U.S. stocks of crude oil, gasoline and distillates all fell in the latest reporting week ended last Friday, providing the market with headline numbers that were bullish, according to the Energy Information Administration (EIA) Wednesday and a commentary by Geoffrey Craig, S&P Global Platts oil futures editor. However, the bullishness was mitigated somewhat by another increase in estimates of domestic production levels.
Crude oil inventories dropped 4.727 million barrels to 490.623 million barrels the week ended July 14, marking the fifth draw over the last six weeks, EIA data showed Wednesday.
Analysts surveyed Monday by S&P Global Platts were looking for a draw in crude stocks of 3 million barrels last week.
The size of declines has accelerated the last three reporting periods, dropping by a cumulative 18.6 million barrels, compared with an average draw of around 11.9 million barrels from 2012-16 for the same time of year.
While stocks remain far above historical levels, these recent draws have cut into excess barrels in storage. The surplus to the five-year average stands at 100.663 million barrels, a year-to-date low.
The progress being made toward reducing the size of the surplus inventories has helped lift the oil complex since June 21, when prompt-month NYMEX crude oil futures fell to a 10-month low at around $42 per barrel (/b). Oil futures have since found support above those lows — with NYMEX August crude contracts in excess of $47/b Wednesday.
U.S. output increased 32,000 b/d to 9.429 million b/d, the highest level since July 2015, according to EIA estimates. Production in the Lower 48 states rose 30,000 b/d to 8.97 million b/d. Another headwind has been total crude imports, which remain elevated despite a noticeable drop recently in barrels coming from Saudi Arabia.
Crude imports rose 386,000 b/d last week to 7.996 million b/d. Over the last four weeks, imports have averaged 7.84 million b/d, down approximately 130,000 b/d from a year ago, but nearly identical to the five-year average.
By country of origin, imports from Saudi Arabia plunged 327,000 b/d last week to 524,000 b/d. The four-week moving average fell to 810,000 b/d, the lowest this year.
Although imports from Canada also fell sharply, down 335,000 b/d to 3.033 million b/d, those declines were offset by weekly increases from Kuwait and Colombia totaling 740,000 b/d.
Even though crude oil inventories have been declining, there is market concern that the tide could soon shift when the U.S. refinery activity starts to ease, presumably in late summer, for seasonal repairs.
Until then, refinery operations remain brisk. Despite last week’s drop in crude processed by refiners, refinery runs remained greater than 17 million b/d. That is the 11th time in the last 13 weeks.
Last week’s crude run decrease of 125,000 b/d to 17.119 million b/d lowered refinery utilization 0.5 percentage points to 94% of capacity. Analysts were looking for an increase of 0.5 percentage points.
In the Midwest, refinery utilization rose 0.3 percentage points to 97.7% of capacity. That helped push Midwest crude stocks down 2.6 million barrels to 146.591 million barrels, the biggest weekly regional drawdown.
Stocks at Cushing, Oklahoma, delivery point for the NYMEX crude futures contract, were down 23,000 barrels to 57.538 million barrels. Inventories there have fallen the last nine weeks by 8.77 million barrels.
GASOLINE STOCKS DOWN FIVE WEEK IN A ROW
U.S. gasoline stocks fell 4.445 million barrels last week to 231.211 million barrels. Analysts expected a drop of 700,000 barrels. It was the fifth straight draw, which has helped strengthen RBOB futures and allay concerns over demand that surfaced in early June.
The prompt-month RBOB crack spread against West Texas Intermediate (WTI) touched $20.82/b Wednesday, a high going back to April 11 and extending a rally that began a month ago.
Despite high levels of refinery utilization, gasoline stocks have declined by a total of 10 million barrels since the week ended May 5. That compares with an average build of approximately 600,000 barrels during the same time period in 2012 through 2016. As such, the surplus to the five-year average has roughly halved to 10.2 million barrels since late April.
Stocks on the U.S. Atlantic Coast (USAC), home to the New York Harbor-delivered NYMEX RBOB futures contract, fell 1.922 million barrels to 64.349 million barrels, which was 7.654 million barrels less than a year ago.
USAC imports edged up 80,000 b/d last week to 536,000 b/d. During the last four weeks, imports have averaged 554,000 b/d. A year ago imports for the same period averaged 747,000 b/d for the same time of year.
Some market sources are looking for imports to rise further as the strength in the New York Harbor gasoline market could attract cargoes.
Implied gasoline demand decreased 194,000 b/d to 9.592 million b/d. Demand has averaged 9.655 million b/d the last four weeks, which lags the year ago level by 75,000 b/d, but tops the five-year average by 411,000 b/d.
IMPLIED DISTILLATES DEMAND JUMPS
Distillates stocks saw a surprise drawdown of 2.137 million barrels to 151.416 million barrels. Analysts were looking for a build of 500,000 barrels.
Inventories have been stuck in a range of approximately 150 million to 153 million barrels during the last seven weeks, but have still managed to close the gap with the five-year average.
The surplus to the five-year average stands at 17.1 million barrels, down from 21.7 million barrels the week ended June 2.
On the Gulf Coast, stocks of low- and ultra-low sulfur diesel rose 813,000 barrels to 43.752 million barrels, a surplus of 7.08 million barrels to the five-year average.
Implied demand increased 476,000 b/d last week to 4.334 million b/d. Demand has averaged 4.14 million b/d the last five weeks, compared with an average of 3.792 million b/d for the same time a year ago.
*RBOB=reformulated blend stock for oxygenate blending
**Implied demand is the amount of product that moves through the U.S. distribution system, not actual end consumption.
Source: PlattsPrevious Next