The national average retail price for regular gasoline has fallen for three consecutive weeks for the first time since December, reading $3.87 per gallon on April 23, seven cents per gallon lower than the 2012 peak of $3.94 per gallon on April 2. While global oil markets remain tight, some easing has occurred in recent weeks. Evidence of this easing can be seen in decreases in prompt prices for crude oil, reduced backwardation in the Brent futures curve, and accompanying builds in U.S. crude oil inventories, particularly in the important Gulf Coast (PADD 3) market.
The retreat in global crude prices came after the Brent spot price reached its year-to-date peak of $128 per barrel on March 13. Since that time, the Brent spot price fell about $10 per barrel to about $118 per barrel on April 20. This decline has been concurrent with a decrease in the spread between the 1st and 3rd month Brent futures contracts. On March 13, the five-day average 1st to 3rd month backwardation was $1.05 per barrel; by April 20, it had narrowed to $0.51. As would be expected when backwardation narrows, we have seen strong inventory builds in the United States since March 16, over two-thirds of which has occurred in the Gulf Coast market. Gulf Coast crude inventories have increased 18.1 million barrels (520,000 barrels per day [bbl/d]) to reach 183.3 million barrels (Figure 1); a typical build over this period is about 4.3 million barrels (120,000 bbl/d).
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Lessening incentive to sell barrels into the prompt market is only part of the story behind rising Gulf Coast inventories. Crude oil imports into the Gulf Coast have also risen significantly over the last month. Imports for the week ending April 20 were 4.79 million bbl/d, 430,000 bbl/d more than the week ending March 16. This increase is likely due largely to an increase in volumes from Saudi Arabia being received on the Gulf Coast. While EIA weekly data does not break out country-level weekly imports by area of entry, U.S.-level data show the four-week average crude imports from Saudi Arabia on April 20 at 1.56 million bbl/d, a 190,000-bbl/d increase compared to the four weeks leading up to March 16. Most of this increase likely went to the Gulf Coast, the destination of almost three quarters of Saudi imports in 2011. Some of that volume may have been destined for Motiva's expanded Port Arthur, TX refinery. As Motiva (a joint venture between Saudi Aramco and Shell) has prepared for the impending startup of its new 325,000-bbl/d expansion, inventory requirements for the refinery have likely contributed to recent builds.