Released on December 24, 2003
(Next Release on December 31, 2003)

No Scrooge This Christmas?
Last Christmas (actually the week ending December 27, 2002), crude oil imports fell by 1.5 million barrels per day to average just 7.6 million barrels per day. Of course, this was due to the strike in Venezuela, which dramatically curtailed production beginning in December until it finally affected U.S. crude oil imports the last week of December. But this year, there may be a different story.

After averaging about 9.2 million barrels per day over the previous four-week period, U.S. crude oil imports increased by 375,000 barrels per day last week to average over 9.5 million barrels per day. While still a far cry from the 10+ million barrels per day average as recently as October and early November, should imports remain this high or higher in the coming weeks, it would be a welcome rise from the late November/early December period, at least as far as refiners and consumers of oil products are concerned. Because without an increase in crude oil imports, it will be difficult to increase crude oil inventories and help return total petroleum inventories to more normal levels, thus relieving some upward price pressure.

As we wrote nearly one year ago (see the January 15, 2003 TWIP), if oil imports drop, a domino effect might occur. Should demand increase due to cold weather or some other factor, a decline in crude oil imports will lead to a decline in crude oil inventories. This is in fact what occurred in late November/early December. Once crude oil inventories fall to very low levels, there is little that can be done other than to reduce the amount of crude oil being used in refineries. Over the last two weeks, crude oil inputs to refineries have dropped by a total of 504,000 barrels per day. With less crude oil being run through refineries, less refinery production will ensue and ultimately lead to a decline in product inventories as well. At that point, the market is left with low crude oil and refined product stocks, which is the situation we saw by the end of the last winter, and total U.S. petroleum inventories struggled for most of the year to even get to the low end of the normal range. As of December 19, 2003, U.S. total petroleum inventories remain more than 60 million barrels below the 5-year average for this time of year. Thus, while data for last week indicate a sizeable increase in crude oil imports, it will need to be more than a one-week blip to keep the last domino (declining product inventories) from falling. If it is just a one-week blip, then we may be visited by the ghost of Christmas Past and see increasing price pressure in U.S. oil markets similar to what was experienced last year.

U.S. Retail Average Gasoline Price Increases by 2 Cents
The U.S. average retail price for regular gasoline rose last week by 2.0 cents per gallon as of December 22 to reach 148.5 cents per gallon, which is 8.4 cents per gallon higher than a year ago. Retail regular gasoline prices were mixed last week, with the West Coast seeing a decrease of 1.1 cents per gallon to hit 159.3 cents per gallon. California prices averaged 161.5 cents per gallon after losing 0.9 cent this past week. The Midwest saw the largest price increase in the country, rising by 4.3 cents to hit 145.7 cents per gallon.

Retail diesel fuel prices rose 1.8 cents per gallon as of December 22 to a national average of 150.4 cents per gallon, which is 6.4 cents per gallon higher than a year ago. Retail diesel prices were mixed last week, with New England seeing a price increase of 2.6 cents to reach 164.9 cents per gallon while the West Coast saw a price decrease of 0.4 cent to 163.5 cents per gallon.

Residential Heating Fuel Prices Continue to Rise
Residential heating oil prices showed another increase for the period ending December 22, 2003. The average residential heating oil price gained 3.0 cents from last week to reach 148.9 cents per gallon, an increase of 12.6 cents over this time last year. Wholesale heating oil prices increased 0.7 cent to reach 94.2 cents per gallon, an increase of 4.4 cents compared to the same period last year.

The average residential propane price gained 2.3 cents, increasing to 141.5 cents per gallon. This was an increase of 18.4 cents over the 123.1 cents per gallon average for this same time last year. Wholesale propane prices decreased 0.4 cent per gallon, from 73.7 to 73.3 cents per gallon. This was an increase of 12.2 cents from the December 23, 2002 price of 61.1 cents per gallon.

Propane Inventories Continue Seasonal Decline
U.S. inventories of propane continued their seasonal descent last week with a large stock draw of 4.4 million barrels that positioned inventories at an estimated 55.0 million barrels as of December 19, 2003. The combined stockdraw so far this month has totaled about 9.2 million barrels, a level that remains roughly on target to match the average monthly stockdraw for December. However, the consistent cold weather in many parts of the nation that are dependent on propane for heating and for other uses, pushed inventories to follow a path that now tracks towards the middle of the average range. Regional inventories posted seasonal declines with East Coast and Midwest regions down respectively by 0.5 million barrels and 1.3 million barrels, while in the Gulf Coast, inventories reported the largest weekly decline with a 2.4 million-barrel draw. Propylene non-fuel use inventories drifted slightly higher last week with a 0.1-million-barrel increase that accounted for a 3.4 percent share 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.