Early EIA '03 Data: US Oil Demand at Record 20 Million B/D

Despite record high crude oil prices for 2003, U.S. oil demand topped 20 million barrels a day for the first time ever in the year, rising by 1.3%, the most since 1999.

Early data released Wednesday by the Energy Information Administration show consumption of gasoline and distillate fuel, comprising home-heating oil and diesel fuel, was the highest for any year.

Imports of crude oil set a volume record of 9.6 million b/d, up 5.2% from a year ago. Refiners processed more crude each day in 2003 than ever before, running at a rate of 15.286 million b/d, up 2.3% from a year earlier.

The EIA data measuring U.S. oil use through Dec. 26, also show company-held crude oil stocks ended the year at 270.7 million barrels, down 27.4 million barrels from the five-year average level. A review of EIA data show the figure would be the lowest end-year crude stocks since 1975.

Total company-held inventories of crude and petroleum products ended the year at 929.1 million barrels, down 19.9 million barrels from a year ago, and 60.2 million barrels below the five-year average.

A review of EIA data show commercial stocks fell by 478,260 b/d during the fourth-quarter, the most biggest drop in fourth-quarter stocks since 1999.

The melange of data from the U.S., which as the world's biggest oil consumer accounts for 25% of global demand, will complicate OPEC's output policy making.

The Organization of Petroleum Exporting Countries has sought to rein-in oil output to avoid a potential counter-seasonal global stockbuild in the fourth-quarter, which it fears would push down prices in the post-winter demand period.

The sizable drop in U.S. inventories in the fourth-quarter may suggest that those fears are unfounded.

The U.S. and the International Energy Agency have criticized OPEC for overtightening inventories by keeping output too low, and thereby inflating prices, which could hinder the world economy.

But OPEC could argue, as it has, that with the U.S. oil demand surging even with prices at record levels, oil prices really aren't too high.

Nymex crude oil futures prices so far this year have averaged $31.04, up 19% from a year ago, and the highest annual average in the 20 years the contract has been trading.

OPEC is expected to informally discuss next week whether it should loosen output restraints as the price of its oil reference basket remains above the $28 top end of its $22-$28 for 20 straight trading days.

The group's price-band guidelines suggest OPEC could consider increasing its output ceiling by 500,000 b/d. But several OPEC ministers, fearing a sharp drop in demand in the second quarter, and a potential price crash, have argued that OPEC shouldn't add more oil to the market now. They argue that high prices are due to speculation and politics, not fundamentals, and say OPEC should delay any consideration of output changes until its Feb. 10 meeting in Algeria.

The weaker level of the U.S. dollar is also said to justify OPEC's hands-off policy, with current $28 oil prices for the basket providing the same buying power as a $25 price of a few years ago.

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