Released on April 23, 2003
(Next Release on April 30, 2003)

Another Record, But …
U.S. crude oil imports averaged a record 10.6 million barrels per day for the week ending April 18, breaking the record set just three weeks earlier. Over the last four weeks, U.S. crude oil imports have averaged more than 9.8 million barrels per day and crude oil inventories, as a result, have increased by 12.3 million barrels. So, clearly, oil markets are well supplied, right?

Well, not yet. While imports of this magnitude are certainly helpful in increasing crude oil inventories, as well as in supplying crude oil for increased refinery runs in the near future, inventories across all oil products are starting from such low levels, that even with imports pouring in at record levels, it will still take months, not weeks to return inventories to normal. To understand this more fully, it’s instructive to see how inventories for crude oil and major refined petroleum products have changed over the last four weeks, a period which includes not one, but two, record-setting weeks!

Crude Oil
Commercial crude oil inventories (excluding those from the Strategic Petroleum Reserve) have increased by 12.3 million barrels over the last four weeks, reaching 286.2 million barrels as of April 18. Yet, they are 41.6 million barrels below the level last year and over 40 million barrels less than the average over the last five years. Additionally, according to the United Nations Oil-for-Food Program statistics, the last week of “normal” Iraqi oil exports was for the week ending March 14. Given the usual time lag of 35-45 days for oil to get from the Persian Gulf to U.S. shores, imports from Iraq may be sharply reduced in the next week or two and ultimately, the United States will not get oil exports from Iraq for several weeks, since it is still unclear when Iraqi oil exports will resume. With Saudi Arabia and other countries already pumping at high levels, it’s likely that U.S. crude oil imports a week or two from now will be considerably lower than the record set this past week, as it will be difficult to compensate for a total loss of Iraqi imports. Any decision by OPEC at their meeting on April 24 to reduce production from current levels could put further strain on maintaining U.S. crude oil imports at high levels as long as Iraq’s oil exports are suspended.

Major Refined Products
Crude oil inventories typically increase significantly in April, but then gradually decline as crude oil inputs into refineries usually are much higher in the May through September period. Gasoline inventories generally continue to increase into May, before increased demand requires drawdowns from inventories, while distillate fuel inventories generally increase through the summer and into the fall. Assuming that the same refinery pattern occurs this year, if crude oil imports remain high over the next few months, some of the barrels would likely go not only to increasing inventories, but also to increasing inputs to refineries. This would mean an increase in refinery output. Yet, again, inventories are starting from such low levels, that it will take a long time for inventories to recoup to normal levels. Total gasoline inventories, for example, fell by 0.7 million barrels last week, despite a sizeable increase in refinery output and over 1 million barrels per day of imports. Gasoline inventories, which are actually the oil category that is closest to normal levels, are 6.5 percent below last year’s level and about 4.3 percent below the five-year average level. Distillate fuel inventories, however, are much lower comparatively speaking. As of April 18, U.S. distillate fuel inventories are 21.7 percent below year-ago levels and 16.6 percent below the five-year average for this time of year. Last week’s “This Week In Petroleum” explained how difficult it might be to rebuild heating oil inventories to normal levels by the beginning of next winter. Jet fuel inventories are also at low levels, with current inventories 13.4 percent lower than year-ago levels and 15.0 percent below the five-year average.

In summary, inventories of refined products are still so low, that even with an increase in refinery output expected over the next few months, they will be hard pressed to reach normal levels. And, when inventories are low, there is little flexibility to adjust to any infrastructure problems, such as unplanned refinery outages or pipeline problems. This limited flexibility keeps pressure on retail prices and elevates them to somewhat higher levels than they might otherwise be. And with the U.S. economy struggling to improve, a significant increase in product prices would not be helpful. So, while record-setting import levels are an encouraging sign, they will need to be sustained at very high levels this summer to rebuild inventories to more comfortable levels.

U.S. Retail Gasoline Prices Continue to Drop
The U.S. average retail price for regular gasoline fell last week for the fifth week in a row. Prices dropped by 2.1 cents per gallon as of April 21 to hit 157.4 cents per gallon, which is still 17.0 cents per gallon higher than a year ago. Over the last five weeks, the average price for regular gasoline has declined by 15.4 cents per gallon. The decline reflects, in part, the reduction in crude oil prices recently. Prices were down throughout the nation last week, with the exception of the Midwest, where prices rose by 0.8 cent per gallon. The region with the lowest price is the Gulf Coast, where prices for regular gasoline averaged 146.0 cents per gallon, while the region with the highest price is the West Coast, where prices for regular gasoline averaged 191.2 cents per gallon on April 21. Despite falling by 6.8 cents per gallon, retail prices in California remained above $2 per gallon for the eighth week in a row, decreasing to 200.9 cents per gallon.

Retail diesel fuel prices decreased for the sixth consecutive week, falling 1.0 cent per gallon to a national average of 152.9 cents per gallon as of April 21. Diesel fuel prices are down in conjunction with recent drops in crude oil prices and in anticipation of weaker market conditions. Retail diesel prices were down throughout the nation last week, with the exception of the Midwest, where prices rose by 0.4 cent per gallon. The region with the lowest price is the Gulf Coast, where prices for diesel averaged 143.4 cents per gallon, while the region with the highest price is the Central Atlantic, where prices averaged 168.8 cents per gallon on April 21.

Weak Propane Build Persists
U.S. inventories of propane continued on a path of modest weekly builds after posting a relatively weak 0.6 million-barrel gain that put inventories at an estimated 22.3 million barrels as of the week ending April 18, 2003. With little over a week remaining in April, U.S. inventories of propane are poised to end the month at the lowest level in 33 years for this period, reflecting a monthly build that so far totals less than half of the normal 5.6 million-barrel rate averaged over the most recent 5-year period. Modest gains were reported across all the major regions last week with inventories in the East Coast remaining nearly flat, while Midwest and Gulf Coast inventories showed weekly gains measuring 0.2 million barrels and about 0.3 million barrels, respectively. Inventories of propylene for non-fuel use inched lower by less than 0.1 million barrels to finish the week at 1.6 million barrels, a level that accounts for 7.2 percent of total propane/propylene inventories.

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.