By July 6, 2016 Read More →

US gasoline refinery stocks draw 900,000 barrels – Platts

Despite ongoing streak of weekly draws, total crude stocks have held onto 32% surplus to 5-year average

gasolineStrong summer demand is expected to keep downward pressure on US gasoline inventories, but with production rampant across much of the United States.

Avoiding another week of stocks builds would require fewer imports and solid exports, according to a Tuesday preview of the US EIA data by S&P Global Platts.

A surprise jump in gasoline stocks of 1.4 million barrels reported by the US EIA for the week ending June 24 highlighted the market’s inability to clear surplus inventory, despite weekly demand record highs this spring according to S&P Global Platts analysis.

Analysts surveyed by S&P Global Platts are looking for US gasoline stocks to have fallen 900,000 barrels last week.

Of particular interest to market observers will be the movement in US Atlantic Coast stocks, which shot up 3.8 million barrels the week ending June 24 on the back of a surge in imports, and are 24 per cent above the five-year average.

Imports of blending components from Europe have contributed to greater stocks, but that trend is likely to reverse itself, BNP Paribas analysts said in a Monday research note.

“Recently, tankers fixed to move gasoline from Europe and as far ashore as India have been diverted away from New York Harbour,” said BNP Paribas analysts.

Arbitrage economics of sending gasoline from Northwest Europe to the US Atlantic Coast stock still looks favorable, but less so than earlier this year.

Delivered European blend stock for oxygenate blending gasoline cargoes on the US Atlantic Coast stock averaged a discount of $33.30 per metric ton (/mt) to front-month New York Mercantile Exchange  eformulated blend stock for oxygenate blending (RBOB) contract in June.

The size of that discount was $50.54/mt in May, $47.70/mt in April and $93.72/mt in March.

Meantime, a pick-up in gasoline exports, particularly to Latin America, should help gasoline inventories on the Gulf Coast decline, BNP Paribas analysts said.

Stocks on the Gulf Coast, the epicenter of the US refinery complex, sit 8.3 per cent above their five-year average for this time of year.

US exports of finished motor gasoline were relatively strong at the start of 2016. From Jan. through April, exports outpaced year-ago levels by 132,500 b/d on average, according to the EIA’s latest monthly data.

A light refinery maintenance season on the Atlantic Coast diverted supply from the Gulf Coast toward export markets, while a mild winter reduced heating oil demand and led refiners to maximize gasoline production, according to Abudi Zein, CEO of ClipperData.

Gasoline exports turned lower in June because Gulf Coast refiners shipped products north in response to Midcontinent refiners cutting back heavy crude oil units after wildfires struck Alberta’s oil sands region, he said.

gasoline

Petro-Canada facility

“Once Canadian supply is fully restored, it is likely that the supply pressure will build again, and exports will rise,” said Zein.

Apart from imports and exports, another factor impacting gasoline stocks will be how U.S. refiners respond to a relatively soft gasoline crack.

The front-month RBOB crack against Intercontinental Exchange Brent was trading Tuesday afternoon around $12.85/b. It hovered in the $13/b-$14/b range for most of June, compared with $15/b-16/b a year ago.

“The gasoline crack spread is currently at the same level as the diesel crack spread, which is unusual during the summer months,” Commerzbank analysts said.

The ultra-low sulfur diesel crack spread against Intercontinental Exchange Brent was trading Tuesday afternoon at $12.46/b having slipped from $14/b-$16/b in late June.

Unlike gasoline stocks, distillate inventories have fallen since the start of the year, which has helped support the diesel crack.

Distillate stocks equaled 150.513 million barrels the week ending June 24, down from 159.418 million barrels as of Jan. 1.

Analysts surveyed Tuesday expected distillate stocks fell 500,000 barrels last week.

Cheap freight rates from the US Gulf Coast to Northwest Europe last week supported the shipment of products and provided an additional outlet for US distillate supplies.

There was around 740,000 mt of distillates, most of which was likely diesel that has departed from the US Gulf Coast for arrival in Europe in the first three weeks of July, according to a Platts analysis based on trade flow software cFlow.

One question that analysts are asking is whether refiners will respond to the relative strength in the diesel crack by shifting yields toward distillates.

Another potential scenario is for refiners to process less crude, and that in turn would push up crude oil stocks, Commerzbank said.

Refiners typically ramp up operations in the summer to meet peak demand for gasoline, causing crude inventories to fall until the start of the autumn maintenance season.

Analysts are looking for crude stocks to have drawn 2.6 million barrels last week, with the refinery utilization rate up 0.5 percentage point to 93.5 per cent of capacity.

If confirmed, it would mark the seventh straight weekly decline in crude stocks, but fall short of the average 3.4 million-barrel-draw seen the last five years for the same reporting period.

Despite the ongoing streak of weekly draws, total crude stocks have held onto a 32 per cent surplus to the five-year average.

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