Released on June 25, 2003
(Next Release on July 2, 2003)

Less Than Perfect
In the movie “10”, this number represented perfection in terms of beauty. But for U.S. oil markets this summer, 10 million barrels per day of crude oil imports doesn’t represent perfection; rather it is the minimum number needed to help rebuild very low crude oil and refined petroleum inventories. With an average of less than that last week (9.3 million barrels per day), it’s no surprise that crude oil inventories fell. Since total U.S. commercial petroleum inventories typically increase during the month of June, even the seemingly small 1.1-million-barrel decline was notable. With inventories very low for many months now, sustained high import levels will be critical if inventories are to rebuild over the next several months.

Over the last four weeks, refined product imports have averaged nearly 2.8 million barrels per day, a record amount for this time of year, while crude oil imports have averaged 10.0 million barrels per day. And yet, little progress has been made over this time in rebuilding inventory levels. Crude oil inventories have actually dropped by 2.0 million barrels over the last four weeks, while total commercial petroleum inventories have risen by 16.2 million barrels. As of May 23, U.S. commercial petroleum inventories were 122.2 million barrels below last year’s level. Four weeks later, as of June 20, they are 110.8 million barrels below last year’s level, an improvement of 11.4 million barrels, or on average, less than 3 million barrels per week. If inventories continue to gain on last year’s level at this rate, it would take 39 weeks until the year-ago comparison would turn positive!

Of course, most analysts envision a return to normal inventory levels much sooner than March 2004. This is evident from a recent survey of 13 analysts conducted by Bloomberg News, in which the average price of West Texas Intermediate crude oil in the fourth quarter of 2003 is expected to be about $25 per barrel, or significantly less than it has been in recent weeks. Implicit in this analysis is an improving global supply situation, especially as Iraqi oil exports begin to increase on a sustained basis later this year. But if U.S. gasoline demand begins to rise later this summer, assuming the economy improves and the torrential downpours each weekend along the East Coast cease, the U.S. will need to import some of this increased global production, both in the form of crude oil and refined products, in order to continue to rebuild inventory levels and provide a cushion against the possibility of price spikes later this year.

U.S. Retail Gasoline Prices Fall by 2 Cents
The U.S. average retail price for regular gasoline fell last week for the first time in 3 weeks. Prices decreased by 2.2 cents per gallon as of June 23 to reach 149.6 cents per gallon, which is still 11.2 cents per gallon higher than a year ago. The Midwest saw a large price decrease, falling by 6.7 cents to 145.1 cents per gallon, driving the national average price lower. Gasoline demand has been surprisingly weak so far this summer, due in part to decreased vacation driving stemming from persistent, if not record, rainy weather on the East Coast. Although retail gasoline prices were down throughout most of the nation last week, the West Coast increased 1.3 cents to reach an average of 175.2 cents per gallon, making it the region with the highest average price. The region with the lowest price is the Gulf Coast, where prices for regular gasoline averaged 139.6 cents per gallon.

Retail diesel fuel prices decreased for the fourteenth time in 15 weeks, falling 0.9 cent per gallon as of June 23 to a national average of 142.3 cents per gallon, which is still 14.2 cents per gallon higher than a year ago. Retail diesel prices were down throughout the nation last week, with the largest decrease occurring in California, where prices fell on average by 2.5 cents to 162.6 cents per gallon after a large refinery-disruption-driven increase in the previous week. The region with the lowest price is the Gulf Coast, where prices for diesel averaged 136.5 cents per gallon.

Propane Inventories Post Average Weekly Gain
U.S. inventories of propane continued their seasonal build last week, but at a more moderate rate compared with the rate over the past several weeks that was being driven primarily from a near-record level of imports. U.S. inventories of propane posted a weekly gain measuring 2.9 million barrels that positioned U.S. inventories of propane at an estimated 42.6 million barrels as of week ending June 20, 2003, a level that remains below the average range for this time of year. Regional inventories posted mediocre gains of less than 0.1 million barrels in the East Coast and slightly more than 0.1 million barrels in the Midwest, while in the Gulf Coast, the increase was much higher at 2.5 million barrels. Inventories of propylene for non-fuel use gained nearly 0.5 million barrels last week to 2.7 million barrels, accounting for 6.4 percent of total propane/propylene inventories, up from the prior week's 5.6 percent share.

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.