Released on June 11, 2003
(Next Release on June 18, 2003)

Product Build at Expense of Crude Draw
For the week ending June 6, total gasoline inventories (including blending components) increased by 2.6 million barrels. Total distillate fuel oil inventories increased by 2.8 million barrels this same week. However, the builds in these two major refined petroleum products were nearly offset by a 4.6-million-barrel decline in crude oil inventories. With inventories this spring low for both major refined products and crude oil, it is next to impossible to build both crude oil and refined product inventories back to normal levels at the same time. With crude oil input into refineries at very high levels recently (a monthly record in May using weekly data, and a weekly record for the week ending May 30), it appears that refiners will likely build product inventories back to normal levels before crude oil. In fact, with the latest increases in gasoline and distillate inventories, both of these products are now either barely back within their normal range for this time of year (gasoline) or right at the lower end of the normal range (distillate fuel). However, crude oil inventories remain well below the low end of the normal range for this time of year. In fact, according to weekly data, crude oil imports averaged just a hair below 10 million barrels per day in May (which would be a monthly record if it is not revised down when monthly data become available), yet crude oil inventories rose a paltry 0.4 million barrels in May. This highlights the importance of crude oil imports in eventually building back up crude oil inventories to more typical levels, as even record imports are doing little to rebuild inventories now. Crude oil imports remained relatively high last week, averaging nearly 9.9 million barrels per day, yet inventories declined. While imports from Iraq dried up completely last week, imports from Saudi Arabia continue to average higher than usual levels, helping to maintain U.S. crude oil imports near the 10 million barrel per day level. With the announcement earlier today that OPEC will keep quotas and production steady for the next month or two, U.S. crude oil imports may be able to maintain these high levels and eventually begin to rebuild crude oil inventories, especially in late summer when refiners typically cut back on the amount of crude oil being refined. But it is unlikely that we will see a quick return to normal inventory levels for both refined products and crude oil at nearly the same time.

Gasoline Demand vs. Product Supplied
In analyzing our weekly data, many analysts, including some at EIA, use the word “demand” when looking at our “product supplied” data. However, it is important to understand the difference between consumption (demand) and product supplied. For gasoline, consumption refers to the actual amount of gasoline we use each day. While there are no actual data on this, it is likely that this does not vary significantly from one week to the next. Of course, as people take vacations in the summer and around holidays, we would expect to see consumption increase, but it probably does not vary as much as our “product supplied” data. Our “product supplied” data for gasoline measures how much gasoline was delivered into the U.S. gasoline market as opposed to how much was actually consumed. It is a subtle difference, but especially when looking at weekly data, the timing of gasoline being supplied into the market and being removed through consumption can sometimes cause a disconnect. To obtain our “product supplied” for finished gasoline on a weekly basis, we add together the refinery production of finished gasoline with the imports of finished gasoline, subtract our estimate of gasoline exports, and add any reduction in finished gasoline inventories (or subtract any addition to finished gasoline inventories). We do not actually survey weekly gasoline consumption. While we feel “product supplied” is an excellent proxy for gasoline “demand”, it does not actually measure consumption. This is why we typically look at gasoline product supplied over a four-week period. By looking at it over a longer time period, it is hoped that any timing difference between “product supplied” and consumption would be minimized. But it is instructive to understand the difference between “product supplied” and consumption, especially when analyzing weekly data.

U.S. Retail Gasoline Prices Rise by Almost 2 Cents
The U.S. average retail price for regular gasoline rose last week after many weeks of falling prices. Prices increased by 1.7 cents per gallon as of June 9 to reach 149.0 cents per gallon, which is 11.5 cents per gallon higher than a year ago. Before last week’s price increase, gasoline prices had fallen 10 of the previous 11 weeks. The rise in retail prices may be due in part to recent relatively low gasoline inventory levels. Prices were mixed throughout the nation last week, with prices rising the most in the Midwest, where prices gained 5.7 cents to hit 150.6 cents per gallon, making it the driving force behind the national increase. The region with the lowest price is the Gulf Coast, where prices for regular gasoline averaged hit 137.8 cents per gallon, while the West Coast had the highest prices at 165.7 cents per gallon.

Retail diesel fuel prices decreased for the thirteenth consecutive week, falling 0.1 cent per gallon as of June 9 to a national average of 142.2 cents per gallon, which is still 13.6 cents per gallon higher than a year ago. Diesel fuel prices continue to fall as market conditions improve. Retail diesel prices were mixed throughout the nation last week. The region with the lowest price is the Gulf Coast, where prices for diesel averaged 136.5 cents per gallon, while the region with the highest price is New England, where prices averaged 156.3 cents per gallon on June 9.

Propane Inventories Rise on Imports
The expected flotilla of propane imports continues to arrive through the first week of June. Imports accounted for more than half of the 2.9-million-barrel weekly increase in propane inventories, which reached an estimated 36.1 million barrels as of June 6, 2003. Unseasonably high natural gas prices in recent weeks have helped to keep propane spot prices at the major trading hubs at Mont Belvieu, Texas and Conway, Kansas, from about 60 percent to more than 80 percent above their respective year-ago levels, which in turn has provided an incentive for the importation of propane into the United States, particularly waterborne imports into the Gulf Coast region. Although still low, current levels of U.S. inventories of propane last week continued to narrow the gap from the lower limit of the average range for this time of year. Regional gains showed the Gulf Coast with more than two-thirds of the weekly increase in inventories, followed by the Midwest, which accounted for about one-fourth of the total share. Gulf Coast inventories reached the lower limit of the average range last week for the first time since January 2003, but Midwest inventories continue to remain below the average range. East Coast inventories remained above the average range for the fifth consecutive week. Inventories of propylene for non-fuel use gained more than 0.3 million barrels last week to nearly 2.3 million barrels, accounting for 6.3 percent of total propane/propylene inventories, up from the prior week’s 6-percent share.

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