Curtindo merecidas férias com a Família, divido com os colegas o Relatório da Divisão Petrolífera do EIA - Americana
2006: The Year in Review
This past year saw the near-month price of crude oil on the New York Mercantile Exchange hit an all-time high (unadjusted for inflation) in August, then retreat to significantly lower levels in subsequent months. The U.S. average retail price for regular gasoline remained at or above $3 per gallon for four consecutive weeks during the summer, before declining to an average of $2.26 per gallon over the last quarter of the year . This year also saw OPEC cut its production targets for the first time since April 2004. While many noteworthy events occurred this past year, listed below are excerpts from previous editions of This Week in Petroleum that highlight some of these events.
Changes in Fuel Specifications This past year saw a major reduction in sulfur content of diesel fuel and the elimination of methyl tertiary butyl ether (MTBE) used in reformulated gasoline. Below are excerpts from two editions in 2006 that highlighted these fuel specification changes:
The Year of the Fuel Spec (January 5)- The ultra-low-sulfur diesel (ULSD) program begins in 2006 with the requirement that at least 80 percent of on-highway diesel fuel being supplied must have no more than 15 ppm sulfur content at retail. Refineries are scheduled to comply by June 1. (The sulfur content of non-road, locomotive, and marine diesel fuel will be ratcheted down in subsequent years.)
Notwithstanding the hurricanes last fall, refinery modifications to allow production of ULSD are largely on track. The biggest challenge is expected to be delivery of the product from supply source to retail. ULSD will travel with other petroleum products through pipelines on the way to bulk terminals from which it will be shipped by tanker truck to truck stops and retail stations. However, other petroleum products traveling in the pipeline system with a much higher sulfur content could easily contaminate ULSD -- jet fuel, for example, can have 3000 ppm of sulfur. If ULSD is contaminated, it may not be possible to correct the batch by blending with additional low sulfur product. Contaminated ULSD may have to be returned to a refinery for reprocessing, which can be difficult because petroleum product transportation systems are not designed to return product to refineries. However, even without supply problems, the price of diesel should increase over what it would otherwise be due to the higher cost of producing ULSD.
What About "BOB"? (May 10)- Not to be confused with the 1991 movie starring Bill Murray and Richard Dreyfuss, the “BOB” of most relevance to petroleum markets today is RBOB, an acronym for Reformulated Blendstock for Oxygenate Blending. First introduced in 1994 as an element of the reformulated gasoline (RFG) program, RBOB grew out of suppliers’ inability to ship ethanol, or gasoline containing ethanol, through pipelines. Now that nearly all RFG, which makes up about one-third of U.S. gasoline consumed, contains ethanol, the supply, demand, and prices of RBOB are a key to U.S. gasoline markets.
In recent weeks, a major concern in U.S. gasoline markets has been the changeover from MTBE to ethanol in RFG sold in much of the Northeast and parts of Texas, the last remaining MTBE RFG markets. While issues regarding ethanol, including supply adequacy and the logistics of transportation, storage, and blending, have attracted more attention, the supply of RBOB is also being watched to determine if supplies are adequate. Tight specifications for RBOB, especially Reid Vapor Pressure (RVP) limitations, make it more difficult and costly to produce, and some refineries in the U.S. may find it difficult to produce as much RFG when ethanol is used as they formerly made when MTBE was used. While this doesn’t necessarily mean that RFG supply will be reduced, it does imply that there will be a change in the pattern of supply. The winter-summer transition and the continuing effects of last fall’s hurricanes on refinery operations have further exacerbated the situation.
Weather Was a Key Factor This YearA very warm January 2006 helped to keep oil prices from reaching even higher levels during the first part of 2006. Below are highlights from two editions of This Week In Petroleum that spoke to this issue:
Hello, Winter (February 8)- - As if on cue, with the opening ceremony for the Winter Olympics just two days away, winter weather has returned to many parts of the country after a long absence. Following the warmest weather on record in January in the United States, temperatures have recently returned to normal and below-normal in many regions of the country. But with only a few weeks left in the heart of winter, will the drop in temperature, even if it persists, dramatically affect heating oil prices?
While a severe, lengthy cold snap could have an impact on heating oil prices, there are a number of factors that would tend to limit any upward price movement. First, the record warmth in January enabled total distillate fuel inventories (diesel fuel and heating oil combined) to increase when they typically decline. Between December 30, 2005 and February 3, 2006, total distillate fuel inventories increased by 7.1 million barrels, compared to the most recent 5-year monthly average for January in which they declined by 9.5 million barrels. The increase in inventories seen over the last five weeks is the largest increase in January since 1990! Even heating oil inventories (greater than 500 ppm sulfur distillate fuel) rose by 3.8 million barrels, compared to the 5-year average for January of a decline of 4.0 million barrels. Since 1993, when EIA began collecting data on heating oil inventories, the only other year which saw a similar increase in January was 2001, when inventories increased by 3.7 million barrels.
Winter weather may have returned just in time to help put us in the mood to watch the Winter Olympics, but probably too late to cause any major increase in residential heating oil prices.
In Retrospect (March 29)- - What began as a potential crisis for petroleum heating fuel markets in the aftermath of Hurricanes Katrina and Rita, did not materialize, as these markets essentially weathered the 2005-06 heating season in much better shape than many petroleum market analysts had anticipated. Although heating fuel prices quickly adjusted upward following the devastating effects of the hurricanes, generally mild temperatures prevailed in much of the United States over most of the winter, reducing demand and helping to calm these markets over this period. Distillate fuel inventories, including heating oil and diesel fuel, fell a paltry 3.5 million barrels from the end of September 2005 through March 24, 2006. Comparatively, the 5-year average stockdraw for distillate fuel during the October through March period totals about 17.5 million barrels. The absence of a significant stockdraw reflects the weak level of heating fuel demand this past winter, leaving distillate inventories 16.6 million barrels above the same period last year, and well above the average range for this time of year. EIA’s pre-season outlook had called for 2005-06 heating oil prices to be as much as 30 percent higher in the Northeast compared with the previous year. However, with the mild winter, average heating oil prices, although still high by historical standards, were only about 23 percent above the prior-year average.
Ironically, what appeared to be a potentially dire situation for heating fuels if the United States experienced a cold winter, actually turned out to be quite different, as a result of the milder temperatures.
The Oil Price Drop of 2006 While much of 2006 will be associated with high oil prices, the spot price of West Texas Intermediate (WTI) crude oil did drop from just above $77 per barrel on August 7 to just below $56 per barrel on November 17. The article below was written just as WTI was falling and being sustained below $60 per barrel for the first time since December 2005:
Expectations (October 4)- - This past summer, U.S. crude oil and petroleum product prices rose, in part due to expectations about the coming hurricane season and the possibility of a supply disruption occurring in any number of countries or regions. The devastating impact last year’s hurricanes had on oil infrastructure, along with forecasts of another strong hurricane season this year, led many oil market participants to buy additional contracts early in the year, with the expectation that prices could be much higher should hurricanes do similar damage this year or supply be disrupted overseas. However, when these expectations did not materialize, the sell off of contracts began and prices plummeted. Now, many market participants are judging that the risk of a supply disruption is very low and that oil demand growth is slowing along with the country’s economy.
This past year has certainly been an interesting one for oil market analysts and 2007 appears likely to be another interesting year, especially given various opinions on how the coming year will unfold. Happy New Year to all of the readers of This Week In Petroleum!
Residential Heating Oil Prices Dip While Propane Prices Remain SteadyResidential heating oil prices decreased for the period ending December 25, 2006. The average residential heating oil price decreased 0.7 cent per gallon last week to reach 243.7 cents per gallon, an increase of 0.4 cent from this time last year. Wholesale heating oil prices decreased 8.3 cents to reach 174.8 cents per gallon, a decrease of 2.1 cents compared to the same period last year.
The average residential propane price increased 0.3 cent, arriving at 198.5 cents per gallon. This was a decrease of 2.1 cents compared to the 200.6 cents per gallon average for this same time last year. Wholesale propane prices decreased by 1.4 cents per gallon, from 102.7 to 101.3 cents per gallon. This was a decrease of 16.6 cents from the December 26, 2005 price of 117.9 cents per gallon.
Retail Gasoline Price Continues to Increase; Diesel Down SlightlyThe U.S. average retail price for regular gasoline for December 25, 2006 increased 2.1 cents to 234.1 cents per gallon. Prices are 14.4 cents per gallon higher than at this time last year. East Coast prices were up 3.4 cents to 235.2 cents per gallon. In the Midwest, prices rose 0.2 cent to 227.3 cents per gallon. Gulf Coast prices increased 1.6 cents to 221.3 cents per gallon, while Rocky Mountain prices rose 0.7 cent to 224.9 cents per gallon. Prices for the West Coast were up 3.8 cents to 257.9 cents per gallon, marking the seventh consecutive week of price increases. West Coast prices are 36.3 cents per gallon higher than at this time last year.
Retail diesel fuel prices were lower again this week, falling 1.0 cent to 259.6 cents per gallon. However, prices are still 14.8 cents higher than at this time last year. East Coast prices fell 1.2 cents to 258.7 cents per gallon, while the Midwest price decreased 0.5 cent to 255.0 cents per gallon. The Gulf Coast also saw a decrease of 0.5 cent to 251.4 cents per gallon. Rocky Mountain prices fell 0.3 cent to 271.3 cents per gallon. Prices on the West Coast decreased 3.1 cents to 285.6 cents per gallon.
Propane Stockdraw Maintains Average Trend for MonthU.S. propane inventories continued lower last week while maintaining a course above the 5-year average range for this time of year. Last week’s stockdraw totaled 0.5 million barrels, pushing inventories down to an estimated 63.5 million barrels as of December 22, 2006, a level that continues to track near the upper boundary of the average range. Changes in inventory levels were mixed across the regions last week with East Coast inventories moving higher by 0.1 million barrels, and Midwest inventories rising by 0.3 million barrels. However, Gulf Coast inventories dropped by 0.8 million barrels last week, while inventories in the combined Rocky Mountain/West Coast regions were 0.1 million barrels lower during this same time. Propylene non-fuel use were relatively unchanged, accounting for a 5.6 percent share of total propane/propylene inventories compared with the prior week’s 5.5 percent share.