S&P Global Platts Analysis of U.S. Energy Information Administration (EIA) Data
EIA Data: Mixed U.S. Inventory Data Showed Crude Oil Drawdown; Product Inventories Builds
By Geoffrey Craig, S&P Global Platts Oil Futures Editor
New York - December 07, 2016
U.S. EIA Data Reported
- Cushing stocks jump 3.783 million barrels
- Gulf Coast crude stocks fall 6.9 million barrels
- Implied* demand for gasoline, distillate declines
U.S. crude oil stocks fell last week, but the key storage hub of Cushing, Oklahoma, saw its biggest build since 2009, and product stocks rose more than expected, U.S. Energy Information Administration (EIA) data showed Wednesday.
Crude oil stocks showed a drawdown for the third straight reporting period, declining 2.389 million barrels to 485.756 million barrels in the week that ended December 2, EIA said.
Analysts surveyed by S&P Global Platts Monday were looking for crude stocks to draw 1.7 million barrels.
Refinery demand picked up last week, helping draw crude stocks lower. Crude oil runs rose 134,000 barrels per day (b/d) to 16.417 million b/d, raising the refinery utilization rate 0.6 percentage points to 90.4% of capacity.
Even though Midwest refinery utilization jumped 3.3 percentage points to 95.5%, its highest rate since early September, the region's crude stocks rose 2.547 million barrels to 148.511 million barrels.
Midwest imports increased 319,000 b/d last week to 2.805 million b/d, pushing stocks higher.
Moreover, stocks at Cushing, Oklahoma - the delivery point for the New York Mercantile Exchange (NYMEX) crude oil futures contract -- built 3.783 million barrels to 65.285 million barrels, the largest weekly increase since January 2009.
Cushing stocks had fallen to 58.362 million barrels in mid-October, but have now returned to levels greater than 65 million barrels for the first time since August.
Cushing stocks have increased 6.2 million barrels during the last two reporting periods, which has helped drive the NYMEX crude contango** wider.
The prompt NYMEX price spread averaged minus 92 cents per barrel (/b) last week, out from an average of minus 62 cents/b during the first half of November. As of Wednesday afternoon, it was trading around minus $1.14/b.
A wide contango creates a profit incentive to buy and store crude at Cushing as long as timespreads are sufficient to cover storage costs and miscellaneous expenses.
Cushing could see stocks rise in coming weeks as opportunistic traders take advantage of the widening contango.
One reason why Cushing stocks have increased recently could be ebbing U.S. Gulf Coast (USGC) demand, as USGC refiners try to mitigate state ad valorem taxes on year-end crude stocks, causing flows from the Midwest to slow.
In a similar vein, USGC imports dropped 403,000 b/d last week to 2.931 million b/d. USGC stocks plunged 6.911 million barrels last week to 246.450 million barrels.
CRUDE IMPORTS RISE
Total imports increased 755,000 b/d to 8.303 million b/d in the week ending December 2, EIA said. Imports have averaged 7.9 million b/d year to date.
U.S. Atlantic Coast (USAC) imports jumped 568,000 b/d last week to 1.136 million b/d, but some of these additional barrels were absorbed by refiners leaving USAC crude stocks little changed week on week.
USAC refinery utilization rose 2 percentage points to 87% of capacity, while USAC crude stocks rose 108,000 barrels to 14.152 million barrels.
By country of origin, imports from Angola, Canada, Saudi Arabia and Mexico rose by a combined 1.1 million b/d.
Analysts question how imports and exports will respond to a wider Brent-to-West Texas Intermediate (WTI) price spread, which has emerged since OPEC's November 30 agreement to cut supply for the first time since 2008.
Expectations for a tighter global balance outside the U.S. have caused Brent's premium over WTI to grow, which should discourage imports and encourage exports.
The front-month Intercontinental Exchange (ICE)/WTI price spread was approximately $2.05/b Wednesday afternoon, compared with 68 cents/b a month ago.
In light of OPEC's supply deal, market participants are also keeping a watch on U.S. crude production, which could respond to higher oil prices. Front-month NYMEX crude oil futures climbed Monday to a 16-month high near the $52/b level.
U.S. crude oil production was little changed last week, according to EIA estimates. Output was down 2,000 b/d last week to 8.697 million b/d.
Gasoline and distillate stocks saw builds last week that were larger than anticipated, minimizing any sense of bullishness coming from the EIA data.
Gasoline stocks rose 3.425 million barrels to 229.548 million barrels, which was the largest build since late January. Analysts were looking for an increase of 900,000 barrels.
Implied demand fell 323,000 b/d last week to 8.757 million b/d. Over the last four weeks, demand has averaged 9.055 million b/d, compared with 9.169 million b/d during the same period a year ago.
Stocks on the Atlantic Coast, home to the New York Harbor-delivered NYMEX reformulated blend stock for oxygenate blending (RBOB) futures contract, rose 2.128 million barrels to 61.557 million barrels, a 13% surplus to the five-year average for the same time of year.
A draw of 626,000 barrels on the Gulf Coast mitigated the size of last week's total build. USGC gasoline stocks equaled 81.697 million barrels last week, a 6.6 million barrels surplus to the year-ago level.
Distillate inventories rose 2.501 million barrels to 156.697 million barrels in the week ending December 2, EIA said. Analysts expected a build of 100,000 barrels.
Implied demand dropped 137,000 b/d to 3.704 million b/d. Demand has averaged 3.903 million b/d during the last four weeks. This compares to 3.693 million b/d during the same period in 2015.
Stocks of low- and ultra-low sulfur diesel on the Atlantic Coast increased 429,000 barrels last week to 59.361 million barrels. Combined stocks sit 6.476 million barrels above year-ago level.
*Implied demand is the amount of product that moves through the U.S. distribution system, not actual end consumption.
**Contango is the industry vernacular for the condition whereby prices for nearby delivery are lower than prices for future-month delivery.
Kathleen Tanzy, + 1 917 331 4607, firstname.lastname@example.org
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