Released on March 24, 2004
(Next Release on March 31, 2004)

Patience and Perspective
Data released today for the week ending March 19 showed that U.S. commercial crude oil inventories climbed by 7.5 million barrels. While most analysts and traders were expecting an increase in crude oil stocks, no one imagined the increase would be so large. But what does this one data point really tell us about the short-term outlook for crude oil?

First, as EIA has repeatedly pointed out, one week does not make a trend. While data for the week ending March 19 show a large increase in crude oil imports, there was no major increase in crude oil refinery inputs. A lot of these imports found their way into storage terminals and not into refineries, and consequently, inventories of all the major products (gasoline, distillate fuel, jet fuel, and residual fuel) fell. And while the sources of weekly crude oil imports are preliminary and thus not published, it appears that import volumes from Nigeria were unusually high, bringing into question whether these import levels can be sustained, especially if OPEC members implement planned production cuts.

In addition, notwithstanding this week's large increase, crude oil inventories are still below the lower end of the normal range, and are well below the 5-year average. Once refineries come back from maintenance and begin full-bore operations, crude oil inventories are unlikely to see such big increases. Last week's data is another example of the "cycling" that inventories have gone through over the last several years. Whether the inventory deficit is being cycled across regions (e.g. European stocks rising as U.S. stocks are declining) or as in the case of this week's data, being cycled between crude oil and refined products (e.g., crude oil inventories up, while product inventories decline), ultimately, inventories need to be rebuilt across all regions and all types of oil, to help limit the price spikes that have become almost commonplace over the last few years. Thus, while this large crude oil inventory increase is a good sign for oil consumers, patience and perspective are important attributes to have when analyzing current oil markets. Until inventories rise across the board, consumers and producers would be unwise to react too strongly based on just one week's worth of data, particularly with the heart of the U.S. summer driving season still ahead.

U.S. Retail Average Gasoline Gains Nearly 2 Cents
After declining by 1.4 cents per gallon between March 8 and March 15, the U.S. average retail price for regular gasoline increased by 1.9 cents per gallon as of March 22 to hit 174.3 cents per gallon, which is just 0.4 cent per gallon less than the all-time high (unadjusted for inflation) set on August 25, 2003. Retail regular gasoline prices were up throughout most of the country last week, with the Midwest leading the way with a 3.6-cent gain to hit 168.3 cents per gallon. California prices averaged 208.3 cents per gallon after moving down 1.4 cents this past week, but they remained over $2 per gallon for the fifth week in a row. West Coast prices remained over $2 per gallon as well, although prices dropped by 1.1 cents to hit 200.4 cents per gallon. While regular gasoline prices are 5.3 cents per gallon higher than year-ago prices nationwide, in New York state, they are 9.1 cents per gallon higher than last year, perhaps reflecting the additional tightness seen in East Coast gasoline markets.

Retail diesel fuel prices increased by 2.4 cents per gallon as of March 22 to a national average of 164.1 cents per gallon, which is 2.1 cents per gallon lower than a year ago. Retail diesel prices were mostly up last week, with the Rocky Mountain region seeing the largest increase of 3.4 cents to hit 167.0 cents per gallon. Prices decreased on the West Coast and in California, reaching 179.5 cents per gallon and 185.4 cents per gallon, respectively.

Propane Inventories Post Weekly Gain
U.S. inventories of propane continued higher last week with a 0.4-million-barrel stockbuild that moved inventories up to nearly 27.1 million barrels as of March 19, 2004. With inventories up over one million barrels since the beginning of the month, March is almost assured of posting a net gain in inventories by month's end, potentially making it only the third increase in March over the past 10 years. Moreover, the weekly stockbuild may also be a signal that the seasonal build season has finally begun in earnest. The weekly build was spread across all regions last week, with the Midwest showing a robust 0.2-million-barrel gain, with more modest 0.1-million-barrel gains in both the East Coast and Gulf Coast areas during this same period. Propylene non-fuel use inventories remained relatively unchanged at 1.6 million barrels last week, a level that continued to account for 6.1 percent of total propane/propylene inventories.

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.

Weekly retail and wholesale prices for heating oil and propane will restart for the 2004/05 winter season beginning in October 2004.