23-06-2017

S&P Global Platts Analysis Of U.S. Energy Information Administration (EIA) Data

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Data released by the U.S. Energy Information Administration (EIA) Wednesday showed crude oil and gasoline stocks falling for the latest reporting week ended June 16, according to the government data and a commentary by Jack Laursen, oil editor, S&P Global Platts. However, the EIA report failed to counteract pervasive bearishness in recent weeks that has prompted crude oil futures to tumble by 17% since May 23.

  • Crude stocks fell 2.451 million barrels to 509.095 million barrels
  • Gasoline stocks fell 578,000 barrels to 241.866 million barrels
  • Distillate stocks rose 1.079 million barrels to 152.495 million barrels
  • Refinery utilization dropped 0.4 percentage points to 94% of operable capacity

New York Mercantile Exchange (NYMEX) August light sweet crude oil fell 98 cents to settle at $42.53 per barrel (/b), while Intercontinental Exchange (ICE) Brent settled $1.20 lower at $44.82/b. Refined products rounded out a day of losses for the oil complex, with NYMEX July reformulated blend stock for oxygenate blending (RBOB) futures shedding 1.35 cents to settle at $1.4105/gal and ultra-low sulfur diesel (ULSD) falling 3.01 cents to settle at $1.3648/gal.

“The [EIA] report picked our head up with the drop in crude inventories and the rise in gasoline demand, but the market continues to show concerns that OPEC cuts aren’t enough to curtail excess supply,” Gene McGillian, senior analyst at Tradition Energy said.

U.S. crude oil stocks fell by 2.451 million barrels to 509.095 million barrels, while gasoline stocks dropped 578,000 barrels to 241.866 million barrels.

Analysts surveyed by S&P Global Platts Monday expected crude stocks to show a drawdown of 2 million barrels against a five-year average decline of 180,000 barrels for the same week. The analysts were looking for gasoline inventories to have fallen 750,000 barrels, compared with an average build of roughly 630,000 barrels in the same reporting period between 2012 and 2016.

Crude oil futures held steady in the hours after the EIA report was released, but started sliding again in midday trading as the market returned its focused to rising production out of the U.S., Nigeria and Libya, seen curtailing the effects of the recently extended coordinated OPEC/non-OPEC output cuts.

Many analysts viewed the EIA data as supportive for the oil complex, with total petroleum supplied — an indicator of total demand — rising 1.553 million b/d to 21.067 million b/d, the highest since the week ended December 16, 2016.

“Overall, a bullish report as total petroleum inventories were lower and fell back below last year and dramatically reduced the surplus to the five-year average,” Kyle Cooper of IAF Advisors said.

While there have been jitters in recent weeks related to the state of U.S. gasoline demand, gasoline product supplied jumped 547,000 barrels per day (b/d) to 9.816 million b/d. On a four-week average, product supplied was up 28,000 b/d at 9.556 million b/d, down 159,000 b/d from a year ago but still the second highest on record for the same reporting week.

Crude inventories fell despite a reduction in refinery throughput, which fell 104,000 b/d on the week to 17.152 million b/d, taking the refinery utilization rate down 0.4 percentage points to 94% of operable capacity. Refinery throughput is up 289,000 b/d from the same week a year ago.

Refinery throughput has hit record levels in recent weeks, leading to gasoline inventory pressure. In the week ended May 26, refinery throughput hit a record 17.510 million b/d.

The crude inventory drawdown also occurred despite a rise in net imports, with U.S. crude exports falling 205,000 b/d at 517,000 b/d, the lowest since the week ended December 9. Imports were down 149,000 at 7.876 million b/d.

As crude trade flows declined trade in gasoline rose, with both imports and exports the highest in six reporting weeks. Gasoline exports rose 132,000 b/d to 657,000 b/d and imports were up 335,000 b/d at 909,000 b/d.

While the reduction in U.S. crude and gasoline inventories may have been perceived as supportive for the oil market, a build in distillate in inventories weighed on NYMEX ULSD, which fell more sharply than crude futures and RBOB.

Distillates stocks rose 1.079 million barrels to 152.495 million barrels, as exports fell 97,000 b/d at 1.026 million b/d.

Distillates product supplied was up 113,000 b/d at 4.158 million b/d, but is moving lower on a four-week average, edging down 51,000 b/d to 3.933 million b/d.

Ultimately, rising U.S. production, coupled with a stubborn Atlantic Basin crude glut amid steadier supply out of Nigeria and Libya is weighing on prices.

U.S. production rose 20,000 b/d to a 22-month high of 9.350 million b/d.

Iran oil minister Bijan Zanganeh said Wednesday many OPEC members were taken aback by the level of U.S. production.

“The U.S. oil production increase was unpredictable and this increase is more than what OPEC members had foreseen,” Zanganeh was quoted as saying by state broadcaster IRIB news agency

Looking at the glut in Atlantic Basin supply, Libya’s state-owned National Oil Corp. said Monday that production at its key Sharara oil field has reached 270,000 b/d after it was restarted on June 8, the same output level as before it was shut.

Additionally, exports from Nigeria are set to jump 263,355 b/d from the amended July programs to 2,018,452 b/d in the longest loading program in more than a year and a half, as pipeline attacks in the country have eased in recent months.

The glut has been reflected in the physical North Sea crude market, with Brent contract for differences moving into steep contango*, opening up floating storage opportunities in the process.

Analysts remain focused on the excess supply in the market, raising questions whether deeper cuts are needed among the OPEC/non-OPEC group, and whether members will look to include Nigeria and Libya, having previously allowed exempted the two in-turmoil countries.

“I’m not convinced the market has bottomed out yet and could see a further move towards $40/b unless OPEC is willing to increase the cuts from 1.8 million b/d,” McGillian said.

* Contango is the industry vernacular for the condition whereby prices for nearby delivery are lower than prices for future-month delivery.

Source: Platts 

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