Released on December 4, 2002
(Next Release on December 11, 2002)

Where’s The Crude?
Back in 1984, a popular television commercial asked the question, “Where’s the beef?” Now, in the oil market, traders, analysts, and perhaps even refiners are asking, “Where’s the crude?” Over the last few weeks, there have been many reports about increased crude oil production in October and November, particularly from OPEC, being shipped and on its way to arrive in consuming markets. But with crude oil inventories remaining below the lower limit of the normal range for the last several weeks, some concern on the timing of these increased imports in consuming countries has surfaced. But has the question been answered already?

Over the last four weeks, U.S. crude oil imports have averaged 9.45 million barrels per day, the highest four-week average since the period ending November 9, 2001. Does this mean that the armada of ships supposedly headed this way has begun to arrive? Perhaps, but it also may simply be the result of high amounts arriving in two non-consecutive weeks, and not necessarily indicative of a trend. Two weeks ago, crude oil imports into the United States averaged nearly 10.2 million barrels per day, the most since the week ending May 18, 2001, and last week’s average of 9.5 million barrels per day was the fourth largest level over the last 52 weeks. But sandwiched between these two weeks was a week in which imports averaged less than 9 million barrels per day. If indeed most of the production increase was in October and November, then it may be a little too early to see the bulk of this increased production arriving here already. However, if U.S. crude imports continue to average around 9.5 million barrels per day over the next few weeks, then perhaps it will be safe to say that OPEC’s increased production in recent months has found its way here and crude oil inventories would be expected to show an increasing trend. But with crude oil imports and inventories showing weekly up-and-down movements over the last few weeks, it may be too early to emphatically state that the crude oil many expected to arrive in consuming countries has indeed begun to offload at U.S. ports. And, even if crude oil imports have begun to arrive, heating fuel markets are still vulnerable to a stretch of extended cold weather, as it can take up to a month to refine extra crude oil and deliver the increased heating oil to residential customers in the Northeast, where inventories remain very low.

Retail Gasoline Prices Continue to Fall
The U.S. average retail price for regular gasoline fell last week for the fourth week in a row, decreasing by 1.6 cents per gallon as of December 2 to end at 136.4 cents per gallon. Although this price is 25.6 cents per gallon higher than last year, it has dropped by 7.5 cents per gallon over the last three weeks. Regionally, Midwest states have seen the largest decreases in prices over the past three weeks (15.4 cents), while New England saw a slight (0.1 cent) increase this week.

Residential Heating Fuel Prices Increase
Residential heating oil prices increased slightly for the period ending December 2, 2002. The average residential heating oil price was 128.4 cents per gallon, up 0.5 cent per gallon from the previous week. Residential propane prices continued to move upward by 0.7 cent per gallon, from 116.8 to 117.5 cents per gallon. Heating oil prices are 11.7 cents per gallon higher than last year at this time while residential propane prices are 4.9 cents higher than one year ago. Wholesale heating oil prices decreased 1.7 cents per gallon this week, to 82.1 cents per gallon, while wholesale propane prices decreased from 55.2 to 55.0 cents a gallon, down 0.2 cent per gallon.

Propane Stock Draw Modest Despite Frigid Temperatures
U.S. inventories of propane continued nearly flat for the second week despite Arctic temperatures that blanketed many regions of the nation last week. The modest 0.1 million barrel stock draw pushed U.S. inventories slightly lower to an estimated 61.1 million barrels as of the week ending November 29, 2002, a level that remains near the upper limit of the average range for this period. While the second half of November has seen only flat to modest stock draws, the first half of the month was much different with inventories dropping at near record levels which contributed to the largest November draw on U.S. inventories since 1997. The unseasonably cold weather since late October that continued unabated through November added to the sharp inventory decline early in the month. But it could be reasonably expected that a resumption of steep inventory declines during December could occur ahead of anticipated cold weather as heating customers begin to replenish their propane tanks.

Regional inventories were mixed last week with an offsetting 0.3 million-barrel gain in the East Coast region nearly matching the 0.3 million-barrel loss in the Gulf Coast region, while during this same period Midwest inventories reported a weekly decline of 0.1 million barrels. While the East Coast and Gulf Coast regions remain above the upper limit of the average range for this time of year, the Midwest region remained within the average range during this same period.