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Oil inventories were up strongly last week with demand still very weak, down 6.6% from the same period last year. Inventories rose for total petroleum, gasoline and crude oil and declined by 100,000 barrels for propane/propylene and 200,000 barrels for distillate fuels. For those heating with propane a bad winter cold snap could mean much higher prices as inventories are below average for the season. With refinery activity up, gasoline production up and jet fuel demand still more than 17% below year ago levels, propane is the only major petroleum category with real short term potential for a sustained price spike. Distillate fuel demand is below last year levels, but this category bears watching as the inventory levels approach the lower end of the average range and demand is down the least of the reported products.

US Petroleum Supplies and Refining At a Glance

• Total Petroleum Inventories: Up 9.7 million barrels
• Crude Oil Inventories: Up 7.3 million barrels
• Gasoline Inventories: Up 1.9 million barrels
• Distillate Fuels Inventories: Down 200,000 barrels
• Propane/propylene inventories: Down 100,000 barrels
• Refinery Crude Inputs: 14.8 million barrels/day
• Change: Up 280,0000 barrels/day
• Refinery Activity: 86.2%

US Petroleum Demand At a Glance
Compared to Same 4-Week Period Last Year

• Total Products Supplied: Down 6.6%
• Gasoline: Down 2.8%
• Distillate Fuel: Down 2.2%
• Jet Fuel: Down 17.7%

The large increase in ethanol production due to a variety of government mandates has been widely criticized and This Week in Petroleum looks at one of the unintended consequences of increased production: ethanol prices dropped relative to gasoline because of an oversupply of ethanol:

A major reason is that the ethanol industry invested in a significant amount of new production capacity in response to the boom of late 2005 and 2006, but infrastructure to deliver and blend the ethanol into gasoline has not expanded as rapidly, creating supply surplus relative to demand.

This Week in Petroleum and Oil Report 11262008 [PDF]

Full current report with data tables [PDF]