessarily in the same week. Adding to market confusion, this week's data (for the week ending May 31) showed gasoline demand averaging "only" an estimated 8.8 million barrels per day, slightly less than the same week in the past two years, suggesting weak restocking at the service station level. However, variation in the timing and reporting of these “surge” flows makes one-week estimates of gasoline demand potentially misleading, and it is usually better to look at the average of several weeks. Estimated gasoline demand over the past three weeks (the two weeks prior to Memorial Day weekend and the week following it) has averaged 8.9 million barrels per day, the highest ever for that period, and 2.5 percent greater than the same period last year (using weekly data). This is consistent with EIA models, which suggest gasoline demand somewhere between 8.8 and 9.0 million barrels per day during the month of May.

Of course, the absolute peak for gasoline demand for the year usually occurs later in summer than Memorial Day. In seven out of the last ten years (1992 through 2001), the peak weekly gasoline demand estimate has occurred in either June, July, or August. Thus, it is still too early to declare that gasoline demand has peaked, just as it was too early to write off the chances of the United States World Cup team prior to the beginning of the tournament. If anything, recent preliminary weekly data suggest strong gasoline consumption levels, with a peak well over 9 million barrels per day this summer.

Crude Inventories Show Large Build Last Week
U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) surprised many analysts with an increase of 6.0 million barrels last week, and are once again close to year-ago levels. This large increase was unexpected, especially considering that crude oil inputs to refineries increased. While crude oil imports did increase last week compared to the previous week, the difference would not support such a large increase in reported inventories. Thus, “unaccounted for crude oil”, which is a balancing item used to balance crude oil supply with crude oil demand (defined here as crude oil inputs to refineries), was much larger than normal at 1.4 million barrels per day. Such is the bane of weekly data. It will be interesting to see in subsequent weeks what happens to crude oil inventories; history suggests a downward correction over the next week or two. Nevertheless, even with this large increase, crude oil inventories are slightly below year-ago levels, and are in the middle of the normal range for this time of year.

Retail Gasoline Prices Edge Up 0.5 Cent
The retail price for regular gasoline rose 0.5 cent last week, ending at 139.2 cents per gallon as of June 3. This price is 28.7 cents per gallon lower than last year. Prices were mixed throughout the country, with decreases occurring in the East Coast, Gulf Coast, and Rocky Mountain regions, and increases happening in the Midwest and West Coast. The largest decrease occurred on the East Coast, where prices fell 0.7 cent to end at 135.8 cents per gallon. The largest increase took place in the Midwest, with prices jumping 2.0 cents to end at 139.8 cents per gallon. Prices have remained relatively flat over the past eight weeks, and the near term outlook calls for prices to remain steady over the next few weeks assuming the status quo in oil markets. As we have noted before, however, prices at the pump may rise if there are increases in crude oil prices or gasoline demand during the summer driving season. Retail diesel fuel prices decreased by 0.8 cent per gallon to a national average of 130.0 cents per gallon as of June 3.

Retail Prices (Cents Per Gallon)

Retail Data		Changes From		Retail Data		Changes From
06/03/02		Week	Year	06/03/02		Week	Year
Gasoline	139.2	0.5	-28.7	Diesel Fuel	130.0	-0.8	-21.4

Spot Prices (Cents Per Gallon)

Spot Data		Changes From
05/31/02		Week	Year
Crude Oil WTI	25.37	-1.32	-2.51
Gasoline (NY)	68.5	-2.3	-13.6
Diesel Fuel (NY)	64.1	-2.7	-15.2
Heating Oil (NY)	63.0	-2.5	-13.1
Propane Gulf Coast	38.1	-1.4	-11.1
Note: Crude Oil WTI Price in Dollars per Barrel.

Stocks (Million Barrels)


Stocks Data		Changes From		Stocks Data		Changes From
05/31/02		Week	Year	05/31/02		Week	Year
Crude Oil	324.9	6.0	0.5	Distillate	127.5	2.6	19.4
Gasoline	215.9	-2.2	5.6	04/30/02		Month	Year
Note: Propane Stocks is Estimated Data.				Propane	45.818	6.140	15.325

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