Data shows crude oil stock drawdown tempered by builds in refined products

Refineries have potentially already begun shifting more production towards distillate as gasoline demand has not kept pace with production

EIA

ExxonMobil’s Beaumont, TX refinery.

US crude oil stocks declined last week, in line with market expectations, but inventories of distillates and gasoline saw surprise builds, EIA data showed Wednesday according to S&P Global Platts.

US commercial crude stocks fell 3.228 million barrels to 532.476 million barrels in the week ended June 3, EIA said, as refineries increased their throughput ahead of the summer driving season and imports fell, according to an analysis of the data by S&P Global Platts.

Refinery utilization increased by 1.1 per cent to 90.9 per cent as refiners processed 16.417 million b/d, up 211,000 b/d from the week ended May 27 but still lagging rates seen last year.

Gulf Coast crude stocks had the sharpest decline, falling 3.805 MMbl to 274.076 MMbl, as regional refinery utilization increased 1.1 per cent to 92 per cent, in part due to several refinery units returning from maintenance.

Citgo restarted a fluid catalytic cracker at its 157,500 b/d East Plant at Corpus Christi, Texas.

However, refineries typically increase their throughput ahead of summer, when demand for gasoline historically peaks as drivers take to the roads.

For the same reporting week in 2015, the EIA reported U.S. refinery utilization to have increased by 1.2 per cent to 94.6 per cent, before peaking at 96.1 per ccent in late July.

A narrowing WTI-Brent spread has failed to prompt a jump in crude imports into the US, which fell by 134,000 b/d to 7.705 million b/d, led lower by a fall in imports from Saudi Arabia and Venezuela.

Imports from Canada rose by 347,000 b/d to 3.064 million b/d despite the Alberta wildfires that took out over 1 million b/d of oil sands output last month.

Imports from Nigeria fell 84,000 b/d to 193,000 b/d with three local grades, including Bonny Light, still under force majeure following sustained attacks on oil infrastructure.

The ICE WTI-Brent spread averaged 27 cents/b in May, with Brent at a premium, compared to $1.33/b in April and 69 cents/b in March.

US West Coast Crude stocks build amid refinery issues

The draw in crude stocks may have been more pronounced if not for a build in US West Coast (USWC) crude oil stocks, which grew by 2.359 million barrels to 60.895 million as oil in transit from Alaska rebounded by 2.282 million barrels to 4.890 million barrels.

The EIA reported West Coast refinery utilization rising by 1.8 per cent to 86 per cent despite a spate of refinery issues last week.

In the Pacific Northwest, there was a small fire at BP’s Cherry Point refinery in Blaine, Washington, on Tuesday afternoon, while Chevron shut down multiple units at its 55,000 b/d Burnaby, British Columbia, refinery for planned maintenance on Thursday.

Crude oil production in the Lower 48 states fell 8,000 b/d in the reporting week to 8.217 million b/d, the 13th consecutive weekly decline but the smallest since output last rose in the week ended March 4.

The EIA reported that total U.S. output rose by 10,000 b/d owing to an 18,000 b/d increase in Alaskan production.

Houston traffic jam

Houston traffic jam

Gasoline demand falls

U.S. gasoline stocks increased 1.01 MMbl last week to 239.629 MMbl, EIA data showed while analysts expected gasoline inventories had fallen 900,000 barrels last week.

The surprise build initially weighed on NYMEX RBOB futures. Prices flipped into negative territory shortly after the EIA data was released, before quickly recovering.

Front-month RBOB was up roughly 1 cent at $1.5971/gal Wednesday afternoon.

Implied gasoline demand decreased 148,000 b/d last week to 9.568 million b/d. The moving four-week average — 9.639 million b/d — still exceeded the five-year average for the same time of year by 6.6%.

Distillate stocks rise

U.S. distillate stocks rose 1.754 MMbl last week to 151.377 MMbl, snapping a streak of seven consecutive weekly draws, EIA data showed.

Analysts were looking for a draw last week of 600,000 barrels.

Implied demand dropped 251,000 b/d to 3.576 million b/d, pushing stocks higher.

Another possible factor could have been greater supply as refineries focus more on distillates than gasoline, said Anthony Starkey, energy analysis manager at Platts Analytics, the forecasting and analytics unit of S&P Global Platts.

“Refineries appear to have potentially already begun shifting a bit more production towards distillate as gasoline demand, as robust as it has been, has been unable to keep pace with the amount of gasoline being produced,” Starkey said.

That would mark a turnaround from the winter when mild temperatures likely convinced refiners to switch away from diesel and toward gasoline earlier than usual.

The economics, however, began shifting as the steady decline in distillate inventories this spring pushed the ULSD crack above $14/b in late May. It was trading Wednesday afternoon at around $13.60/b.

 

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