US gasoline stocks steady last week, falling to 238.876 million barrels, but still 11.54% above 5-year average
Oil train carrying crude to market.
NEW YORK – US crude oil inventories declined for the seventh consecutive week, according to Energy Information Administration data for the reporting week ended July 1.
However, the size of the draw down fell short of market expectations, causing oil futures to turn negative according to S&P Global Platts.
US Commercial crude stocks decreased 2.223 million barrels to 524.35 million barrels the week ended July 1, EIA data showed. Analysts surveyed Tuesday by S&P Global Platts expected data to show a 2.6 million-barrel-draw.
A separate industry report Wednesday evening lifted bullish expectations even further according to Platts. The American Petroleum Institute report issued Wednesday evening raised bullish sentiment when it showed US crude oil stocks experiencing a drawdown of 6.7 million barrels last week.
The oil complex pushed higher overnight before flipping into the red following the EIA‘s report of a modest crude drawdown. New York Mercantile Exchange August crude was down $2.18 at $45.25 per barrel Thursday afternoon, off an intraday high of $48.25/b.
Crude oil inventories have fallen steadily, in line with seasonal norms, as the peak summer driving season pulls barrels out of storage.
Despite these week-on-week declines, crude inventories proved unable to erase the large surpluses relative to historical levels.
Crude oil inventories are 33.5 per cent greater than the five-year average (2011-15) for the same time of year. That figure has been approximately 32 per cent-33 per cent over the last seven reporting periods.
A big drop in Alaskan output led crude oil stocks lower last week. Production fell 156,000 b/d to 340,000 b/d, while output in the Lower 48 States decreased 38,000 b/d to 8.088 million b/d.
A likely reason for the decline in Alaskan production was the closure of the Trans-Alaska Pipeline System for 36 hours last week, according to Jenna Delaney, senior energy analyst at Platts Analytics, the forecasting and analytics unit of S&P Global Platts.
“Production disruptions in Alaska are typical during the summer due to such maintenance events,” said Delaney.
The persistent decline in continental US production has strengthened the view that the oil market balance is growing tighter.
Output in the Lower 48 States has fallen 17 straight weeks, and now stands on the cusp of dropping below 8 million b/d for the first time since June 2014, according to EIA weekly estimates.
Crude oil imports rose 808,000 b/d to 8.363 million b/d, limiting the size of the last week’s crude draw. Imports have averaged 7.831 million b/d year to date.
By country of origin, import upticks were reported from Colombia, Iraq, Kuwait, Mexico, Nigeria and Saudi Arabia. These helped offset the Canadian imports drop of 419,000 b/d to 2.618 million b/d.
Another factor putting upward pressure on crude stocks was refinery utilization, which fell 0.5 percentage point to 92.5 per cent of capacity. That was contrary to market expectations; analysts had anticipated a 0.5-percentage-point increase in refinery utilization.
For the last six weeks, refinery utilization has trailed the year-ago level by more than 2 percentage points, Delaney said. For example, a year ago the refinery utilization rate stood at 94.7 per cent of capacity.
USAC GASOLINE MAINTAINS SURPLUS
Total US gasoline stocks were relatively steady last week, falling by 122,000 barrels to 238.876 million barrels, but still standing 11.54 per cent above the five-year average for the same reporting week.
Regional gasoline inventories across the US tell differing stories, with US Atlantic Coast stocks currently 22.69 per cent above the five-year average.
This is despite the fact that inventories fell 613,000 barrels last week to 71.852 million barrels.
Part of the reason Atlantic Coast stocks stocks were so well-supplied is the fact of the steady imports from Europe.
USAC imports fell 139,000 b/d to 765,000 b/d last week, but remain above the four-week moving average of 722,000 b/d, EIA data shows.
Arbitrage economics have favored sending gasoline from Northwest Europe to the Atlantic Coast recent months, with delivered European reformulated blend stock for oxygenate blending (Eurobob) cargoes averaging $32.54 per metric ton discount to New York Mercantile Exchange reformulated blend stock for oxygenate blending (RBOB) in June.
With Atlantic Coast gasoline stocks bloated, the New York Mercantile Exchange RBOB crack spread has come under significant pressure, breaking below $14/b in June to touch multi-month lows. It was trading Thursday afternoon for less than $12/b.
Crack spreads for other global gasoline benchmarks have hit multi-year lows recently, as stockpiles have swelled around the world.
US Gulf Coast gasoline stocks also showed considerable slack, building 1.768 million barrels to sit at 79.815 million barrels last week, 10.27 per cent above the five-year average.
Despite ample inventories across both the US Atlantic Coast and US Gulf Coast, Midwest product stocks tightened.
Midwest gasoline stocks fell 874,000 barrels to 51.963 million barrels, putting them just 7.08 per cent above the five-year average and down from a cushion of 10.34 per cent at the start of June.
However, differentials for Midwest gasoline grades do not necessarily reflect regional tightness, according to S&P Global Platts, apart from a 21-cent spike in Chicago CBOB to front-month New York Mercantile Exchange plus 35 cents/b on June 8 that followed issues at Marathon’s Robinson, Illinois, refinery, at a time when the market was concerned with Western Canadian wildfires.
Since then, though, CBOB has fallen to a 4.78-cent-per-gallon (/gal) discount.
MIDWEST DIESEL STOCKS STAY TIGHT
US diesel stocks showed a similar regional pattern, even as total US distillate stocks fell by 1.574 million barrels to 148.939 million barrels last week.
Atlantic Coast stocks of low and ultra-low sulfur diesel rose 738,000 barrels to 52.769 million barrels, 76.9 per cent above the five-year average, while Gulf Coast stockpiles were virtually flat at 41.16 million barrels, 16.38 per cent above the five-year average.
Midwest low sulfur and ultra-low sulfur diesel stocks, on the other hand, dipped 1.06 million barrels to 27.93 million barrels, falling 0.84 per cent below the five-year average.
The relative tightness seen in the Midwest product market — despite run rates and production levels being near multi-month highs — could provide an outlet for Gulf Coast refiners in coming weeks.
Gulf Coast cracking margins have weakened in recent weeks, S&P Global Platts data shows.
The USGC West Texas Intermediate WTI cracking margin averaged 63 cents/b in the reporting week, down from $1.57/b the week prior.
The Midwest WTI cracking margin averaged $4.83/b in the reporting week, down from $5.94/b.