W
orld crude oil prices reported
by EIA as of January 22, 1999: Saudi Arabian Lt (34 API) - $10.33, Nigerian Bonny Light
(37 API) - $11.05, Indonesia Minas (34 API) $10.75, UK Brent (38 API) - $11.20, Mexico Maya (22 API) - $7.44, and
Russia Urals (32 API) $11.20.
Posted prices for crude oil as of February 1, 1999
were: Scurlock, West Texas Intermediate (WTI) $9.75; Louisiana Lt. Sweet Onshore $8.75,
Oklahoma Sweet $9.75; Refiner posted prices were: WTI (36 API) $11.50, Kern River (13 API) $7.00;
Alaska North Slope (28 API) $10.64 (Est);
Kettleman Hill (34 API) $9.20 and Wilmington (17 API) $7.10
East Coast Gasoline and Heating Oil
East of the Rockies - East of the Rockies gasoline stocks are plentiful.
Demand for gasoline decreased about 7%. Production
decreased a total of 309 thousand bpd (MBD) in PADDs I, II and III. Even with the decreased
production, and decreased imports, stocks of gasoline were only drawn down
a total of 500 thousand barrels.
Distillate production was also down in all three PADDs. Inventories were drawn down 3 million
barrels while imports remained very low at 181 MBD. The amount in storage in PADD I is 68.1 million
barrels, which is 13.5 million barrels more than was in inventory in January 1998. Eastern refiners
are likely to find operations constrained by high levels of distillate this spring if they don't
figure out how to move some of this product. High gasoline inventories and moderate levels of
imports will be used to make up the difference. Meanwhile, consumers will continue to
enjoy low prices.
Gasoline and diesel prices decreased in all three regions which is a trend that is likely
to continue through February. EIA reported gasoline prices per gallon for Regular on January 22
were as follows: PAD I - $.92,
PAD II - $.91, and PAD III - 0.89.
Diesel prices on January 22 were:
PADD I - $.97, PADD II - $.94, and PADD III - $.94
FORECAST: Gasoline prices will remain low and may drop further with the price of crude oil
during late February and early March. Heating oil prices will decrease through spring as
refiners try to draw down inventories. Diesel prices should remain stable through spring.
Competition in Eastern Regions could become cut-throat this spring. Refiners are now working
off of crude oil inventories that cost an average of less than $12/bbl. With no high priced
crude oil costs to cover, competitors for market shares could trim prices to levels not seen
since the late 1970's.
Rocky Mountain Gasoline and Diesel
Rocky Mountain - the price of regular gasoline decreased
to $.96 per gallon and the price of diesel remained at a bit less than $.99 per gallon.
Rocky Mountain prices will continue to mirror changes in the price of crude oil.
West Coast Gasoline and Diesel Forecast
West Coast - gasoline production decreased 105 MBD, which is
700 MB for the week. Inventories decreased 700 MB, from 31.2 to 30.5 million
barrels. The ability to collectively control the exact drop in inventory by reduction in
gasoline production demonstrates the remarkable level of control western refiners seem
to have over the supply of gasoline.
Distillate production was reduced by 309 MBD and stocks decreased 400 MB.
On January 22 the average price of (reg-mid-premium)
gasoline in PADD V was still $1.14 per gallon.
The price of Regular in PADD V was $1.09 per gallon. Reformulated gasoline decreased one cent to
$1.12 per gallon.
The average price of diesel in PADD V dropped to $1.05 and Californian's are paying
$1.10 per gallon, which is outrageous.
FORECAST: Prices of crude oil to California refineries have been
below an average $10/bbl for a year now. Although the cost of refining heavier crude oil is
generally higher than the cost of refining light crude oil, this logic only works when the
refiners have high capital overhead and fluctuating energy costs. Any investments refiners made
in new equipment to make reformulated gasoline have been more than recovered within the past couple
of years. In the current market where energy costs have been depressed by 50% for more than a
year, we must assume
the refiners' energy costs have also decreased 50%. Since the cost of energy
(to boil oil) is the primary cost in refining, there is now no reason product prices remain
so high in California. For a brief period during January, it looked like competition might
arise out of the thin ranks of majors (Shell/Texaco, Exxon/Mobil, Chevron, ARCO and Tosco/Unocal) in the
western market. The most recent data dispels that hope.
Many readers write in and ask for more data or specific information. You are encouraged to explore
the NOESIS Index Page and the Links Page. The
links listed have been especially selected to get you to data and information which will supplement
the information you find on the NOESIS site. They are all great sites! For EIA data used in these
forecasts, select the Energy Information Administration link. Once there, select Petroleum. Then
select "Weekly Petroleum Status Report" The TEXT version gives you basic data. Or scroll down
and select pdf, text or html files for tables and graphs. There is a wealth of information on
the EIA site. With the analytical tools you've picked up by reading the NOESIS reports, you should
be able to use most of the data! As always, if you have questions, send email.
contact George Clemen at NOESIS
