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Released on December 11, 2002
(Next Release on December 18, 2002)
Venezuela Impacts Not Felt Yet in U.S. Oil Data
Impacts from the cessation of oil exports out of Venezuela as the result of a general strike in that country have not yet been seen in the latest weekly data, nor were they expected. Because the weekly data cover the week ending December 6, and oil exports out of Venezuela ceased at about the same time, this week's data reflect a full schedule of U.S. oil imports from Venezuela. Since it takes about one week to transit from Venezuela to the United States, we are also not expecting to see much of an impact in the data released next week, as this should reflect shipments that were already on the water headed this way. Any impacts from the cessation of exports from Venezuela would not likely be seen until December 26 (the release date that week is delayed one day due to the Christmas holiday), which would cover the week ending December 20, assuming that oil exports are not resumed shortly. Even then, it may be difficult to see in the overall U.S. oil import data, as increased production from several OPEC countries that reportedly took place in October and November may be now arriving on U.S. shores. U.S. crude oil imports over the last four weeks have averaged over 9.6 million barrels per day, the highest four-week average since the four weeks ending May 18, 2001.
November Demand Was No Turkey
What is typically billed as the heaviest travel day of the year, the Wednesday before the Thanksgiving Day holiday has historically been a traveler’s nightmare as family and friends alike make the mad dash to grandma’s house in time for Thanksgiving dinner. The past holiday season was no exception as travelers hit the road or took to the skies in large enough numbers that contributed to help boost November demand for motor gasoline and for jet fuel above the same month a year-ago. At the same time, cold weather, particularly in the Northeast where most of the nation’s heating oil is consumed, increased November demand for distillate fuel to the highest level ever for this month. Moreover, based on weekly data, U.S. total oil demand also set a record for November with nearly 20.0 million barrels per day consumed, so total oil demand continued its recovery, growing 2.9 percent over last year.
Preliminary estimates for November 2002 show jet fuel demand reached nearly 1.7 million barrels per day, about 16 percent above the same month last year when demand was at a yearly low because of the lingering affects of September 11th. Since the attacks, the airline industry has struggled with falling travel demand and rising costs that resulted in some companies reporting huge losses over the period. Nevertheless, many airlines over this period have implemented sweeping changes in their operations in an attempt to return to profitability by cutting schedules and reducing capacity, while at the same time offering discounted fares in an attempt to increase air travel demand. While it may be too early to tell if these efforts are finally beginning to pay off, the recent upsurge in demand may be a signal that the worst is over and that a slow recovery is now in the making. Jet fuel demand for the four-week period ending December 6, 2002 totaled nearly 1.7 million barrels per day, surpassing the prior year average for this period by 16.3 percent. Conversely, it should be noted that jet fuel demand still lags recent yearly trend levels, with November 2002 demand still 3.3 percent below November 2000. But with recently passed Congressional legislation coupled with numerous government efforts aimed at shoring up airline security, regaining consumer confidence in air travel would be expected to lead to an eventual, if not partial, recovery in jet fuel demand beginning, perhaps with the holiday travel season this year.
Motor gasoline remains the only major petroleum product that continues to show positive year-over-year demand growth. The trend continued during November with preliminary estimates reporting that gasoline demand totaled 8.7 million barrels per day, a level that was slightly less than 1 percent above the same month last year. But speculation abounds that following the September 11th attacks, many air travelers shifted their preference to highway travel instead, and that shift may have contributed to the exceedingly high levels of gasoline demand seen during most of 2002. While this may be true, and even if air travel demand does rebound soon, gasoline demand may still be expected to show continued growth well into 2003 if the U.S. economy continues to follow a path of recovery that maintains a stable supply and price scenario for gasoline that has prevailed for most of the year.
Distillate fuel demand continued to heat up from colder-than-normal weather that persisted throughout the Midwest and East Coast regions during November 2002. Preliminary estimates for November show distillate fuel demand with gains totaling 6 percent above the same month during 2001 when weather was much warmer-than-normal. The cold weather in the Northeast (which includes the Mid-Atlantic and New England regions, which combined, account for 75 percent of the nation’s heating oil is consumption), appears to be the driving force that is pushing up distillate demand as indicative of the first October to November drop in inventories since 1990, a movement that runs counter to the typical inventory buildup during this period. Temperatures in the Northeast were about 10 percent colder-than-normal during November 2002, compared with nearly 19 percent warmer-than-normal temperatures last year at this time. Moreover, during the 2001-02 year heating season, temperatures in the Northeast region averaged 18 percent warmer than average. The heating oil component of high sulfur distillate fuel apparently more than offset relatively weak demand seen in the industrial sector for both low sulfur distillate and other high sulfur distillate fuel during November. But cumulative demand for distillate fuel this year through the week ending December 6, 2002 remains about 3 percent below the comparable level of demand for this period last year.
Retail Gasoline and Diesel Fuel Prices Fall Back Last Week
The U.S. average retail price for regular gasoline fell last week for the fifth week in a row, decreasing by 0.4 cent per gallon as of December 9 to end at 136.0 cents per gallon. Although this price is 26.5 cents per gallon higher than last year, it has dropped by 7.9 cents per gallon over the last four weeks. The Rocky Mountain region saw the largest decrease in prices this week (1.9 cents), while the Midwest saw an increase of 1.4 cents per gallon over the last week.
Retail diesel fuel prices decreased last week, falling to a national average of 140.5 cents per gallon as of December 9. Diesel fuel prices are not expected to soften significantly during the coming months, as distillate fuel inventories have dropped below the normal range this winter and are expected to remain low through 2003. Retail diesel prices were down throughout most of the country, with the largest price decrease occurring on the West Coast, which saw the price fall by 0.9 cent per gallon to end at 147.8 cents per gallon. Prices rose on the East Coast, gaining by 0.2 cent to end at 140.4 cents per gallon.
Cold Weather Drives Residential Heating Fuel Prices Higher
Residential heating oil prices increased for the week ending December 9, 2002. The average residential heating oil price was 129.9 cents per gallon, up 1.5 cent per gallon from the previous week. Residential propane prices also continued to move upward by 1.2 cents per gallon, from 117.5 to 118.7 cents per gallon. Heating oil prices are 14.0 cents per gallon higher than last year at this time while residential propane prices are 6.7 cents per gallon higher than one year ago. Wholesale heating oil prices decreased 3.8 cents per gallon this week, to 78.3 cents per gallon, while wholesale propane prices increased from 55.0 to 56.0 cents a gallon, up 1.0 cent per gallon.
Propane Inventories Resume Sharp Slide
Responding to the frigid temperatures and winter storms that swept across many areas of the nation last week, U.S. inventories of propane resumed the recent slide with the largest weekly draw of the season that measured more than 2.8 million barrels. With last week’s sharp stock draw, U.S. inventories of propane were pushed down to an estimated 58.3 million barrels as of week ending December 6, 2002. Nevertheless, U.S. inventories remain well positioned within the average range for this period.
Regional inventories fell sharply across all regions last week with East Coast inventories down nearly 8 percent with a 0.4 million barrel draw, followed with a more than 5 percent decline in the Midwest that measured 1.2 million barrels. Gulf Coast inventories posted a decline of 1.0 million barrel draw that was 3.5 percent lower from the previous week level.
"This Week In Petroleum" Upcoming Holiday Schedule
The "This Week In Petroleum" (TWIP) issue that would normally be released at 1:00 pm EST on December 25, will now be released at 2:00 pm EST on December 26 due to the Christmas holiday. Similarly, the issue that would normally be released at 1:00 pm EST on January 1, will now be released at 2:00 pm EST on January 2 due to the New Year’s Day holiday. The December 26 issue will not contain a major analysis article, but will contain some text. The January 2 issue will be a full edition of TWIP.
Note: Text from the previous editions of “This Week In Petroleum” is now accessible through a link at the top right-hand corner of this page.
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