Released on July 28, 2004
(Next Release on August 4, 2004)

A Big Wave or the Beginning of High Tide?
Many Americans vacationing at the beach this week may be watching that first big wave as it crashes on the shore, wondering whether it was just an isolated incident or the beginning of the tide coming in. With crude oil imports last week more than 11.3 million barrels per day shattering the old weekly record by 565,000 barrels per day, many oil market analysts must be wondering whether this is an isolated event or the beginning of a tidal wave of imports that will soon arrive in the United States.

While it is always difficult to answer such questions, there are some clues that might point us in the right direction. If this were the beginning of a “high tide” of imports, one would expect most of the increase to come from Saudi Arabia. When OPEC agreed to increase production quotas beginning on July 1, and then recently agreed to increase another 500,000 barrels per day effective August 1, it was thought that most of any increase in actual production would come from Saudi Arabia, since most other OPEC countries were already producing at maximum, or very near maximum, capacity. Yet, the record amount of crude oil imports last week came mainly as the result of a large increase from Nigeria, as well as relatively high levels of imports from Canada and Mexico. (While EIA’s data on the origins of weekly crude oil imports are preliminary, and thus not published, we can make qualitative statements such as the one above.) While only 16 percent of total U.S. crude oil imports came into PADD I (East Coast) in 2003, 42 percent of crude oil imports from Nigeria arrived there. Crude oil imports into the East Coast were also at record levels last week, lending further support to the notion that higher imports from Nigeria played a key role last week. Imports from Nigeria tend to fluctuate substantially from week to week, and there is no evidence suggesting a sustained surge in Nigeria’s production and export levels.

Any sustained surge in U.S. imports will more likely be the result of a significant increase in shipments from Saudi Arabia, as it is the country that has likely increased its production the most in recent weeks. As the world’s largest crude oil importer, it is likely that the U.S. will receive a share of the increased production from Saudi Arabia, as well as receive additional imports from other suppliers whose export capacity is freed up by the increased flow of Saudi Arabian oil into other markets. Due to transit times for tankers to complete the route from the Persian Gulf to the Gulf Coast of the United States, any increase in oil exports from Saudi Arabia that began on July 1 would likely not begin to arrive in the United States until mid-August. Thus, crude oil imports may begin to reach and sustain very high levels towards the second half of August and into September. While Americans at the shore can refer to tidal charts to differentiate between an occasional swell and the rising tide with a high degree of precision, no such guide is available to oil analysts trying to predict exactly when a sustained rise in U.S. crude oil imports will begin.

Retail Gasoline Prices Decrease 2.3 Cents
The U.S. average retail price for regular gasoline decreased by 2.3 cents per gallon from the previous week to reach 190.5 cents per gallon as of July 26, 38.9 cents higher than this time last year. This is the seventh time prices have decreased in the last nine weeks. Retail regular gasoline prices were down throughout the country last week, with the Midwest seeing the largest decrease of 4.6 cents to hit 184.6 cents per gallon. Prices in California and on the West Coast remained the highest in the nation, with California prices falling by 2.4 cents to 216.2 cents per gallon and West Coast prices falling by 2.2 cents to 209.1 cents per gallon.

Retail diesel fuel prices gained 1.0 cent this week to a national average of 175.4 cents per gallon, which is 31.6 cents per gallon higher than a year ago. Retail diesel prices were mixed last week, with the West Coast seeing a decrease of 0.2 cent to hit 203.1 cents per gallon. California prices gained 1.1 cents to 210.7 cents per gallon.

Weekly Propane Build Remains Strong
Relatively strong imports again contributed to lift U.S. inventories of propane higher last week with a 1.8-million-barrel gain that positioned inventories at an estimated 48.0 million barrels as of July 23, 2004. With reports of near record feedstock demand for propane and other natural gas liquids by the petrochemical industry, the recent surge in imports, particularly in the Gulf Coast region, is more than countering this trend as the region’s inventories slowly begin to rebuild from levels that have been below normal for most of the year. Gulf Coast inventories gained 1.4 million barrels last week, accounting for more than three-fourths of the weekly stockbuild. During this same time, Midwest inventories rose by a relatively modest 0.2 million barrels, while in the East Coast, inventories posted a 0.1-million-barrel loss. The combined Mountain/West region continued to show strong inventory growth last week with a 0.2-million-barrel gain. Propylene non-fuel use inventories remained unchanged for the fourth consecutive week at 2.5 million barrels, accounting for a smaller 5.2 percent share of total propane/propylene inventories, compared with last week's 5.4 percent share.

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