Released on September 6, 2007
(Next Release on September 12, 2007)

Measuring Oil Demand Growth
Last Friday, EIA released monthly data for June, and for the 10th month in a row, total oil demand was lower than suggested by the weekly data for the same period. Gasoline demand was also lower than suggested by the weekly data for the same period for the sixth time in a row. The monthly data provide a less timely estimate, but one based on more complete information. Some analysts have pointed to the recent relationship between weekly and monthly demand data as an indicator that demand growth may not be as strong as markets once thought. However, a user should use caution when analyzing demand growth as there are many different comparisons.

Several different comparisons of current data to year-ago data can be made. In addition to the monthly-based-on-weekly to monthly comparisons described above, analysts can make monthly-to-monthly, weekly-to-weekly, and weekly-to-monthly comparisons. Each comparison provides a different perspective on trends in demand growth.

This can be illustrated using June 2007 data (see table below). When the weekly data covering that month is aggregated to develop a monthly average, gasoline demand is estimated at 9,560 thousand barrels per day. When compared to the June 2006 monthly data, demand grew 120,000 barrels per day, or roughly 1.3 percent. However, the just-released monthly data for June 2007 estimated gasoline demand at 9,510 thousand barrels per day, 50 thousand barrels per day less than the monthly-from-weekly estimate. Compared to the June 2006 monthly data, gasoline demand grew by only 70,000 barrels per day or about 0.7 percent. So, should a user assume that U.S. gasoline demand growth in June 2007 was not as strong as the market originally thought?

Not necessarily. Some analysts, recognizing that the monthly and weekly estimates are developed from different surveys, rely on comparisons of current weekly data to year-ago measures that are based on weekly data. Using this approach, the 9,560 thousand barrels per day monthly-from-weekly estimate of gasoline demand in June 2007 would have been compared to the monthly-from-weekly estimate for June 2006. By this measure, the estimated June-over-June growth in gasoline demand was about 0.6 percent, LESS than the 0.7 percent growth rate estimate based on the recently released monthly data (see table above). Based on this comparison, once could argue that the monthly data just released for June 2007 show slightly stronger gasoline demand growth than the earlier weekly data had indicated.

One of the reasons why EIA and some other organizations are not forecasting a sharp decline in oil pries this winter is the expectation that oil demand growth, particularly in China and the United States, will remain strong enough to keep prices from falling dramatically. Thus, properly measuring oil demand growth is important in understanding the near-term path for oil markets.

Retail Gasoline Prices Gain Almost 5 Cents
The U.S. average retail price for regular gasoline increased 4.7 cents last week to jump to 279.6 cents per gallon as of September 3, 2007, 6.9 cents higher than last year. Retail regular gasoline prices were up throughout all of the major regions last week, with the Midwest soaring 13.3 cents to hit 297.3 cents per gallon, the highest in the country and 37.5 cents per gallon over last year. East Coast prices rose 1.3 cents to 270.9 cents per gallon. Prices for the Gulf Coast were 0.5 cent more, settling at 265.7 cents per gallon, the lowest regional price. The Rocky Mountain region price advanced to 282.1 cents per gallon, up 1.5 cents this week but 12.3 cents per gallon below last year. West Coast prices inched up 0.4 cent to 277.2 cents per gallon. The average price for regular grade in California was unchanged at 279.1 cents per gallon, 21.9 cents per gallon lower than the previous year.

Retail diesel prices strengthened to 289.3 cents per gallon, 3.0 cents higher than last week, but 7.4 cents per gallon lower than this time last year. Prices rose in all regions of the country with the exception of the Rocky Mountain region where the price fell by 0.8 cent to 293.9 cents per gallon. East Coast prices were up 3.3 cents to 286.7 cents per gallon. In the Midwest, prices rose 4.0 cents to 291.0 cents per gallon, while the Gulf Coast increased 2.8 cents to 283.6 cents per gallon. The West Coast price grew by 0.7 cent to 297.2 cents per gallon. California prices fell slightly settling at 298.5 cents per gallon, 19.0 cents per gallon lower than a year ago.

Propane Inventory Build Remains Sluggish
Propane inventories posted a sluggish 0.9-million-barrel stockbuild last week that inched stocks up to an estimated 55.2 million barrels as of August 31, 2007. The overall August stockbuild also remained sluggish with inventories gaining about 3.8 million barrels during the month, far below the most recent 5-year average of nearly 5.1 million barrels. Regional inventories posted modest gains in all the major areas last week, except in the East Coast where inventories reported a slight 0.1-million-barrel decline. Midwest inventories rose by 0.4 million barrels while the Gulf Coast region posted a 0.3-million barrel increase during this same time. The combined Rocky Mountain/West Coast region showed inventories up by 0.3 million barrels. Propylene non-fuel use inventories rose slightly last week by 0.1 million barrels and accounted for a slightly higher 4.9 percent share of total propane/propylene inventories, up from the prior week's 4.8 percent share.

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.