Crude oil stocks declined 1.034 million barrels to 532.343 million barrels in the week ended April 14, according to the EIA. Analysts surveyed Monday by S&P Global Platts were looking for a draw of some 50,000 barrels.
After building 12 of 13 weeks year to date, crude oil inventories have now fallen two consecutive weeks on the back of rising refinery utilization.
With refinery activities running at higher-than-normal levels for this time of year, seasonal draws in crude stocks — which typically begin in May – likely have already started.
Refinery utilization jumped 1.9 percentage points last week to 92.9% of capacity. Analysts expected an increase of 0.7 percentage points. The run rate stood at 89.4% last year for the same reporting period.
Since hitting a trough of 84.3% in mid-February that marked the depth of the winter maintenance period, refinery utilization has risen sharply during the last two months.
U.S. Gulf Coast (USGC) refinery utilization rose 3.8 percentage points last week to 93.4%, helping draw the region’s crude stocks lower. USGC stocks fell 3.004 million barrels to 274.1 million barrels, the biggest draw by region.
Crude runs averaged 16.938 million b/d last week, which was 241,000 b/d more than the week prior and 1.667 million b/d higher than mid-February.
Additional crude demand has helped absorb US crude production, which has climbed by 482,000 b/d this year. Output rose 17,000 b/d last week to 9.252 million b/d, highest level since August 2015, EIA estimates showed.
Growing U.S. crude production has weighed on New York Mercantile Exchange (NYMEX) crude futures, which climbed from a low of $47/b in late March and topped $53/b last week before running into resistance.
In addition, NYMEX crude’s discount to Intercontinental Exchange (ICE) Brent widened sharply. The front-month ICE Brent/West Texas Intermediate (WTI) spread topped $3/b March 27 for the first time since December 2015, but has now closed to around $2/b.
The building of U.S. pipeline infrastructure and lifting of U.S. crude export restrictions in December 2015 should keep the two benchmarks relatively tight.
WTI also flipped to a discount to Dubai crude this year, encouraging U.S. crude exports, especially to Asia. U.S. crude exports averaged a record 1.076 million b/d in February, according to monthly U.S. Census Bureau data.
According to the EIA’s weekly inventory report, exports have since slowed down, averaging 684,000 b/d the last six reporting periods. Exports fell 124,000 b/d last week to 565,000 b/d.
CRUDE IMPORTS STAY BELOW 8 MILLION B/D
WTI’s discount to Dubai and Brent should discourage U.S. crude imports. However, over the first 12 weeks, imports averaged 8.196 million b/d, compared with the five-year average of 7.83 million b/d for the same period.
But the last three reporting periods show imports around 7.85 million b/d. Imports were down 68,000 b/d last week to 7.81 million b/d.
By country of origin, imports from Colombia fell 593,000 b/d to 179,000 b/d and imports from Mexico were down 221,000 b/d.
Imports from Saudi Arabia rebounded 302,000 b/d to 1.185 million b/d. Saudi imports have averaged 1.03 million b/d the last four weeks.
Imports from Canada averaged 3.029 million b/d last week, down 160,000 b/d and 543,000 b/d lower than two weeks ago. The drop was likely driven by a fire that could keep imports subdued for at least several more weeks.
An upgrader fire in Alberta on March 14 was extinguished two days later, but disrupted production at the 350,000 b/d Syncrude facilities and led Suncor to advance the start date of planned maintenance.
DISTILLATES KEEPS DRAWING
Distillates stocks fell 1.955 million barrels last week to 148.266 million barrels, EIA data showed. Analysts were looking for a draw of 1.4 million barrels.
Inventories have fallen 10 straight weeks by a total of 22.5 million barrels, versus the five-year average showing a decline of 7.1 million barrels over the same time period.
Distillates inventories still sit 19 million barrels above the five-year average, but have fallen 11.7 million barrels below the year prior because of the mild winter of 2015-16 that weakened heating fuel demand.
On the U.S. Atlantic Coast (USAC), combined stocks of low- and ultra-low sulfur diesel (ULSD) fell 1.224 million barrels to 47.507 million barrels, a deficit of 1.65 million barrels to last year.
But with USAC combined stocks 18.3 million barrels above the five-year average for this time of year, that cushion has prevented NYMEX ULSD time spreads from flipping into backwardation.
The front-month/second-month spread averaged around an 80 points/gal contango last week, and year-to-date has averaged a 1 cent/gal contango.
In terms of forward demand cover — dividing product inventories by EIA’s product supplied data — the distillate market loosened last week.
Total distillate demand cover rose 3.1 days to 35.5 days last week. A year ago, demand cover stood at 37.4 days.
GASOLINE BUILD RETURNS
Gasoline stocks increased 1.542 million barrels last week to 237.672 million barrels. Analysts expected a draw of 2 million barrels.
Demand cover rose slightly from 25.46 days to 25.80 days last week. A year ago, demand cover equaled 25.4 days.
Inventories had fallen the previous eight weeks by 22.9 million barrels even as production increased with refinery utilization rising.
Implied gasoline demand fell 52,000 b/d last week to 9.223 million b/d. Demand has averaged 9.29 million b/d the last five weeks, versus 9.4 million b/d last year and 8.84 million b/d from 2012-16.
On the Atlantic Coast, home to the New York Harbor-delivered NYMEX reformulated blend stock for oxygenate blending (RBOB) futures contract, gasoline stocks sit 655,000 barrels below the year prior, but 5 million barrels above the five-year average.
That surplus to the five-year average has weighed on NYMEX RBOB time spreads and the crack spread.
The front-month NYMEX RBOB crack spread against WTI averaged $20.23/b last week, compared with $22.10/b a year ago. The crack was trading Wednesday afternoon at $19.20/b.
The May/June spread flipped back into contango last week after having been backwardated since late March. That spread has been in a contango of less than 1 cent/gal since April 11.
* Contango is the industry vernacular for the condition whereby prices for nearby delivery are lower than prices for future-month delivery. Backwardation is the industry vernacular for the condition whereby prices for nearby delivery are higher than prices for future-month delivery.
Source: PlattsPrevious Next