The crack has risen – topping $18/b late last week — even though high utilization still threatens to overwhelm demand
A resurgent New York Mercantile Exchange (NYMEX) reformulated blend stock for oxygenate blending (RBOB) crack spread could keep refinery activity above normal levels for this time of year, preventing gasoline stocks from erasing a surplus to the five-year average, according to an S&P Global Platts preview of this week’s pending US Energy Information Administration (EIA) oil stocks data.
Refinery activity caught a tailwind from the crack spread, which rose roughly $5/b in March to more than $21/b by the end of the month and stayed above that level through early April, according to S&P Global Platts Oil Futures Editor Geoffrey Craig.
But concerns about product oversupply led the crack lower to just below $15/b on May 1, but since then the crack has risen – topping $18/b late last week — even though high utilization still threatens to overwhelm demand.
The refinery run rate has averaged nearly 93 per cent the last four weeks ending May 5, compared with 89.1 per cent during the same period last year.
Refinery utilization topped 94 per cent of capacity the week ending April 21, a mark not broken in all of 2016 even during the summer when refineries tend to run the hardest to meet peak demand.
Analysts surveyed Monday by S&P Global Platts expect the utilization rate increased 1 percentage point last week to 92.5 per cent. For the same period a year ago the rate stood at 90.5 per cent.
US gasoline stocks have shown a build of roughly 5 million barrels over the last four weeks to 241 million barrels in the week that ended May 5, a surplus of 20.7 million barrels to the five-year average.
Analysts are looking for US gasoline stocks to have declined 500,000 barrels in the week that ended May 12, compared with an average decline of 900,000 barrels the same reporting period from 2012-16.
US distillates stocks have dropped 12 of the last 13 weeks by nearly 22 million barrels, versus an average draw of 9.3 million barrels over the same period from 2012-16.
That has helped lower the surplus to the five-year average, which stood at 21.8 million barrels for the week that ended May 5.
Analysts surveyed Monday by Platts were looking for distillates stocks to show a drawdown of 1.3 million barrels for the latest reporting week ended last Friday.
This compares to the five-year average showing a build of approximately 200,000 barrels.
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WILL CRUDE IMPORTS REBOUND?
US crude oil stocks have shown a drawdown during the last five weeks by 13 million barrels, compared with a build of 10.4 million barrels from 2012-16 over the same period.
Strong refinery activity has been the main catalyst behind the drawdown, but fewer imports the week that ended May 5 served as another driver.
Imports dropped 644,000 b/d to 7.62 million b/d, averaging 8.1 million b/d year to date, versus 7.8 million b/d over the same period in 2016, exceeding the year-ago level despite OPEC-led supply cuts being in place.
Because import figures can fluctuate sharply on a weekly basis, traders will be looking for further signs that imports have indeed started trending lower possibly on account of OPEC cuts finally materializing.
Analysts expect crude stocks to be down 2.2 million barrels in the week that ended May 12, versus an average draw of 1.4 million barrels for the same period from 2012-16.
Crude oil futures rebounded following Wednesday’s EIA inventory report, and rallied again Monday after Saudi Arabia and Russia said they backed an extension of the OPEC-led supply cut deal until March 2018.
One of the stated objectives behind the agreement is lowering the global oil inventories to levels on par with the five-year average, a daunting task considering the surplus in OECD countries still stands at 276 million barrels by OPEC’s own reckoning.