24-06-2016

S&P Global Platts Analysis of U.S. Energy Information Administration (EIA) Data: EIA Data Showed Draw Down in Crude Stocks Failed to Live Up to Market Expectations

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U.S. Energy Information Administration (EIA) data showed a smaller-than-expected draw in crude oil stocks last week, and surprise builds in gasoline and distillate inventories.

U.S. commercial crude oil stocks declined 917,000 barrels to 530.626 million barrels the week ending June 17, EIA said.

It was the fifth straight decline, consistent with the seasonal draws that typically occur as refinery activity increases to meet peak summer driving demand.

But the size of last week’s draw was smaller than the 1.4-million-barrel decline analysts had expected, as well as the 5.2-million-barrel draw reported Tuesday evening by the American Petroleum Institute.

Crude futures flipped into negative territory right after the EIA data was released. In afternoon trading, New York Mercantile Exchange (NYMEX) August crude was down 96 cents at $48.89/b, while Intercontinental Exchange (ICE) August Brent was $1.01 lower at $49.61/b.

The surplus of crude oil stocks relative to a year ago grew to 68 million barrels, up from 63.6 million barrels the week ending June 10. Crude stocks sit 33% above the five-year average for this time of year.

An increase in refinery utilization helped stocks draw, but a jump in imports limited the size of the decline.

Crude runs rose 188,000 b/d to 16.505 million b/d, pushing refinery utilization 1.1 percentage points higher to 91.3% of capacity, the highest level since the end of 2015.

But utilization still lagged the 94% rate from a year ago when refining economics looked more attractive. For example, the NYMEX 3-2-1 crack spread averaged $14.97/b last week, compared with $25.32/b a year ago.

Cracking margins for popular crude grades on the U.S. Atlantic Coast (USAC) have been positive, but remain below the year-ago levels, S&P Global Platts data shows.
USAC cracking margins for Saudi Arab Light averaged $6.31/b last week, versus $9.59/b a year ago, while Nigerian Bonny Light averaged $5.88/b last week, less than half the amount a year ago.Production and exports of Nigerian crude, including Bonny Light, have been affected recently by renewed militancy in the Niger Delta.

Cracking margins for crude popular among USAC refiners — Canadian Hibernia — averaged $4.16/b last week, versus $10.49 a year ago.

USAC IMPORTS JUMP

Atlantic Coast crude imports climbed 222,000 b/d last week to 1.033 million b/d. The 10-week moving average equals 813,000 b/d.

Part of the upswing in USAC crude imports could have come from East Coast Canada, according to S&P Global Platts cFlow ship-tracking software. cFlow shows that six dirty tankers have made or are making the voyage between regions since June 13. This is up from just four the week prior.

Imports from Canada rebounded 342,000 b/d last week to 3.099 million b/d. Most Canadian crude enters the U.S. via the Midwest where imports rose 250,000 b/d to 2.288 million b/d.

By country of origin, Saudi Arabian grades saw the biggest increase, with imports up 550,000 b/d to 1.485 million b/d. Saudi imports have averaged 1.1 million b/d year to date.

Crude stocks at Cushing, Oklahoma — delivery point for the NYMEX crude futures contract — fell 1.28 million barrels to 65.181 million barrels. Cushing inventories have declined four of the last five reporting periods, but were still 8.9 million barrels higher than a year ago and 22.6 million barrels above the five-year average for this time of year.

Domestic crude production fell 39,000 b/d last week to 8.677 million b/d, according to EIA estimates. The last time output averaged under 8.7 million b/d was September 2014.

Market observers are watching to see if U.S. crude production ticks higher with crude prices having roughly doubled since February to around $50/b.

Drilling activity has already been picking up. The U.S. oil rig count has increased the last three weeks to 337 rigs as of June 17, according to Baker Hughes.

GASOLINE, DISTILLATE STOCKS BUILD

U.S. gasoline stocks added 627,000 barrels to stand at 237.631 million barrels, led by a significant build in the Midwest, despite a 1.040-million-barrel draw on the Atlantic Coast, where stocks now stand at 68.624 million barrels.

Analysts surveyed Monday by S&P Global Platts were looking for a draw of 800,000 barrels last week.

Gasoline imports into the Atlantic Coast were virtually flat at 684,000 b/d and have eased since hitting a seven-month high at 875,000 b/d in the week ended April 22.
The gasoline arbitrage from Northwest Europe to the Atlantic Coast has turned less favorable since March and April, according to S&P Global Platts data.

Delivered Eurobob (European reformulated blend stock for oxygenate blending) cargoes on the Atlantic Coast have averaged a $35.27 per metric ton (/mt) discount to front-month NYMEX reformulated blend stock for oxygenate blending (RBOB) futures in June, compared with discounts of $94.68/mt and $46.59/mt in March and April, respectively.

Midwest gasoline stocks rose by 2.120 million barrels to 53.118 million barrels as refiners ramped up their throughput. Midwest refinery utilization rose 0.4 percentage points to 93.6% of operable capacity, a 15-week high.

A boost in conventional blendstock for oxygenate blending (CBOB) inventory accounted for nearly all of the rise in gasoline stocks in the Midwest, EIA data showed. RBOB and conventional gasoline stocks were level with the week ending June 10, the data showed.

Meanwhile, U.S. gasoline supplied — seen as a product for implied demand — reached an all-time high of 9.815 million b/d last week.

Gasoline demand has remained robust over the past year, supported by low prices over the past 1 1/2 years. Gasoline stocks soared at the start of 2016, reaching a peak of 258.693 million barrels in the week ended February 12. U.S. gasoline stocks were largely in line with the five-year average until January 2016 and now stand 10.4% above the five-year average following increased refinery output.

U.S. distillate stocks rose for the third consecutive week but were still relatively steady, adding 151,000 barrels last week to 152.314 million barrels.

Analysts expected distillate stocks to be unchanged last week. Prior to the latest succession of builds, distillate stocks had drawn by 13.866 million barrels over seven consecutive weeks.

Source: S&P Global Platts

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