Gasoline storage levels are down 3.2% from last year, but remain historically high. Propane supplies are almost 15% above last year and way above average. Distillates (heating oil and diesel) are 12% above last year and way above average. And today’s EIA weekly natural gas report shows this fuel also remains above average, though it is only .8% above.

The cold snap finishing up on the East Coast today will probably put a little more pressure on heating fuels to move toward average levels in next week’s report. But then some warmer weather may help them stay high in the following weeks.

There were two interesting tidbits in the latest oil report. Crude oil production was higher than last year for the first time this year. This doesn’t mean that the EIA will be right about the huge production gains they predict, but increases the chances that US production will actually increase instead of fall on lower oil prices.

And the second interesting occurrence was the increase in gasoline consumption last week. Even though it was only a 1.1% uptick, it was the first time I’ve seen higher gasoline demand than the previous year in many months. We’ll see if it was an anomaly or a sign that sub-$2 gasoline drives demand higher even when we are in a recession.

Bottom line: Production may become an issue down the road on these low fuel prices. But for now, lower demand continues to win the battle and keeps inventories of both petroleum and natural gas above average. Renewable energy companies will have to continue to lower prices in the near-term to compete at the resulting low oil and gas prices.

I’ll be in touch how this develops in the weeks to come…