With U.S. gasoline oversupply showing few if any signs of balancing before the end of the summer, expectations that stocks actually fell last week could help keep the oil complex buoyed in the mid-$40/b range, according to a Monday preview of the U.S. Energy Information Administration (EIA) data by S&P Global Platts.
Survey of Analysts Results:
-Gasoline stocks expected to show drawdown of 700,000 barrels
-Crude oil stocks expected to decrease 2.6 million barrels
-Refinery utilization expected to increase 0.4 percentage points
-Distillate stocks expected to rise 400,000 barrels
An S&P Global Platts Analysis:
Analysts surveyed Monday by S&P Global Platts expect gasoline stocks fell 700,000 barrels last week, compared with an average build of 1.19 million barrels from 2011-15 for the same reporting period.
A draw of this size is unlikely to reduce the surplus facing U.S. gasoline stocks, but it could help counter the disappointment market bulls have felt this summer from the inability of summer driving to make a larger dent in total inventories.
At 241 million barrels, U.S. gasoline stocks are still more than 12% above the five-year average of U.S. Energy Information Administration (EIA) data, but certainly within what has become the normal range since late March.
This glut has weighed on the oil complex, and has been seen as partly responsible for the recent downward shift in futures prices. On Monday, the four major oil futures contracts — NYMEX crude, ICE Brent, NYMEX RBOB and NYMEX ultra-low sulfur diesel (ULSD) — traded at multi-month lows for prompt delivery.
The refusal for gasoline inventories to budge lower has stood in sharp contrast to the EIA’s demand estimates, which reached a record-high 9.815 million b/d the week ended June 17.
But other proxies for U.S. gasoline consumption have painted a less sanguine picture, a possible explanation for why inventories have been so resilient.For example, U.S. government data shows the number of miles driven by U.S. motorists has slowed recently on a year-on-year basis. Overall vehicle miles driven in May equaled 279.4 billion, up 2% from a year earlier, according to Federal Highway Administration data released last week. That was down from April, which showed 2.5% year-on-year growth.
USAC GASOLINE IMPORTS
Another reason for solid gasoline inventories has been imports, which paradoxically have been running high. U.S. Atlantic Coast (USAC) imports averaged 746,500 b/d over the last four weeks, which was 5% more than the same period a year earlier.
Northwest Europe, which supplies the bulk of these barrels, is dealing with a glut of its own. Stocks in the Amsterdam-Rotterdam-Antwerp region sit 73.1% above the five-year average at 11.7 million barrels, according to BNP Paribas.
Cargoes continue to make the journey east despite rising freight rates. S&P Global Platts trade-tracking software cFlow Thursday showed nine tankers carrying almost 3 million barrels of gasoline that at the time were expected to reach the Atlantic Coast in the following nine days.
ULSD CRACK ABOVE RBOB
Amid plentiful gasoline supplies, the RBOB crack has been dwindling. It fell last week to $10.50/b against ICE Brent, which was a year-to-date low and down from over $20/b in late May.
Eyeing a better ULSD crack spread, refiners could have decided to switch yields in favor of maximizing distillates over gasoline.
The ULSD crack spread has traded at a premium to the RBOB crack for almost all of July. On Monday afternoon, the ULSD crack was 75 cents above the RBOB crack at $12.02/b.
This could help support refinery run rates, which analysts expect rose 0.4 percentage points last week to 93.6% of operable capacity.
If confirmed, that would still lag the year-ago level for refinery utilization, which equaled 95.1% of capacity.
Analysts also expect crude stocks fell for the tenth week in a row, falling 2.6 million barrels.
Even though crude stocks have been drawing, they were still 56 million barrels above year ago levels the week ended July 15.
If refinery runs stay high until the onset of the autumn turnaround season, that would support crude demand, but provide no relief on the refined product side of the ledger.
U.S. distillate stocks, like gasoline, are ample. At nearly 153 million barrels, U.S. distillate stocks are nearly 15% above the five-year average for EIA data. Unlike gasoline, however, this surplus has been winnowed down from almost 28% in early April.
Also, analysts are looking for distillate stocks to have built 400,000 barrels last week. But if confirmed, this could be considered more bullish than bearish, as it would fall far short of the 1.6 million-barrel increase seen on average from 2011-15.
Distillate exports, which provide an outlet for supplies, could find it difficult finding a home in Europe. ARA distillate stocks are above the level from last year and the five-year average, according to BNP Paribas.
Still, some 370,000 metric tons (mt) of distillates have loaded from the U.S. Gulf Coast for discharge in Europe in August, cFlow showed Monday. That compares with 1.42 million mt in July, which was down from previous months.
Source: S&P Global PlattsPrevious Next