Released on April 2, 2003
(Next Release on April 9, 2003)

The Armada Has Arrived
According to the latest weekly data, U.S. crude oil imports averaged nearly 10.4 million barrels per day for the week ending March 28, the highest average ever recorded. There have been various reports pointing to many oil producing countries, particularly Saudi Arabia, increasing production in recent weeks. But the major question has centered on when these increased production levels (and thus an implied increase in exports) would reach the United States. Well, it appears that an armada of tankers hit the U.S. shores last week. Of course, with a record level of crude oil imports last week, many analysts and traders will be interested in knowing the sources behind this surge. Although the origins of weekly crude oil imports are preliminary and thus not published, they do provide an indication of the distribution, if not the precise magnitude of the sources of U.S. crude oil imports. Looking at the data this way, we can see that crude oil imports from Saudi Arabia increased sharply, along with crude oil imports from Nigeria. Venezuelan crude oil imports, for the second week in a row, continue on a path towards a sustained level of more normal import levels (crude oil imports from Venezuela averaged 1.2 million barrels per day in 2002). It should be noted that oil production, and consequently exports, from Nigeria have recently been disrupted, and this should translate in reduced imports from Nigeria in the weeks ahead. However, for now, this sharp boost in crude oil imports helped push U.S. commercial crude oil stock levels back above 280 million barrels for the first time since December 20, 2002.

But it will take many more weeks of imports at this level to return total petroleum stocks back to normal levels. Even with an increase in crude oil inputs to refineries, distillate fuel inventories fell, as a decline in diesel fuel (low-sulfur distillate fuel) more than compensated for an increase in heating oil (high-sulfur distillate fuel) inventories. And, although gasoline inventories increased by 1.7 million barrels, they remain below the lower end of the normal range for this time of year. In fact, total U.S. commercial inventories are currently over 37 million barrels below the lower end of the normal range, and with large stockbuilds usually occurring in April and May, inventories need to increase at a substantial rate to even return back to the lower end of the normal range by sometime this summer. Thus, for inventories to continue rising well into the normal range, an armada needs to become commonplace at U.S. oil ports this spring.

Gasoline Inventory Situation Varies Across Regions
As mentioned above, U.S. gasoline inventories, despite increasing by 1.7 million barrels last week, remain below the lower end of the normal range. However, more insight is provided when looking at levels across various regions of the United States. EIA uses Petroleum Administration for Defense District (PADD) regions to split the country into smaller regions. Looking at gasoline inventories this way, we can see that stocks are very low for this time of year on the East Coast and in the Midwest, relatively low on the Gulf Coast (the major refining area of the world), high in the Rocky Mountains, and relatively high on the West Coast (see charts of gasoline inventories by PADD region). Thus, all else equal, we would expect a tighter gasoline market in the East Coast and Midwest than we would for the Rocky Mountains. Of course, there are many other factors which influence markets regionally, including the types of gasoline used. Since California has banned the use of MTBE as an additive to gasoline effective January 1, 2004, many refiners have already made adjustments for this summer’s gasoline season. This means that a significant portion of gasoline in California contains ethanol as an additive. As this makes California’s gasoline supply even more unique, any local pressures in California will be hard to supply from elsewhere in the country. So, while looking at gasoline inventories on a regional level can provide more insight into the current gasoline market situation, there are other factors that also need to be analyzed.

U.S. Retail Gasoline Price Decreases by 4 Cents
The U.S. average retail price for regular gasoline fell last week for the second week in a row. Prices dropped by 4.1 cents per gallon as of March 31 to hit 164.9 cents per gallon, which is still 27.8 cents per gallon higher than a year ago. This is the largest one-week price decrease since prices fell by 4.4 cents on October 22, 2001. The decline reflects, in part, the reduction in crude oil prices recently. Retail gasoline prices were down throughout the country, with the largest decrease occurring in the Midwest, where prices fell 7.4 cents to end at 152.4 cents per gallon. California retail prices remained above $2 per gallon for the fifth week in a row, decreasing to 213.0 cents per gallon. Average prices for the West Coast also stayed above the $2 per gallon mark, at 202.1 cents per gallon on March 31.

Retail diesel fuel prices decreased for the third consecutive week, falling 6.0 cents per gallon to a national average of 160.2 cents per gallon as of March 31. Diesel fuel prices are down in conjunction with recent drops in crude oil prices and in anticipation of looser market conditions, with winter weather abating towards the end of March. Prices were down throughout the country, with the largest decrease occurring in the Midwest, where prices fell 7.0 cents per gallon to end at 152.6 cents per gallon. Prices in New England remained the highest in the nation, although they declined by 6.9 cents to 182.3 cents per gallon.

Propane Inventories Report Weekly Gain
U.S. inventories of propane rose for the second consecutive week with a nearly 0.6 million-barrel increase that brought inventories to an estimated 19.5 million barrels for the week ending March 28, 2003. Warmer-than-normal temperatures in all regions of the nation during March dramatically diminished recent intense pressure on inventories during January and February when severe weather pushed inventories to historical lows. Furthermore, preliminary data show the March stockdraw, measuring 1.4 million barrels, was well below the 5-year average of more than 3.0 million barrels. Regionally, Gulf Coast inventories accounted for nearly the entire weekly gain, while East Coast and Midwest inventories remained essentially flat over this period.

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