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Energy markets end 2002 on bullish note

By HIL ANDERSON, UPI Chief Energy Correspondent   |   Jan. 15, 2003 at 5:00 PM   |   Comments

LOS ANGELES, Jan. 15 (UPI) -- Prices for crude oil and natural gas in the United States rose as much as 80 percent in 2002 as a "robust" growth in demand for gasoline combined with a tendency among refiners to keep their inventories of petroleum products well under the levels seen in the previous year.

The American Petroleum Institute said in its annual review of the energy market in the United States that the economy's gradual rebound after the Sept. 11, 2001, terrorist attacks pushed demand for gasoline up by nearly 3 percent and added more than 34 cents to the average retail price of a gallon of gasoline.

"Demand for all petroleum increased only slightly -- 0.1 percent for the year as demand for distillate, jet fuel and residual fuel declined," said API analyst John Felmy. "Gasoline demand was robust, increasing by 2.7 percent."

The API's statistics are among the most closely watched reports in the energy industry since they provide detailed snapshots for traders of just how much oil is going through the U.S. refinery system who use them to formulate their pricing strategies.

The industry association found a fairly substantial degree of volatility in price and supply, however the bottom line for 2002 was substantially higher prices by the time 2003 rolled around.

Felmy said 2002 began basically with OPEC and other crude exporters producing higher amounts of crude at a time when the U.S. economy was still shaking off the post-Sept. 11 slump.

"This situation changed in the spring as producers cut quotas and the economy improved," Felmy told a news conference in Washington Wednesday. "The result was that crude oil prices increased from $18 to $28 per barrel, followed by gasoline prices rising from $1.12 to $1.42 per gallon."

The API report also found that diesel fuel demand was down 2.2 percent in 2002 due largely to a mild winter on the East Coast where diesel is used as heating oil. Jet fuel demand was down 2.5 percent, the second consecutive year demand had fallen, as air travel remained depressed.

While demand for jet fuel, diesel and residual oils actually slipped over the course of the year, gasoline demand and lower inventories in the United States -- combined with unrest in the Middle East and Venezuela -- catapulted the price of benchmark West Texas Intermediate crude to nearly $33 per barrel by the end of the year, 80 percent over the levels seen at the start of last year.

February WTI crude gained 83 cents on the New York Mercantile Exchange Wednesday and closed at 33.20 per barrel.

In addition, a colder winter this year contributed to an 80-percent surge in natural gas prices, the API concluded. The February NYMEX gas contract closed at $5.43 per million BTU Wednesday, up a substantial 32 cents.

Felmy said that the United States would still be able to meet its crude oil needs in the event of a war in the Middle East or continued labor strife in Venezuela, however the U.S. Energy Information Administration cautioned Wednesday that crude imports over the past four weeks were off by about 200,000 barrels per day compared to the previous year.

"With U.S. oil production relatively flat and unable to ... make up for the lost Venezuelan imports, less supply into the U.S. crude oil market means either that less crude oil gets processed through refineries, crude oil inventories are drawn down to replace the lost supply, or a combination of both," the EIA predicted.

The agency noted that refinery production had slumped after the turmoil in Venezuela choked off imports of both crude and refined fuels into the Gulf Coast. As a result, gasoline prices have ticked higher. The average price for a gallon of regular gasoline last week was $1.454, up 1 cent over the previous week and fifth consecutive weekly increase, the EIA said.

"This price is 34.3 cents per gallon higher than last year," the EIA said. "Prices throughout most of the country were up, with the largest increase occurring in the Midwest, where prices rose 2.3 cents to end at 144.2 cents per gallon."

Topics: John Felmy
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