Released on October 16, 2003
(Next Release on October 22, 2003)

Curses
With the Boston Red Sox and Chicago Cubs in this year’s baseball playoffs, there has been a lot of talk among baseball fans about curses. Both of these franchises have a long history of not winning the big game, and the Chicago Cubs did little to alter that talk by losing the last three games of their series against the Florida Marlins. Taking a quick glance at last week’s petroleum supply statistics might make one think that the data is cursed as well.

An initial look at the crude oil balance shows that crude oil inventories have been increasing while the four-week trend in crude oil imports has been falling. Also, last week saw a small jump in crude oil imports compared to the previous week, which was partially countered by an increase in crude oil inputs into refineries. Yet crude oil inventories increased by 3.8 million barrels last week (more than 500,000 barrels per day). There also appeared to be oddities related to gasoline and distillate fuel as well. With crude oil inputs to refineries up from the previous week, why were there such large draws in the inventories of these products (3.4 million barrels for gasoline and 1.7 million barrels for distillate fuel)? Was last week’s supply data “cursed”?

Sometimes it is more important to look at the trends rather than just looking at one week’s worth of data. Crude oil inventories have been on an increasing trend lately, up by 9.2 million barrels over the last two weeks and by 13.8 million barrels over the last five weeks (since September 5). This increase has been greater than normal for this period, which has helped crude oil inventories to get back within their normal range, albeit at the lower end (see Figure 3 in the Weekly Petroleum Status Report or the crude oil inventory chart at the bottom left of this web page). How has this happened? It is mostly due to larger than normal crude oil imports for this time of the year. Crude oil imports over the last four weeks are nearly 900,000 barrels per day more than they were for the comparable four-week period last year, and this has been a consistent theme lately. If crude oil imports remain closer to 10 million barrels per day during October and November, there will likely be enough crude oil to supply refineries and keep crude oil inventories stable or even higher than current levels. However, should crude oil imports dip, as some analysts expect, and consistently average closer to 9 million barrels per day, then a decline in crude oil inventories would be expected. Crude oil imports will be a key data point to monitor over the next several weeks in order to get a feel for U.S. crude oil market conditions.

The situation for gasoline is a little more perplexing. While gasoline inventories typically decline during October, this is usually due to declining crude oil refinery inputs leading to declining gasoline production, thus necessitating a slight draw in inventories to supply the demand for gasoline. However, gasoline inventories have fallen by 4.6 million barrels over the last two weeks and crude oil inputs actually increased last week. Plus, inventories were already at the low end of the normal range (and have since dropped below), so it is a little unusual to see gasoline inventories falling at a faster than normal rate. Of course, with gasoline demand over the last four weeks averaging 3.7 percent more than the comparable four-week period last year, an explanation of why gasoline inventories are falling is not too difficult. But why is gasoline demand running so much stronger now? This question is more difficult to answer at this point and will likely be something analysts will try to better understand in the coming weeks.

As for distillate fuel, it may not be too unusual to see a decline in inventories in early October, especially since most of the decline was in low-sulfur distillate fuel (diesel fuel) and not high-sulfur distillate fuel (heating oil). But, of course, the key point to watch in distillate fuel markets will be the weather. A long, sustained bout of cold weather, particularly in the Northeast, could put a strain on heating oil, although for now, distillate fuel inventories are well within the normal range, even after last week’s decline. While there is some concern about heating oil inventories (see the October 8 This Week In Petroleum ) as opposed to total distillate fuel inventories, any pressure on heating oil markets will likely be a result of cold weather rather than something else. For this reason, heating oil consumers, particularly those in the Northeast, hope that this winter will not be “cursed” by extremely cold weather.

U.S. Retail Gasoline Prices Decrease by Half a Cent
The U.S. average retail price for regular gasoline fell last week by 0.5 cent per gallon as of October 13 to reach 156.8 cents per gallon, which is 12.8 cents per gallon higher than a year ago. This is the seventh week in a row that prices have fallen, declining 17.9 cents since August 25. Retail regular gasoline prices were mixed last week, with the Midwest seeing an increase of 2.5 cents per gallon to hit 152.7 cents per gallon and the Gulf Coast increasing by 0.4 cent to reach 143.0 cents per gallon. The West Coast saw a decrease of 4.4 cents per gallon, the largest regional decrease in the nation, to reach 176.4 cents per gallon, which remained the highest regional price in the nation. California prices averaged 180.5 cents per gallon after falling 4.9 cents this past week, and have now fallen a total of 29.6 cents since August 25.

Retail diesel fuel prices increased last week by 3.8 cents per gallon as of October 13 to a national average of 148.3 cents per gallon, which is 2.2 cents per gallon higher than a year ago. Retail diesel prices were up throughout the country last week, with the Midwest seeing the largest price increase of 5.1 cents to reach 148.6 cents per gallon.

Heating Fuel Price Survey
As we moved into the second week of the heating season, prices began to exhibit increases. On October 13, 2003, the average residential heating oil price stood at 137.8 cents per gallon, an increase of 3.4 cents from last week and 11.4 cents higher than this time last year. Propane prices displayed slight increases as well, with the average residential price moving from 128.2 to 130.6 cents per gallon, an increase of 2.4 cents from last week. Wholesale heating oil prices stood at 94.5 cents per gallon, an increase of 8.4 cents from last year, while the average wholesale propane price stood at 72.3 cents, up 19.6 cents from the October 14, 2002 price of 52.7 cents per gallon.

Propane Inventories Post Large Weekly Gain
Following two weeks of modest declines that possibly signaled the end of the build season, U.S. inventories of propane bounced back with an unexpected 1.4-million-barrel gain that was the largest since the week ending August 15, 2003. With inventories at an estimated 65.8 million barrels as of October 10, 2003, the possibility exists that inventories may continue to build into the early weeks of the heating season as they have during prior years. However, an early bout of cold weather or the start of the traditional crop-drying season could derail any potential continuation of the seasonal stockbuild beyond this period. Nevertheless, U.S. inventories of propane are in a position that is solidly within the average range for this time of year. Inventory gains were posted across all the major regions last week but the East Coast and Gulf Coast regions posted the largest increases, totaling 0.3 million barrels and 0.9 million barrels, respectively. East Coast inventory gains, which were buoyed by strong imports, were particularly welcomed since inventories in this region have deteriorated from their seasonal mid-August high of 4.7 million barrels. Pipeline maintenance projects during the summer and early fall partially hindered the stockbuild in this region. Even with last week’s build, East Coast inventories continue to track well below the average range for this time of year. While the smallest weekly gain was recorded in the Midwest region, totaling less than 0.2 million barrels, the region's inventories over the last several weeks have moved closer to the average range. Propylene non-fuel use inventories followed the lead of total propane/propylene inventories with a 0.3-million-barrel gain to 3.1 million barrels, a level that accounted for 4.7 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.