31-08-2016

S&P Global Platts Preview of U.S. EIA Data: Likely to Show Gasoline Stocks Fell 1.1 Million Barrels

SPGlobal

U.S. Gulf Coast refinery outages combined with stepped-up demand in preparation for the U.S. Labor Day holiday may have helped pull gasoline barrels from storage last week, according to a preview analysis of the U.S. Energy Information Administration (EIA) by S&P Global Platts.

Survey of Analysts Results:

Gasoline stocks expected to show a drawdown of 1.1 million barrels
Distillate stocks expected to be unchanged
Crude oil stocks expected to show a build of 600,000 barrels
Refinery utilization expected to decrease 0.4 percentage points

S&P Global Platts Analysis: (the below may be quoted in part or full, with attribution to S&P Global Platts Oil Futures Editor Geoffrey Craig or an S&P Global Platts analysis)

Severe flooding on the Gulf Coast has caused major disruptions at several refineries, cutting gasoline production by 247,000 barrels per day (b/d) to 2.05 million b/d the week ended August 19, the lowest since early June.

A string of units remained down last week, although there have been some signs of recovery.

ExxonMobil’s plants in Baton Rouge, Louisiana, and Baytown, Texas, still face outages, and Marathon Petroleum experienced issues with an ultracracker at its Galveston Bay, Texas, refinery. Additionally, Motiva had flaring at its facility in Norco, Louisiana.

At one point last week, Gulf Coast conventional gasoline was assessed at New York Mercantile Exchange (NYMEX) October reformulated blend stock for oxygenate blending (RBOB) plus 15 cents per gallon (/gal), or $1.5737/gal, its highest outright value since June 1.

LyondellBasell, however, has restarted a fluid catalytic cracker at its Houston refinery, which may help offset the outages.

Analysts surveyed Monday by S&P Global Platts expect the EIA data to show a gasoline inventories decline of 1.1 million barrels the reporting week ended August 26.

A drawdown in gasoline stocks would help inventories align more closely with historical levels, but any sense of bullishness could be neutralized by falling crude demand stemming from the same refinery outages.

Analysts surveyed expect refinery utilization to have fallen 0.4 percentage points to 92.1% of capacity, which correlates to their expectations of a 600,000-barrel build in crude oil stocks.

Analysts are looking for distillate stocks to be unchanged for the latest reporting week, despite the five-year average of U.S. EIA data, which shows that inventories typically rise by approximately 500,000 barrels during this reporting period.

The U.S. Gulf Coast (USGC) could face another round of punishing weather, with a storm called Tropical Depression Nine forecasted to make landfall later this week. There is risk of another tropical storm hitting the North Carolina coast early this week, which could affect gasoline demand.

U.S. Atlantic Coast (USAC) gasoline stocks have declined the last four reporting periods, helping to erase part of the large inventories surplus that has accumulated in the region.

Despite the recent streak of drawdowns, USAC gasoline stocks total 69.1 million barrels, a 23% surplus to the five-year average for this period of the year.

One factor propelling USAC gasoline stocks is imports, which have exceeded year-ago levels for 15 of the last 20 weeks. However, imports surge could be nearing an end, given the number of tankers spotted making the journey from Europe to the Atlantic Coast has declined, in large part due to unfavorable arbitrage conditions, according to sources and Platts trade flow software cFlow.

According to an S&P Global Platts analysis last week, some four tankers carrying 1.5 million barrels of gasoline were expected to make the journey across the Atlantic in the pending week, as well as a pair of tankers with 675,000-b/d of clean cargoes. This was down from earlier this summer when 4.6 million barrels of gasoline would travel from Europe to the Atlantic Coast on a weekly basis.

LABOR DAY

Factors that may tighten the gasoline market include the upcoming U.S. Labor Day holiday September 5 and the end-of-summer driving season, followed by the autumn refinery maintenance period.

Because the turnaround season also means less crude demand, the question facing the market will be whether imports can moderate enough to prevent large builds.

Among factors muddying the outlook are imports and strong coking margins. Crude oil imports have been trending higher, averaging 8.5 million b/d during the last four reporting periods. This compares to a year-to-date average of 7.9 million b/d. Analysts say imports are being driven in part by the deteriorating economics of floating storage because of a narrowing contango* in Intercontinental Exchange (ICE) Brent crude. A wide contango that had led traders to store barrels at sea is shrinking and making the storage trade less attractive.

For example, the difference between ICE Brent’s prompt-month and sixth-month contract averaged minus $1.89 per barrel (/b) last week, versus $2.52/b in July. At the same time, a similar NYMEX West Texas Intermediate (WTI) crude oil price spread has largely held value, trading around $3.20/b Monday.

Strong coking margins for imported grades could lure imports to the USGC, as well. Margins for Mexican Maya averaged $16.45/b last week, which is nearly double that for West Texas Sour. Benchmark Mars coking margins, by comparison, averaged $13.77/b. S&P Global Platts margin data reflects the difference between a crude’s netback and its spot price. Netbacks are based on crude yields, which are calculated by applying Platts product price assessments to yield formulas designed by Turner, Mason & Company.

Source: Platts

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