American Petroleum Institute had estimated US crude oil stocks increase at 7.1 million barrels
New government data on crude oil inventories released last week show a much smaller increase than industry statistics, according to Platts News.
US commercial crude oil inventories increased 3.502 million barrels to 507.607 million barrels in the week that ended Friday, according to US EIA data . The size of the build was consistent with analysts’ expectations and far below the increase reported Tuesday evening by the American Petroleum Institute.
Analysts surveyed Monday by Platts, the leading independent provider of information and benchmark prices for the commodities and energy markets, expected U.S. crude oil stocks to have increased 3 million barrels. The American Petroleum Institute said Tuesday that US crude stocks increased 7.1 million barrels.
Refinery activity slowed last week, driving stocks higher. Crude runs fell 163,000 b/d to 15.685 million b/d, while refinery utilization dropped 1 percentage point to 87.3 per cent of operable capacity.
Analysts had been looking for a smaller drop in the utilization rate, of 0.7 percentage points.
The amount of crude oil processed by refiners has stayed below 16 million b/d and refinery utilization has been under 90 per cent of capacity the last five reporting periods.
Refiners have taken units offline to perform planned repairs as part of the winter maintenance season, pushing inventories higher four of the last five reporting periods by a total of 21 million barrels.
By region, the biggest build last week was seen on the U.S. Gulf Coast where stocks increased 4.38 million barrels to 255.589 million barrels.
USGC refinery utilization dropped 1.5 percentage points to 86.3 per cent of operable capacity.
Another factor helping USGC stocks build was imports, which increased 198,000 b/d to 3.095 million b/d.
A big jump in oil imports was expected after a logjam of tankers was seen in the US Gulf Coast recently, according to Matt Smith, director of commodity research at ClipperData.
The EIA weekly inventory report does not break down regional imports by country of origin. Though the EIA data showed crude imports from Saudi Arabia were up 435,000 b/d to 1.209 million b/d.
The surge in imports of Saudi crude came just ahead of the restart of a heavy sour crude unit at Motiva’s refinery in Port Arthur, Texas. Motiva is a joint venture between Shell and Saudi Aramco. The 200,000 – b/d unit was shut in early January for planned work but came back online this week, market sources said Wednesday.
Saudi oil may have also entered the U.S. via the Atlantic Coast, where oil imports climbed 234,000 b/d last week to 1.192 million b/d.
Turning Saudi Arab Light crude into refined products has generated modest but stable profits recently for refiners in both regions. Cracking margins averaged $2.94 per barrel (/b) on the Gulf Coast last week and $5.62/b on the Atlantic Coast.
Platts margin data reflects the difference between a crude’s netback and its spot price. Netbacks are based on crude yields, which are calculated by applying Platts product price assessments to yield formulas designed by Turner, Mason & Co.
Oil imports from Canada, most of which enter the U.S. via the Midwest, declined 241,000 b/d last week to 3.006 million b/d. Midwest imports fell 88,000 b/d lower to 2.464 million b/d.
Midwest refinery utilization ticked lower last week, driving regional stocks higher, despite the fall in oil imports.
Midwest refinery utilization dropped 1.6 percentage points to 92.9 per cent of capacity. The region’s crude stocks built 462,000 barrels to 155.431 million barrels.
Stocks at Cushing, Oklahoma — delivery point for the New York Mercantile Exchange (NYMEX) crude oil futures contract — rose 333,000 barrels last week to 65.066 million barrels.
A steep contango* in NYMEX crude has attracted barrels to Cushing where storage has reached 87.5 per cent of working capacity adjusted to reflect pipeline space and oil in transit.
The spread between the front-month and sixth-month reached minus $7.90/b February 11, out from minus $3.56/b December 22. That contango has eased recently, hovering around $5.60/b Wednesday afternoon.
Citi Research analysts said in a research note this week they expect NYMEX crude times spreads to flatten as the bid for storage decline in conjunction with falling U.S. crude oil inventories.
The global oil market should rebalance given declines in U.S. crude oil production and summer demand for crude and refined products, Citi said.
EIA estimated crude oil production in the Lower 48 states fell last week by 35,000 b/d to 8.588 million b/d. According to EIA estimates, December 2014 marked the last time output from the Lower 48 states was below 8.6 million b/d.
GASOLINE, DISTILLATE STOCKS DRAW
U.S. gasoline stocks fell 2.236 million barrels last week to 256.457 million barrels, EIA data showed. Analysts had expected a decline of 900,000 barrels.
Even though refinery utilization fell, gasoline production rose 479,000 b/d to 9.659 million b/d.
Implied** gasoline demand increased 373,000 b/d to 9.576 million b/d, exceeding the year-ago level by 7.4 per cent.
Gulf Coast gasoline stocks drew 2.954 million barrels to 82.51 million barrels. Despite the draw, USGC gasoline stocks sit 8.1 per cent above the five-year average for this time of year.
Stocks on the Atlantic Coast, home to the New York Harbor-delivered NYMEX reformulated blend stock for oxygenate blending (RBOB) futures contract, increased 1.76 million barrels to 72.233 million barrels, and an all-time high.
Gasoline stocks have risen sharply this year after an unusually large slowdown in blending activity at the start of the year and relatively light refinery level turnaround seen in January.
Distillate stocks drew 1.660 million barrels last week to 160.715 million barrels. Analysts expected a draw of 1.5 million barrels.
Combined stocks of low- and ultra-low sulfur diesel on the Atlantic Coast inched 93,000 barrels lower to 51.768 million barrels, a 112 per cent surplus to the five-year average for the same reporting period.
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*Contango is the industry vernacular for the condition whereby prices for nearby delivery are lower than prices for future-month delivery.
**Implied demand is the amount of product that moves through the U.S. distribution system, not actual end consumption.