Released on October 12, 2006
(Next Release on October 18, 2006)

Closing the Book on 2005
With the release of the 2005 Petroleum Supply Annual (PSA) earlier this week, EIA closed the book on oil data for last year. EIA’s weekly, monthly, and annual oil data are each important to serious energy market analysts for different reasons. The weekly data released every Wednesday (Thursday in a week with a Federal holiday before Wednesday, such as this week) for the week ending the previous Friday are valued for their timeliness. The monthly data published in the Petroleum Supply Monthly (PSM), which lag nearly two months behind the weekly data (e.g., August 2006 data will be released later this month) and are based on survey responses from a larger set of respondents than the weekly report sample surveys, are carefully scrutinized to see if any data are significantly different than the weekly releases indicated. Even though the final annual data are released months after the end of the covered calendar year, serious analysts find these data essential to forming their assessments of oil market trends, since they represent EIA’s best estimates of prior year activity.

One issue oil market analysts are likely to revisit is total product demand (product supplied) growth for 2005, particularly given the apparent depressing effects from U.S. Gulf Coast hurricane activity and related high oil prices. Annual-from-monthly data for the 2005 calendar year, as initially published in the February 2006 PSM (showing data through December 2005) showed that total oil demand in 2005 averaged 20,656 thousand barrels per day, a decline of 0.4 percent from 2004 (as published in the 2004 PSA). Since the last two annual oil demand declines (2001 and 1991) were due, in part, to recessions in the United States, a demand decline in 2005, without a recession, would be noteworthy. However, the final 2005 data, released in the PSA, show that demand actually increased by 0.3 percent. While high oil prices in 2005 clearly had a dampening effect on demand growth, prices weren’t high enough to actually cause oil demand to decline, given solid economic growth.

With retail gasoline prices rising through much of the first 8 months of 2005 and then spiking above $3 per gallon following Hurricane Katrina, there was also a lot of interest in what the final PSA data would show for gasoline demand growth. Monthly data published in the PSM indicated a miniscule growth of 0.2 percent in 2005, or just 20 thousand barrels per day. However, final data in the PSA indicate that gasoline demand grew by 0.6 percent in 2005, down significantly from the typical growth rate of 1.5 to 2.0 percent averaged over the past several years, but within the 0.5 to 1.0 percent growth rate expected by some analysts given last year’s price increases. More to the point, final data for 2005 indicate that U.S. gasoline demand grew at about a 1 percent pace through the first 8 months of 2005, and accelerated during the peak summer period from June through August, despite rising retail prices. The dampening effects of Hurricanes Katrina and Rita over the last 4 months of 2005 apparently cut pre-hurricane growth rates nearly in half, when averaged for the entire year. The only other noteworthy change in demand growth in 2005 resulting from final data involved jet fuel. PSM data had indicated a slight decline in jet fuel demand (down 0.2 percent) between 2004 and 2005, but PSA data indicate that jet fuel demand actually rose 3.0 percent in 2005.

Demand data usually get revised upwards when the annual statistics are released, as EIA is able to more fully identify all supply sources, particularly product imports. Thus, in comparing 2006 data to the higher 2005 data now released through the PSA, it may appear demand growth in 2006 is not as robust as once thought. However, experience suggests that 2006 demand data are also likely to be revised upward when final 2006 data are released next year. Whether this indeed happens, and the degree to which the 2006 demand data will be revised upward, won’t be known until the 2006 PSA is released sometime next year. However, as analysts seek to evaluate current oil market demand growth, they should recognize that calculations based on comparisons of preliminary 2006 data to final 2005 data will likely provide a lower estimate of demand growth in 2006 to date than calculations that are made using the final 2006 data when it becomes available.

Residential Heating Fuel Prices Decrease Slightly
Residential heating oil prices decreased for the period ending October 9, 2006. The average residential heating oil price dropped 0.9 cent last week to reach 238.7 cents per gallon, a decrease of 26.1 cents from this time last year. Wholesale heating oil prices decreased by 2.3 cents to reach 174.5 cents per gallon, a decrease of 34.0 cents compared to the same period last year.

The average residential propane price decreased 0.1 cent, to reach 194.0 cents per gallon. This was an increase of 0.5 cent compared to the 193.5 cents per gallon average for this same time last year. Wholesale propane prices decreased 0.7 cent per gallon, from 101.2 to 100.5 cents per gallon. This was a decrease of 21.0 cents from the October 10, 2005 price of 121.5 cents per gallon.

U.S. Average Retail Gasoline Price Continues Declining
The U.S. average retail price for regular gasoline fell 4.9 cents last week to hit 226.1 cents per gallon as of October 9, which is 58.7 cents lower than a year ago. East Coast prices fell 6.3 cents to 224.1 cents per gallon, while the Midwest saw prices fall 1.6 cents to 215.3 cents per gallon. The Rocky Mountains saw the largest regional price decrease, as prices fell 9.5 cents to 249.1 cents per gallon. West Coast prices were still the highest in the nation after falling 7.7 cents to 256.7 cents per gallon. California prices fell by 8.2 cents to 260.1 cents per gallon, which is 36.3 cents lower than this time last year.

Retail diesel fuel prices fell by 4 cents to reach 250.6 cents per gallon as of October 9, 64.4 cents lower than last year. This is the eighth week in a row that prices have fallen. Prices were down throughout the country, with the Rocky Mountains seeing the largest regional decrease of 9.5 cents to 258.4 cents per gallon. West Coast prices, the highest regional prices in the country, dropped 9.2 cents to hit 269.7 cents per gallon, while California prices lost 8.4 cents to reach 275.1 cents per gallon.

Propane Inventories Post Weekly Rise
U.S. propane inventories continued higher last week with a 0.8-million-barrel gain that moved inventories up to an estimated 70.8 million barrels as of October 6, 2006. However, with the first bout of chilly weather now moving through the upper Midwest States that is expected to sweep through the Mid-Atlantic States later this week, some areas in these regions may start to see the season’s first major stock declines in the coming weeks. Strong imports contributed to most of the regional gains last week, particularly in the East Coast where inventories accounted for the largest gain of 0.6 million barrels. Midwest stockholders added 0.3 million barrels to inventories last week, while Gulf Coast stockholders added 0.1 million barrels to the regions inventories during this same time. The combined Rocky Mountain/West Coast regions reported a weekly loss in inventories of 0.1 million barrels. Propylene non-fuel use inventories gained 0.1 million barrels last week to account for a slightly higher 4.5 percent of total propane/propylene inventories from the prior week’s 4.3 percent share.

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