US distillates stocks down 6.51 million barrels since start of April, have not declined for 3 consecutive weeks since Oct.
By Jack Laursen, Platts Oil Editor
Falling US oil production and increased refinery throughput in the week that ended April 29 failed to halt the historic rise in US crude oil inventories, according to US Energy Information Administration (EIA) data released Wednesday.
US oil production continued its downward trajectory, falling 113,000 barrels per day (b/d) week over week to 8.825 million b/d and 394,000 b/d less than at the start of the year.
Lower production levels and an increase in U.S. refinery utilization of 1.6 percentage points to 89.7 per cent would be expected to ease pressure on crude inventories, but such was not the case. EIA reported a 2.784-million-barrel increase to a record 543.394 million barrels.
Analysts surveyed by S&P Global Platts Monday were looking for US crude oil stocks to have risen 1.7 million barrels, with refinery throughput rising 0.6 percentage points.
While falling US tight oil production – in response to low prices – has raised hopes the oil market was beginning to rebalance, pushing New York Mercantile Exchange (NYMEX) crude oil futures 22 per cent higher in April, production in the Lower 48 states was down only 30,000 b/d. Alaska accounted for 83,000 b/d of the decline.
Robert Merriam, EIA manager of petroleum supply statistics, said issues processing natural gas liquids at an undisclosed Alaskan oil field caused the sudden drop in output.
While Alaskan output will likely rebound as the processing issue is addressed, 2016 production is expected to fall at the BP-operated Prudhoe Bay field because of reduced drilling activity and seasonal maintenance.
In the 2016 Prudhoe Bay Plan of Development filed with the state, the company said it expects to produce between 20,000 b/d to 60,000 b/d less in the Initial Participating Area of Prudhoe, which is the core of the field.
BP recently said it was laying off three of five rigs now operating at Prudhoe.
While BP will also reduce the amount of well workovers in 2016 due to low prices, oil field maintenance on Alaska’s North Slope, particularly in Prudhoe Bay, where more than half of ANS production occurs, typically begins in May and runs through August.
In June 2015, Alaska North Slope production fell 7 per cent to 463,289 b/d after falling by 8 per cent in May, according to state tax division data.
The increase in total US refinery throughput was driven by the Gulf Coast and the Midwest, where utilization rose 2.1 percentage points to 92.6 per cent and 1.6 percentage points to 85 per cent, respectively.
Refiners likely increased runs in response to healthy refining margins in each region.
For the third consecutive week, US distillates stocks fell, declining 1.261 million barrels to 156.979 million barrels.
US distillates stocks are down 6.51 million barrels since the start of April and had not declined for three consecutive weeks since Oct. 2015.
The four-week moving average of distillate supplied rose 84,000 b/d to 4.049 million b/d, with EIA data showing similar increases in May in the past two years, as the planting season gets underway in the United States.