Released on October 5, 2005
(Next Release on October 13, 2005)

A Season To Remember
The recently completed inaugural season of the Washington Nationals (Nats) will provide the team’s fans with bittersweet memories, as the Nats faded from first place in July to end the season with exactly as many wins as losses and out of the playoffs. For oil market analysts, this year’s hurricane season will also be one to remember, as forecasts of an active hurricane season came to fruition, sending oil markets towards uncharted territory. The data for the week ending September 30, released earlier today, provides some hints regarding the likely direction of oil markets over the coming weeks.

Crude oil inputs into refineries averaged just 11.7 million barrels per day last week, the lowest average since the week ending March 13, 1987, and over 4.5 million barrels per day less than the week before Hurricane Katrina began to impact refinery operations (the week ending August 26). While several refineries have begun operating again since last week, data for the week ending October 7, while likely showing an increase in refinery inputs, will still probably see them dramatically lower than normal. With the continued shutdown of a significant amount of refinery capacity, less product is being refined, and the result is that inventories will be drawn down in order to provide as much supply as possible to the product markets.

For the week ending September 30, light petroleum product inventories (gasoline, distillate fuel, and jet fuel) fell a combined 12.6 million barrels. Gasoline inventories fell from the middle of the average range to the bottom end of the average range, while distillate fuel inventories, once comfortably above the average range, are now near the middle of the average range. The drop in gasoline inventories came despite a record level of imports as well as refiners and blenders making as much gasoline as they possibly could. Some refineries that are shut down have been able to bring imported petroleum products, such as gasoline, directly into their refinery docks, instead of crude oil, which they can’t currently refine, in order to help replace some of the lost supply.

However, while gasoline markets have received the bulk of the public’s attention, with pump prices increasing by about 20 cents per gallon in regions most affected by the hurricanes (the Gulf Coast via refinery outages and the Midwest and Lower Atlantic regions via reduced product pipeline flows), diesel markets saw even larger price movements over the past week. The average U.S. retail diesel price rose by nearly 35 cents per gallon between September 26 and October 3, with the Lower Atlantic region diesel price increasing by more than 50 cents per gallon. The average diesel price in September was $2.82 per gallon, an all-time monthly high, even after adjusting for inflation, and October is likely to average even higher, given that the average price on October 3 was over $3.14 per gallon. While gasoline markets have seen increased imports partially offsetting supply lost from the refinery outages, increases in diesel fuel imports are much less, and as a result, diesel inventories declined by about 6 million barrels last week. Whether higher diesel fuel costs will translate into higher prices for products shipped using diesel fuel remains to be seen, as retailers for these other products may not be able to fully pass on their increased cost due to concerns about losing market share.

With an unprecedented decline in crude oil inputs into refineries, and with much of this decline expected to continue through a significant portion of October, if not longer, oil product markets are clearly in uncharted waters and this year’s hurricane season will certainly be one that oil market analysts will remember for years to come.

For the latest information on how oil infrastructure is being impacted in the aftermath of Hurricane Katrina, see EIA’s Daily Report and more detailed reports from the Office of Electricity Delinery & Energy Reliability.

Residential Heating Fuel Price Survey Returns to High Prices
Beginning this week and continuing into mid-March 2006, prices for wholesale and residential heating oil and propane will be included in This Week In Petroleum as well as in the Weekly Petroleum Status Report and on EIA's Heating Oil and Propane Update web page. As of October 3, residential heating oil prices averaged 269.4 cents per gallon, which is 86.6 cents per gallon higher than last year at this time. Meanwhile, wholesale heating oil prices averaged 224.0 cents per gallon, an increase of 79.3 cents over the same period last year.

Residential propane prices averaged 190.5 cents per gallon, which is 33.2 cents higher than one year ago. Wholesale propane prices averaged 124.0 cents per gallon as of October 4. This was an increase of 33.3 cents from same period last year.

U.S. Average Retail Gasoline Price Jumps More Than 12 Cents
The U.S. average retail price for regular gasoline increased by 12.5 cents to 292.8 cents per gallon, the second week in a row that prices have risen. This week’s price is 99.0 cents higher than this time last year. Prices were up throughout the country, with the Lower Atlantic seeing an increase of 20.5 cents to 302.4 cents per gallon. Overall, East Coast prices were the highest regionally, up 10.9 cents to 295.8 cents per gallon. The Gulf Coast and Midwest both saw prices gain more than 18 cents, pushing their averages to 291.0 cents per gallon and 290.0 cents per gallon, respectively. Rocky Mountain prices were the lowest, regionally, in the nation. The West Coast averaged 294.5 cents per gallon after gaining only 1.8 cents; California prices added 2.6 cents to 297.3 cents per gallon.

Retail diesel fuel prices rose 34.6 cents to reach 314.4 cents per gallon. This was the highest price on record and the highest one-week price increase on record. Prices were up throughout the country, with the Lower Atlantic seeing an increase of 50.8 cents per gallon to 328.3 cents per gallon. Regionally, East Coast prices were the highest in the nation, up 39.0 cents to 319.8 cents per gallon. Gulf Coast prices rose 42.9 cents to 318.5 cents per gallon. California prices averaged 326.2 cents per gallon, an increase of 23.1 cents. West Coast prices rose 19.6 cents to 317.4 cents per gallon.

Propane Inventories Continue Seasonal Build
U.S. inventories of propane continued to build last week on strong imports that more than offset the sharp decline in production, with inventories moving up to an estimated 68.6 million barrels as of September 30, 2005. Moreover, even the recent hurricane activity failed to limit the monthly stockbuild that showed inventories edge slightly above the most recent 5-year average during September. Although inventories may continue to build over the next several weeks, the seasonal stockbuild that typically spans the April through September period totaled about 41.4 million barrels this year, a level more than 8 percent (or 3.1 million barrels) higher than the 5-year average for this period. Propane inventories managed to surpass the 5-year average build during each month this year, except during August, with inventories reaching their highest pre-heating season level (September 30) since 2002.

Regionally, inventories posted gains in most regions, with East Coast stocks moving up by 0.3 million barrels, while Gulf Coast inventories increased by 1.4 million barrels. Midwest inventories fell by 0.6 million barrels last week, while inventories in the combined Rocky Mountain/West Coast regions increased by 0.2 million barrels during this same time. Propylene non-fuel use inventories remained flat last week at 4.5 million barrels, accounting for a slightly smaller 6.6 percent share of total propane/propylene inventories, compared with the prior week’s 6.7 percent share.

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