EIA - Monthly Energy Review, July 2009

April, international crude oil prices were influenced by modest signs of recovery in world financial markets and economies. Prices for key streams experienced less volatility over the course of the month, despite brimming inventories and some reports of an increase in output from some Organization of Petroleum Exporting Countries (OPEC) thanks to the focus on economic data trends. Prices took a step down at mid-month following the release of an International Energy Agency (IEA) report in which the organization reduced its oil demand forecast for 2009. U.S. inventory data showing crude oil stocks at long-term highs also pressured prices. Nevertheless, news suggesting some improvement in economic trends in major markets provided enough support to keep prices from experiencing more profound decreases.

Additionally, the absence of significant geopolitical issues also contributed to less volatility in April crude oil price trends. Crude oil and refined product prices were also in a less volatile mode in U.S. markets during April. Also similarly, fundamental factors including inventory levels and demand elicited less reaction while economic news and trends in financial markets appeared to have had a larger influence on product prices.

Despite a significant draw on inventories reported early in the month and the start of the spring planting season, data suggest a discernable decline in demand for distillate products in April compared to last month and one year ago. More specifically, data reflecting consumption of distillate and kerosene products in this month’s publication show a 15.3 percent decline year-on-year and a 4.1 percent decrease from last month.

Besides the overall drop in demand seen in recent months, part of the downturn can be attributed to inclement weather in the Midwest delaying the planting of crops and the end of winter heating season. Lower refinery utilization due to discretionary runs cuts and maintenance activities contributed to crude oil stocks reaching long-term highs (although stocks at Cushing, Oklahoma, the physical delivery point for West Texas Intermediate (WTI) crude oil, dropped during April). While market prices for oil products reacted to more positive economic news, the decrease in activity in many business sectors compared with year-ago levels helps explain the current lower rate of demand for petroleum products. However, with the summer driving season approaching, demand for gasoline is expected to rise and pull prices upwards along with it.

EIA predicts that the average wholesale price for regular gasoline will rise nearly 25 cents in May

while the average retail outlet price will increase about 20 cents. Sales of gasoline account for more than 50 percent of refined petroleum product sales in the United States. Notably, market watchers expect imports of gasoline from other Atlantic Basin markets to drop in the immediate future. A look at monthly average spot market prices provides additional perspective to market price trends during April.

At Cushing, Oklahoma, the price forWTIcrude oil averaged $49.64 per barrel, $1.70 (3.6 percent) higher than March’s average of $47.94 per barrel, but $62.94 (55.9 percent) lower than the April 2008 average of $112.58 per barrel. At New York Harbor, the average spot market price for regular gasoline during April was $1.379 per gallon, a 9.2-cents (7.1 percent) increase from March’s average of $1.288 per gallon.

The average price last year was $1.383 (50.1 percent) higher at $2.762 per gallon. The April spot market price for No. 2 heating oil at New York Harbor averaged $1.357 per gallon, up 8.0 cents (6.3 percent) from last month’s level of $1.277 per gallon. In comparison, the April 2008 average price was $3.226 per gallon, a difference of $1.869 (57.9 percent) from this month’s level. Additional April market and sales activity for crude oil and the principal petroleum products are summarized in the following sections.

Crude Oil - The daily spot price for WTI crude oil at Cushing, Oklahoma moved within a comparatively tight range during April. Opening at $49.64 per barrel, the price moved to the month’s high of $52.61 per barrel on April 2 due to market optimism stemming from the G20 summit in London. Nevertheless, robust stock levels and narrowing demand pressured the price during the coming weeks of the month. Troubling economic news coupled with those fundamental conditions sent the price to its low of $45.82 per barrel on April 20. Underpinned by news regarding the plans for the bank stress test and other economic indicators, the price rebounded moderately after that point. Closing the month at $50.35 per barrel, the price was 71 cents higher than its opening level for April.

• April monthly average crude oil prices show increases from March levels in all sales categories. The average domestic crude oil first purchase price rose $2.76 (6.5 percent), to $45.22 per barrel.

• The average free-on-board (f.o.b.) cost of imported crude oil increased $3.08 (7.0 percent), to $47.36 per barrel. The average landed cost of foreign crude oil rose $3.25 (7.0 percent), to $49.41 per barrel

• The average refiner acquisition cost for domestic crude oil climbed $2.60 (5.8 percent), to $47.52 per barrel. The average cost of imported crude oil increased $3.62 (7.9 percent), to $49.58 per barrel. The composite refiner acquisition cost for crude oil rose $3.21 (7.0 percent), to $48.78 per barrel.

Petroleum Products Motor Gasoline - The daily spot price for regular gasoline at New York Harbor moved along a comparatively steady path during April. After opening at $1.301 per gallon, the price immediately registered the month’s low of $1.277 per gallon on April 1. The price rebounded immediately, driven by supportive economic and financial news that spurred prices in the oil products marketplace higher. At mid-month, expectations of a decrease in gasoline imports underpinned the price as it reached the month’s high of $1.463 per gallon on April 17. Broader economic concerns and an increase in refinery runs muted the price during the following weeks, but a larger than expected draw on gasoline stocks helped lift the price at the end of the month. Closing at $1.389 per gallon, the price was 8.8 cents higher than where it began April.

• Monthly average prices for finished gasoline rose firmly in April. The average price for retail sales of motor gasoline by refiners climbed 9.9 cents to $1.602 per gallon, while the average wholesale price increased 8.5 cents to $1.482 per gallon. Including data reported by a sample of motor gasoline marketers, the national average price at company-operated retail outlets rose 8.6 cents to $1.596 per gallon. The average wholesale price for gasoline increased 8.4 cents to $1.488 per gallon. The average dealer tank wagon (DTW) price climbed 8.5 cents to $1.548 per gallon, while the average rack price rose 8.1 cents to $1.483 per gallon. The average bulk sale price increased 10.4 cents to $1.371 per gallon. Reformulated gasoline prices were 9.5 cents more than conventional gasoline prices at retail and 8.7 cents higher at wholesale.

• Sales of motor gasoline by refiners increased overall during April. Total sales rose 10.8 million gallons per day (3.1 percent) to an average of 356.1 million gallons per day. Retail sales fell 100,000 gallons per day (0.2 percent), while wholesales climbed 10.9 million gallons per day (3.7 percent.) DTW sales accounted for 13.7 percent of wholesales, while rack and bulk sales made up 73.7 percent and 12.6 percent, respectively. No. 2 Distillate As the heating season began to wind down, the April daily spot price for No. 2 heating oil at New York Harbor followed the general equanimity seen in the market as a whole. After opening at $1.336 per gallon, the price moved to the month’s high of $1.426 per gallon on April 3, thanks to the economic optimism that affected the complex as a whole. The price experienced modest changes during the following weeks on a variety of fundamental and economic news. After a larger than expected increase seen in inventory reports, the price dropped to the month’s low of $ 1.298 per gallon on April 28. Closing the month at $1.299 per gallon, the price was 3.7 cents below its opening level for April.

• April average prices for No. 2 distillates rose across the board from March levels. The nationalaverage residential sales price inched up 0.3 cent to $2.211 per gallon, while the average wholesale price climbed 11.7 cents to $1.477 per gallon. The average price for No. 2 diesel fuel at company-operated retail outlets rose 12.1 cents, while the average wholesale price increased 13.6 cents. Ultra low-sulfur diesel fuel prices were 0.4 cent less than low-sulfur diesel fuel prices at retail, but 4.3 cents higher at wholesale.

• Refiner sales of No. 2 distillates increased overall during April. Total sales rose 4.8 million gallons per day (2.9 percent), to 166.3 million gallons per day. Sales of No. 2 fuel oil fell 4.3 million gallons per day (21.2 percent), while sales of No. 2 diesel fuel climbed 9.1 million gallons per day (6.5 percent). Ultra low-sulfur diesel fuel accounted for 84.9 percent of all refiner diesel fuel sales, while total diesel fuel sales madeup90.3 percent of all refiner No. 2 distillate sales. Residual Fuel Oil

• Monthly average residual fuel oil prices increased for the most part during April. Refiner prices for low-sulfur residual fuel oil declined 0.9 cent to $1.174 per gallon at retail, but rose 5.8 cents to $1.077 per gallon at wholesale. Refiner prices for high-sulfur residual fuel oil increased 7.5 cents to $1.027 per gallon at retail, and also by 7.5 cents to 99.2 cents per gallon at wholesale. Including data reported by a sample of residual fuel oil marketers, average prices for low-sulfur residual fuel oil fell 2.0 cents to $1.208 per gallon at retail, but increased 8.8 cents to $1.140 per gallon at wholesale. Prices for high-sulfur residual fuel oil rose 5.5 cents to $1.007 per gallon at retail, and 8.3 cents to $1.004 per gallon at wholesale.

• Refiner sales of residual fuel declined in April. Total sales fell 4.4 million gallons (22.6 percent) to 15.1 million gallons per day. Low-sulfur residual fuel oil sales decreased 2.4 million gallons (36.4 percent), while high-sulfur residual fuel oil sales dropped 2.0 million gallons (15.5 percent). Other Products

• Price trends for the remaining surveyed products were mixed during April. The refiner retail sales price for propane tumbled 28.8 cents per gallon, while the wholesale price declined 8.4 cents per gallon. Data from a sample of propane marketers show the average residential price fell 14.4 cents per gallon, while the average retail price fell 17.0 cents per gallon. The average wholesale price for propane decreased 7.6 cents per gallon. Prices for kerosene-type jet fuel, aviation gasoline, and No. 1 distillate rose firmly at both the retail and wholesale levels. Kerosene prices declined at retail, but increased at wholesale.

• Refiner sales of these products were also mixed during April. Sales of propane and No. 1 distillate decreased at both the retail and wholesale levels, while sales of kerosene-type jet fuel and aviation gasoline did the opposite. Sales of kerosene dropped at retail, but rose at wholesale.

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EIA - Monthly Energy Review, July 2009