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US refinery operation dropped by 169,000 barrels per day (crude oil inputs) during the week ending December 8, 2006, and fell to 89.1% of operable capacity. Refinery production was also adjusted to higher gasoline production and lower distillate fuel production. Crude oil imports also fell to 9.6 million barrels per day, a drop of 701,000 barrels per day.

Inventories fell across the board: crude oil inventories down 4.3 million barrels to a total 334.5 million barrels, gasoline down 0.1 million barrels, distillate fuels down 0.5 million barrels and total commercial petroleum inventories down by 7.5 million barrels.

Meanwhile useage was up compared to last year for gasoline (1.9%), distillate fuels (3.0%) and all petroleum products (0.7%) and down for jet fuel (6.5%).

This Week in Petroleum notes that the Energy Information Administration's Short Term Energy Outlook indicates that OPEC production actually needs to increase to maintain worldwide inventories at current levels over the next year. With OPEC announcing cuts of 500,000 barrels per day from February 1, 2007, further decreases in inventories are likely and prices below $60/barrel are likely further off.

oil,petroleum,gasoline,gas prices

Summary of Weekly Petroleum Data for the Week Ending December 8, 2006

U.S. crude oil refinery inputs averaged 15.3 million barrels per day during the
week ending December 8, down 169,000 barrels per day from the previous week's
average. Refineries operated at 89.1 percent of their operable capacity last
week. However, gasoline production increased last week compared to the previous
week, averaging nearly 9.3 million barrels per day, while distillate fuel
production declined, averaging over 4.0 million barrels per day.

U.S. crude oil imports averaged 9.6 million barrels per day last week, down
701,000 barrels per day from the previous week. Over the last four weeks, crude
oil imports have averaged over 10.0 million barrels per day, 132,000 barrels
less than averaged over the same four-week period last year. Total motor
gasoline imports (including both finished gasoline and gasoline blending
components) last week averaged 967,000 barrels per day. Distillate fuel imports
averaged 465,000 barrels per day last week.

U.S. commercial crude oil inventories (excluding those in the Strategic
Petroleum Reserve) dropped by 4.3 million barrels compared to the previous week.
However, at 335.4 million barrels, U.S. crude oil inventories remain well above
the upper end of the average range for this time of year. Total motor gasoline
inventories inched lower by 0.1 million barrels last week, and are below the
lower end of the average range. Distillate fuel inventories declined by 0.5
million barrels, and are in the lower half of the average range for this time of
year. A decline in high-sulfur distillate fuel (heating oil) inventories more
than compensated for a slight rise in diesel fuel inventories (a combination of
ultra-low-sulfur and low-sulfur). Total commercial petroleum inventories fell
by 7.5 million barrels last week, and are just above the upper end of the
average range for this time of year.

Total products supplied over the last four-week period has averaged 21.0 million
barrels per day, or 0.7 percent more than averaged over the same period last
year. Over the last four weeks, motor gasoline demand has averaged over 9.3
million barrels per day, or 1.9 percent above the same period last year.
Distillate fuel demand has averaged nearly 4.3 million barrels per day over the
last four weeks, or 3.0 percent above the same period last year. Jet fuel demand
is down 6.5 percent over the last four weeks compared to the same four-week
period last year.

Complete current report with data tables [PDF file in popup window]

This Week in Petroleum

Released on December 13, 2006
(Next Release on December 20, 2006)

Call(ing) on OPEC
As OPEC ministers gather in Nigeria on Thursday, December 14 to discuss whether they should cut production further, many people are voicing their opinions. Recently, both the U.S. Secretary of Energy and the Executive Director of the International Energy Agency (IEA) called on OPEC to refrain from further cuts in production quotas. While the price of oil certainly plays a large part in OPEC’s decision making, the expected “call on OPEC crude oil” is another important factor that the ministers will consider.

The “call on OPEC crude oil” is defined as the difference between the global demand for oil and the total supply of non-OPEC oil plus the non-crude oil supply from OPEC (primarily natural gas liquids). In essence, the “call on OPEC crude oil” is the amount of crude oil OPEC would need to produce to balance supply and demand without causing inventories to change. If OPEC produces more crude oil than the call on OPEC crude oil, petroleum inventories will increase; producing less causes inventories to decline. When looking ahead to 2007, forecasting the expected growth in non-OPEC supplies (this and all further references to non-OPEC supply include OPEC non-crude oil supply) and the growth in global demand is critical in determining the need for OPEC crude oil production.

Under EIA’s latest forecast for 2007 world oil supply and demand, released yesterday in the December 2006 issue of the Short-Term Energy Outlook, the call on OPEC crude oil during 2007 is expected to be close to OPEC producers’ 2006 average production level. Since OPEC members’ production is currently running about 0.5 million barrels per day below the 2006 annual average rate, our forecast suggests the need for increases rather than decreases in OPEC members’ production over the coming year.

EIA projections regarding the call on OPEC reflect our assessment of world oil demand and net supply changes from non-OPEC producers. Projected world oil demand grows by 1.5 million barrels per day in 2007. New supplies from non-OPEC countries, in addition to expected growth in OPEC non-crude oil supplies, should meet most, but not all, of this anticipated demand growth. Non-OPEC supply is expected to rise by 1.3 million barrels per day in 2007, as new projects in the Caspian Region, Africa, and Brazil add more than 0.8 million barrels per day of production. This forecast also includes production from Russia’s Sakhalin I Project and the United Kingdom’s Buzzard field, both of which should begin adding new supply over the next two months, although production from these fields will be limited initially. Key components that may lower growth in non-OPEC supply during 2007 would include weather-related events, steeper rates of production decline at already mature fields, and continuing new project slippage.

There is a wide range of opinion regarding the outlook for both demand and supply. Some forecasters expect demand to increase by about 2 million barrels per day, while non-OPEC supply only increases by a little more than 1 million barrels per day. If you believe this will be the picture for 2007, you would envision the need for a much larger increase in OPEC production to keep inventories from falling precipitously and putting upward pressure on oil prices. Conversely, some other analysts expect non-OPEC supply to increase by nearly 2 million barrels per day, far surpassing expected growth in world oil demand. Under this view of the global oil balance in 2007, OPEC would need to cut production to keep inventories from rising substantially and putting downward pressure on oil prices.

Time will tell which assessment of the call on OPEC crude oil over the coming year is correct. No one, nor any organization, including OPEC, the IEA, nor EIA can know for sure what 2007 will look like for oil markets. However, OPEC members’ own assessment of supply/demand balances over the coming year will likely have an important impact on the near-term oil price path. Any further OPEC production cuts now, based on concerns that non-OPEC supply growth will exceed demand growth next year, could put upward pressure on oil prices in today’s market.

Residential Heating Fuel Prices Stabilize Again
Residential heating oil prices increased minutely for the period ending December 11, 2006. The average residential heating oil price gained 0.2 cent last week to reach 244.4 cents per gallon, which was an increase of 3.0 cents from this time last year. Wholesale heating oil prices turned downward by 9.0 cents to reach 179.0 cents per gallon, an increase of 3.9 cents compared to the same period last year.

The average residential propane price increased 0.4 cent, to reach 197.8 cents per gallon. This was an increase of 2.2 cents compared to the 195.6 cents per gallon average for this same time last year. Wholesale propane prices decreased by 2.4 cents per gallon, from 108.9 to 106.5 cents per gallon. This was a decrease of 8.8 cents from the December 12, 2005 price of 115.3 cents per gallon.

Average Retail Gasoline Price Declines Slightly, While Diesel Increases
The U.S. average retail price for regular gasoline for December 11, 2006 fell 0.4 cent to 229.3 cents per gallon. Prices are 10.8 cents per gallon higher than at this time last year. East Coast prices were up 1.0 cent to 230.3 cents per gallon. In the Midwest, prices fell 3.7 cents to 222.4 cents per gallon. Gulf Coast prices were up 1.6 cents to 219.8 cents per gallon. Rocky Mountain prices were unchanged at 224.8 cents per gallon. The West Coast saw an increase of 1.1 cents to 249.6 cents per gallon, with California prices increasing by 0.8 cent, to 250.4 cents per gallon.

Retail diesel fuel prices continued their rise this week, with average nationwide prices increasing 0.3 cent to 262.1 cents per gallon, 18.5 cents more than at this time last year. Regionally, East Coast prices were unchanged at 261.0 cents per gallon. The Midwest price fell 1.5 cents to 256.3 cents per gallon. The Gulf Coast saw the average price go up 0.3 cent to 254.0 cents per gallon. Rocky Mountain prices rose 1.7 cents to 272.4 cents per gallon. Prices on the West Coast increased 7.1 cents to 293.1 cents per gallon, while prices in California were up 10.3 cents to 296.3 cents per gallon. California prices are 49.8 cents per gallon higher than at this time last year.

Propane Inventories Moderately Lower
The first week of December saw propane inventories move moderately lower by 2.0 million barrels to settle at an estimated 66.8 million barrels as of December 8, 2006, about 1.7 million barrels below the same level this time last year based on weekly data. The weekly stockdraw continues to show the Gulf Coast region accounting for most of the decline with inventories moving lower by 1.3 million barrels. However, despite the strong stockdraw on Gulf Coast inventories, the region’s inventories remain at the upper boundary of the average range for this time of year. Other regions posted mostly seasonal declines last week, with East Coast inventories showing a loss of 0.4 million barrels, while inventories in the Midwest posted a weekly decline of 0.3 million barrels. The combined Rocky Mountain/West Coast regions reported a 0.1-million-barrel drop during this same time. Propylene non-fuel use inventories remained unchanged at 3.5 million barrels last week, but accounted for a slightly higher 5.3 percent of total propane/propylene inventories from 5.0 percent reported during the prior week.

143rd (Extraordinary) Meeting of the OPEC Conference
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No 21/2006
Abuja, Federal Republic of Nigeria, 14 December 2006

The 143rd (Extraordinary) Meeting of the Conference of the Organization of the Petroleum Exporting Countries (OPEC) convened in Abuja, the Federal Republic of Nigeria, on 14 December 2006, under the Chairmanship of its President, HE Dr. Edmund Maduabebe Daukoru, Minister of State for Petroleum Resources of Nigeria and Head of its Delegation, and its Alternate President, HE Mohamed Bin Dhaen Al Hamli, Minister of Energy of the United Arab Emirates and Head of its Delegation.

The Conference welcomed the presence of the Minister of Petroleum of the Republic of Angola, the Minister of Oil and Gas of the Sultanate of Oman, and the Minister of Energy and Mining of the Republic of Sudan, as well as high-level representatives from the Arab Republic of Egypt and Mexico, attending the Meeting as Observers.

The Conference considered the report of the Ministerial Monitoring Sub-Committee, whose Members the Conference again thanked for their untiring efforts on behalf of the Organization, as well as other presentations.

Having reviewed the oil market outlook, including the overall demand/supply expectations for the year 2007, in particular the first and second quarters, as well as the outlook for the oil market in the medium term, the Conference observed that market fundamentals clearly indicate that there is more than ample crude supply, high stock levels and increasing spare capacity. The Conference noted that, although the global economy is forecast to continue to grow, economic growth is expected to slow down in 2007. Moreover, while world oil demand is estimated to increase by 1.3 mb/d in 2007, the Conference observed that this is likely to be more than offset by a projected increase of 1.8 mb/d in non-OPEC supply, its highest rise since 1984.

The Conference also noted, with satisfaction, that the decision it had taken in Doha to reduce production by 1.2 mb/d as of 1 November 2006 had succeeded in stabilizing the market and bringing it into balance, although prices remain volatile, reflecting the continuing supply overhang in the market.

In view of the above, the Conference decided to reduce current OPEC production by 500,000 b/d, with effect from 1 February 2007, in order to balance supply and demand. The Conference further reiterated the Organization’s determination to take all measures deemed necessary to keep market stability through the maintenance of supply and demand in balance, for the benefit of producers and consumers alike. Concurring on the need, more than ever, for extreme vigilance in assessing the market during the coming months, the Conference also confirmed that its next Ordinary Meeting will be held on 15 March 2007, in Vienna, Austria.

In accordance with the provisions of Article 7 of the OPEC Statute, the Conference unanimously admitted the Republic of Angola as the twelfth Full Member of the Organization, with effect from 1 January 2007.

The Conference approved the Budget of the Organization for the year 2007.

The Conference decided to appoint Mr. Abdulla Salem El Badri, from the Socialist Peoples Libyan Arab Jamahiriya, as Secretary General of the Organization for a period of three years, with effect from 1 January 2007.

The Conference agreed that the III Summit of OPEC Heads of State and Government will take place in the Kingdom of Saudi Arabia in 2007.

The Conference paid glowing tribute to the excellent performance of its outgoing President, HE Dr. Edmund Daukoru, Minister of State for Petroleum Resources of Nigeria and Head of its Delegation, expressing particular appreciation of his also shouldering the responsibilities of Secretary General of the Organization during another challenging year, 2006, and praised his successful endeavours in the advancement of the aims of OPEC and its Members. The Conference equally commended Mr. Mohammed S. Barkindo, Nigeria’s National Representative to the Economic Commission Board, for his excellent conduct of the day-to-day affairs of the Secretariat, as Acting for the Secretary General, during the same period.

The Conference expressed its sincere gratitude to His Excellency General Olusegun Obasanjo, Head of State of the Federal Republic of Nigeria, as well as the Government and people of Nigeria, for having hosted the Meeting and for the friendly welcome extended to the Conference and all Delegates. In addition, the Conference recorded its special thanks to HE Dr. Edmund Daukoru, Nigerian Minister of State for Petroleum Resources, and his Staff for their warm hospitality and the excellent arrangements made for the Meeting.

The Conference passed Resolutions that will be published on 14 January 2007, after ratification by Member Countries.