Released on December 18, 2002
(Next Release at 2:00 pm EST on December 26, 2002)

Last Minute Shopping
Just as many Americans are out shopping at the last minute for Christmas gifts, so are many U.S. refineries and other oil customers shopping for crude oil and refined products. But unlike the Christmas shoppers, those looking to buy crude oil and refined products now will likely not find prices for their products on sale. With colder than normal weather so far this heating season, uncertainty over the near-term future in Iraq, and OPEC’s recent decision to increase production quotas while cutting back on actual production, oil prices were already poised to drift upward. But now that strikes in Venezuela have crippled oil exports from that country since the end of the first week in December, it’s doubtful that there will be many bargains in the oil market over the next few weeks.

Another impact from the cessation of Venezuelan oil exports may also affect the United States in coming weeks. The Hovensa refinery in St. Croix, Virgin Islands is partially owned by PdVSA, the Venezuelan oil company, and as a result, receives about half of its crude oil from Venezuela. A lot of the products refined from this refinery eventually find their way to U.S. ports, particularly along the East Coast. Lack of crude oil exports from Venezuela to this refinery will cause a reduction in gasoline and distillate fuel imports from the Virgin Islands to the United States until other alternate sources of crude oil can be found to replace the missing Venezuelan crude oil normally refined there. Unfortunately, the Energy Information Administration (EIA) does not track the origin of U.S. refined product imports on its weekly surveys, so it will not be possible to see this impact directly in the weekly data. But EIA does track the level of refined product imports on a weekly basis, and for the week ending December 13, the United States imported 674,000 barrels per day of distillate fuel. This is the highest weekly average since the week ending February 9, 2001, and the fifth highest weekly average ever. And gasoline imports remain relatively high, averaging more than 800,000 barrels per day over the last four weeks. Clearly there have been many customers buying gasoline and distillate fuel lately. But with the New York near-month futures prices for heating oil and gasoline up about 9 cents per gallon and 11 cents per gallon, respectively, since December 6, retail prices for these two products are likely to rise soon as well. With natural gas prices above $5 per million Btu and oil prices rising, there may be many oil and gas customers actually wishing Santa leaves them a lump of coal this Christmas season.

Retail Gasoline Prices Rose Last Week
The U.S. average retail price for regular gasoline rose last week after five weeks in a row of falling prices, increasing by 0.3 cent per gallon as of December 16 to end at 136.3 cents per gallon. This price is 30.4 cents per gallon higher than last year. However, the national price increase was driven solely by a 3.0 cent increase in Midwest prices, ending at 132.2 cents per gallon. Prices throughout the rest of the country were down, with the largest decrease occurring in the Rocky Mountain region, where prices fell 1.8 cents to end at 137.3 cents per gallon.

Residential Heating Fuel Prices on the Rise
Residential heating oil prices increased for the period ending December 16, 2002. The average residential heating oil price was 132.3 cents per gallon, up 2.4 cents per gallon from the previous week. Residential propane prices also continued to move upward by 2.0 cents per gallon from 118.8 to 120.8 cents per gallon. Heating oil prices are 16.8 cents per gallon higher than last year at this time while residential propane prices are 9.2 cents per gallon higher than one year ago. Wholesale heating oil prices increased 6.2 cents per gallon this week, to 84.5 cents per gallon, while wholesale propane prices increased from 56.0 to 59.4 cents a gallon, up 3.4 cents per gallon.

Propane Inventories Sharply Lower
Cold temperatures continued to weigh heavily on propane inventories last week with a weekly draw measuring nearly 3.0 million barrels, sending U.S. inventories down to an estimated 55.3 million barrels as of the week ending December 13, 2002. Following the previous week’s 2.8 million barrel stock draw, the monthly draw on U.S. inventories of propane now stands at 5.8 million barrels, a level that could propel the December stock draw above the 5-year average of 9.1 million barrels if weather continues abnormally cold for the remainder of the year. But even if this scenario plays out, the level would most likely fall short of the record draw during December 2000 when 18.7 million barrels were withdrawn from U.S. propane inventories.

Regional inventories were reported sharply lower across all regions, with the East Coast dropping by more than 0.7 million barrels, putting propane inventories there below the average range for the first time since October 2001. Sharp declines were also felt in the Midwest and Gulf Coast regions with declines measuring 1.1 million barrels and 1.0 million barrels, respectively. Midwest inventories continued to track slightly below the average range last week while inventories in the Gulf Coast region continued at a level near the upper limit of the average range during this same time.