30-09-2016

S&P Global Platts Analysis of U.S. Energy Information Administration (EIA) Data: Crude Oil Stocks Declined for Fourth Straight Week

SPGlobal

U.S. crude oil and distillate stocks fell, while gasoline inventories built in the week that ended September 23, according to Energy Information Administration (EIA) data released Wednesday.

Crude oil stocks declined 1.882 million barrels to 502.716 million barrels. Analysts were looking for a build of 3.2 million barrels last week.

It was the fourth straight weekly decline, which has helped narrow the surplus inventories over levels from 2015.

Crude oil stocks sit 44.8 million barrels above the year-ago level, compared with a year-on-year surplus of 70.4 million barrels in the week that ended August 26.

The biggest driver behind last week’s draw was imports, which fell by 474,000 b/d to 7.835 million b/d. That was closely aligned with the year-to-date average of 7.952 million b/d.

By country of origin, the biggest decline came from Canada, which saw imports fall by 266,000 b/d last week to 3.194 million b/d.

That was down from the previous reporting period when Canadian imports averaged 3.46 million b/d, the highest level so far this year.

Most Canadian barrels enter the U.S. through the Midwest, where imports fell 227,000 b/d to 2.437 million b/d. Fewer imports helped draw Midwest stocks 366,000 barrels lower to 146.639 million barrels.

The biggest draw in crude stocks occurred on the Atlantic Coast, where inventories plunged 3.269 million barrels to 14.239 million barrels.

The only region where inventories rose was the West Coast, which saw a build of 2.446 million barrels to 51.916 million barrels.

A slowdown in U.S. refinery activity helped mitigate last week’s crude draw. Crude oil runs declined 253,000 b/d to 16.334 million b/d, which was still 955,000 b/d above the five-year average for this time of year.

The drop in crude runs pulled refinery utilization 1.9 percentage points lower to 90.1% of capacity. Analysts were looking for a drop of 0.5 percentage points.Despite the bigger-than-expected decline, refinery utilization remained above the level from a year-ago, which equaled 89.8% of capacity.

U.S. crude oil production fell 15,000 b/d last week to 8.497 million b/d, according to EIA estimates.

Output was estimated by EIA to have increased the two previous reporting periods, raising the prospect that more drilling activity was causing an uptick in production.

The number of rigs drilling for oil in the U.S. has increased 13 of the last 14 weeks. The U.S. oil rig count stood at 418 on September 23, according to Baker Hughes.

GASOLINE STOCKS RISE

Total U.S. gasoline stocks rose by 2.027 million barrels to 227.183 million barrels last week. Analysts surveyed Monday were looking for gasoline inventories to be unchanged last week.

Implied demand plummeted by 770,000 b/d to 8.88 million b/d, while imports rose 209,000 b/d to 778,000 b/d, according to the EIA.

After falling by a massive 8.475 million barrels in the week that ended September 16 following the outage of Colonial Pipeline’s gasoline-only Line 1 pipeline, Atlantic Coast gasoline stocks rose last week by 715,000 barrels to 56.215 million barrels.

Colonial shut Line 1 on September 9 after a leak was discovered in Alabama, causing concerns about prompt availability and a price spike in New York Mercantile Exchange (NYMEX) October reformulated blend stock for oxygenate blending (RBOB).

Colonial restarted Line 1 on Wednesday, while the company also moved gasoline flows onto its distillates Line 2, allowing depleting regional stocks to replenish.

The Atlantic Coast gasoline market has tightened considerably in recent weeks, with inventories currently just over 3% over the five year average for the same reporting week, compared to nearly 25% in early August.

On the Gulf Coast, where Colonial lines originate, gasoline stocks rose for the second consecutive week, dropping 1.314 million barrels to 84.995 million barrels.

For the week that ended September 16, Gulf Coast stocks rose by 4.765 million barrels as supply was pushed into storage owing to the Colonial outage.

Total U.S. gasoline stocks now sit roughly 7% above the five-year average for the same reporting week.
Meanwhile, total U.S. distillate stocks fell by 1.915 million barrels to 163.077 million barrels with the heating oil season fast approaching.

Analysts were looking for distillate stocks to have drawn by 700,000 barrels.

Stocks of low- and ultra-low sulfur diesel (ULSD) on the U.S. Atlantic (USAC) fell by 581,000 barrels last week to 59.984 million barrels last week.

Combined USAC stocks were 10.237 million barrels above the level from a year ago. Despite the surplus, the NYMEX ULSD timespread looks stronger than it did at the same time last year.

The front-month/second-month contango Wednesday afternoon was less than 1 cent per gallon (/gal) Wednesday afternoon, compared with around 2.5 cents/gal a year ago.

Source: S&P Global Platts

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