Noesis: Crude Oil, Gasoline and Diesel Stock and Price Forecast



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February 22, 1999 FOR THE CURRENT INFO ON RIG COUNT CHECK OUT THE BAKER HUGHES SITE
Weekly Forecast Report
Crude Oil and Refineries Inputs to refineries increased from 14.3 to 14.6 million bpd, or 92.8% of operable capacity. However, the 4-week moving average decreased from 14.4 to 14.3 million bpd, which is probably a more realistic picture of the trend. Imports of crude oil decreased from 8.4 to 8.25 million bpd. The combination of decreased imports and increased feed to refineries resulted in a decrease of 1.7 million in crude oil inventories, which ended up at 331.7 million barrels For the next few weeks, continued slack demand in the U.S. will contribute to a slow decline of crude oil prices. However, there is still room to add crude oil to U.S. inventories and the sooner those purchases begin, the sooner prices will stabilize. For a look at the recent history of key crude oil prices, check out the Maguire chart at SMU and the chart at Berry Petroleum Online. Current conditions and data still suggest that the NOESIS long term forecast for crude oil prices remains the same.

Due to increased inputs to the refinery crude stills, slightly more gasoline, jet fuel, and distillate were produced. Although imports of gasoline were increased from 441 to 549 thousand bpd, the total U.S. inventory of gasoline decreased from 228.2 to 226 million barrels. Virtually all of the increase in imports of gasoline occurred in the eastern and Gulf Coast areas, while the gasoline inventory decreases occurred in the Midwest and on the West Coast. The end result is that we have higher inventories of gasoline in PADDs I and III, where we already had too much gasoline, and lower inventories in the West, where demand appears to be on the increase already. Distillate inventories increased from 142.9 to 143.3 million with the bulk of the increase occurring in the midwestern refineries. Imports of distillate increased, which is probably why refiners did not draw down distillate, even with lower prices.

EIA U.S. Refining Data
Inputs and Imports are 4-week Avg
	Input/Output	Million BPD	Imports	Million BPD	Inventory	Million BBL
Week	Feb 5	Feb 12	Feb 5	Feb 12	Feb 5	Feb 12
Crude Oil	14.4	14.3	8.6	8.4	333.4	331.7
Gasoline	7.9	7.8	0.477	0.478	228.2	226.0
Distillate	3.3	3.3	0.318	0.300	142.9	143.3
Resid	0.76	0.74	0.260	0.257	42.0	41.7

W orld crude oil prices reported by EIA as of February 12, 1999: Saudi Arabian Lt (34 API) - $9.68, Nigerian Bonny Light (37 API) - $9.60, Indonesia Minas (34 API) $10.60, UK Brent (38 API) - $10.06, Venezuela Tia Juana Light (31) $9.36, Mexico Maya (22 API) - $6.81, Mexico isthmus (33) $9.29, and Russia Urals (32 API) $8.96.

Posted prices for crude oil as of February 15, 1999 were: Scurlock, West Texas Intermediate (WTI) $9.00; Louisiana Lt. Sweet Onshore $8.00, Oklahoma Sweet $9.00; Refiner posted prices were: WTI (36 API) $11.00, Louisiana Lt. Sweet Onshore $10.25, Kern River (13 API) $7.00; Alaska North Slope 10.31 (28 API) $11.18; Kettleman Hill (34 API) $9.20 and Wilmington (17 API) $7.10.

The low demand for crude oil across the board is manifesting abnormal differentials between crude oils, as expected. Refiners seem to be paying higher prices for their favorite crudes and much lower relative prices for high sulfur, low API crudes. Thus, the price of heavy, high sulfur (sour) crudes is crashing faster than the lighter crudes. Indonesia Minas, on the other hand is still priced above other crudes of similar qualities. Minas is the primary import into California, which imports less than 5% foreign crude oil (refinery feed is about 50% California and 45% Alaska North Slope crude).

Additionally, even though the price of crude oil has been dropping everywhere, especially for heavy, high sulfur crudes, magically, refiner posted prices for California crudes has not changed now for 3 weeks. It appears the oil companies have quietly found a price floor beyond which they are not willing to go, despite world prices.

The question is, how low will world prices have to fall below current California crude oil prices before the one of the major oil companies elects to back out its own crudes for cheaper international crudes?

East Coast Gasoline and Heating Oil

East of the Rockies - Refinery rates were down in PADDs I (East Coast) at 1.54, and up in PADD II (Midwest) at 3.362 and PADD III (Gulf Coast) at 6.916 million bpd. Crude oil inventories increased in PADD II, but decreased in PADDs I and III, for an overall decrease in the combined regions of 1.8 million barrels.

Combined gasoline production in the three PADDs was about the same as last week. The amount of gasoline on hand is currently higher than normal for this time of year. Continued production at the current refinery rates will completely overload the system. Extra gasoline appeared in tanks on the East Coast and the Gulf Coast, while Midwest gasoline stocks decreased 1.8 million to 59.5 million barrels from an all time high of 61.3 million last week.

Overall, refiners actually increased production of distillate by 100 thousand bpd and increased imports of distillate, despite high levels in their tanks and low seasonal demand. Total inventory in PADD I was 65.1 million, down 900 thousand barrels, PADD II was 34.3, up 1.1 million barrels, and PADD III was 29.6 million, up 400 thousand barrels.

Gasoline prices decreased: PAD I - $.90, PAD II - $.89, and $.88 in PAD III.

Diesel prices on February 15 were: PADD I - $.96, PADD II - $.94, and PADD III - $.94

The retail price of heating oil on February 15 was reported to be $.86 and the wholesale price was $.32.

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.

Rocky Mountain Gasoline and Diesel

Rocky Mountain - the price of regular gasoline increased to $.96 per gallon and the price of diesel remained at $.99 per gallon.

Rocky Mountain prices seem to be fairly stable, but may decrease as the price of crude oil decreases over the next few weeks.

West Coast Gasoline and Diesel Forecast

West Coast - Refining rates in the West decreased slightly from 2.375 to 2.366 million bpd but production of gasoline and distillate increased, probably due to high cracking rates (residual oil production was down). Inventories of gasoline have been drawn down to 28.5 million barrels, which is only an indication that refiners are managing the supply to match demand.

On February 15 the average price of (reg-mid-premium) gasoline in PADD V remained at $1.12 per gallon. The price of Regular was at $1.07 per gallon.

The average price of diesel in PADD V leveled out at $1.04 and Californian's are still paying $1.11 per gallon.

FORECAST: There are currently no variables that can be used to forecast the price of products in the West. Prices have been steady for months, but inventories are being drawn down, so it is possible that a tighter supply may result in higher prices this spring.

For a good graph of gasoline and diesel prices since 1997, take a look at the EIA graph.

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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

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