S&P Global Platts Preview of U.S. EIA Data: Likely to Show Crude Oil Stocks Fell 3 Million Barrels


By S&P Global Platts Oil Futures Editor Geoffrey Craig

NEW YORK - July 17, 2017

Crude oil inventories are expected to show a drop of 3 million barrels for the reporting week ended last Friday, according to an S&P Global Platts survey of analysts ahead of this week’s report by the U.S. Energy Information Administration (EIA). Despite the struggle by oil futures markets to stage a meaningful rally, there has been a recent strengthening of the term structure of New York Mercantile Exchange (NYMEX) oil futures market stemming largely from a steady drawdown in inventories at Cushing, Oklahoma, the delivery point for NYMEX futures contracts.

Survey of Analysts Results:

  • Crude stocks expected to fall 3 million barrels
  • Refinery utilization expected to increase 0.5 percentage points
  • Distillate stocks expected to increase 500,000 barrels
  • Gasoline stocks expected to draw 700,000 barrels

S&P Global Platts Analysis:
(The below may be quoted in part or full, with attribution to S&P Global Platts Oil Futures Editor Geoffrey Craig)

After eight straight weekly declines, oil inventories at Cushing, Oklahoma, the delivery point for New York Mercantile Exchange (NYMEX) crude oil futures contracts, totaled 57.66 million barrels for the reporting week ended July 7 and marking the lowest level since November 2015, according to Energy Information Administration (EIA) data.

The price spread between the front-month and second-month NYMEX oil futures contracts has averaged minus 19 cents per barrel (/b) in July, a narrowing from minus 23 cents/b in June and minus 32 cents/b in May. The price spread between the front-month and sixth-month contracts has averaged minus $1.11/b so far this month, and July appears on track to post the narrowest monthly average to date in 2017.

A narrowing contango* removes the financial incentive for traders to store crude in Cushing and could force more barrels out of tank.

Cushing's drawdown of inventories has been part of a national trend. U.S. crude oil stocks have declined 12 of the last 14 weeks by 40.2 million barrels, compared with an average drawdown of 7.2 million barrels between 2012 and 2016.

Analysts surveyed Monday by S&P Global Platts are looking for stocks to decline 3 million barrels for the reporting week ended last Friday. If confirmed, such would exceed the five-year average decline of 2.3 million barrels.

Further drawdowns could eventually flip NYMEX crude's term structure into a prolonged backwardation for the first time since October 2014.

But traders are also weighing the possibility that these drawdown will soon come to an abrupt end once refinery activity dries up in late summer for planned repairs and U.S. production likely climbs into autumn.

Such a prospective scenario seems to have weighed more heavily on outright futures prices, which would explain the choppy behavior that has kept prompt-month NYMEX crude futures contracts between roughly $42/b to $50/b since late May.

U.S. refinery utilization has been the biggest driver behind crude inventories declines. The utilization rate has averaged nearly 93.7% of capacity during the last four weeks, versus approximately 92.3% for this time a year ago.

Analysts are looking for the refinery run rate to have increased 0.5 percentage points last week to 95%. Capacity utilization this time a year ago averaged 93.2%.

A slowdown in U.S. production would help mitigate the pending seasonal drop in refinery demand. Market players are watching closely for any signal of slowed production, placing particular attention to any changes in U.S. oil rig count. There has been an easing of the number of rigs added by drillers during the last few weeks, but it remains to be seen whether efficiency gains are compensating for fewer holes being drilled.


Elsewhere, attention is being placed on U.S. crude production and OPEC. One side effect of rising U.S. oil production, when combined with OPEC supply cuts that began January 1, has been the pricing discount of West Texas Intermediate (WTI) to global benchmarks Dubai and Brent. Those price differentials have made US exports more competitive globally.

U.S. exports have averaged 751,000 barrels per day (b/d) year-to-date, compared with approximately 530,000 b/d in the second half of 2016, EIA weekly figures show.

Trafigura recently said it signed an offtake deal for 100,000 b/d of crude and condensate with Plains All American Pipeline for exports out of Corpus Christi, Texas. India's Bharat Petroleum Corp. Ltd announced Monday it had bought 1 million barrels of U.S. sour crude through a tender. Earlier this month, Indian Oil Corp. became the first state-run refiner to purchase U.S. crude in a deal to lift 1.6 million barrels from the Gulf Coast starting October.

A slowdown in crude imports from Saudi Arabia has begun to materialize only recently. The four-week moving average fell below 1 million b/d mid-June for the first time since early January.

Imports for the latest reporting week averaged 449,000 b/d last week, according to U.S. Customs data analyzed by Platts Analytics. In the week prior, EIA pegged imports from Saudi Arabia at 851,000 b/d.

Last week saw unconfirmed rumors about production cuts from Canada's Syncrude facility. If true, the production cuts could continue to limit the amount of crude flowing from Canada to the United States. The Syncrude facility was damaged by fire in March and has faced difficulties restarting. Those rumors pushed Syncrude Sweet Premium last week to its highest differential to WTI calendar-month average since early May.


A strong Mediterranean diesel market has provided U.S. Gulf Coast (USGC) refiners with an export opportunity they have only partly been able to take advantage of due to logistical issues.

Diesel production was already down in the Mediterranean as refiners there maximized jet production. Surprisingly, last week a Greek refinery temporarily halted a number of units following an incident at the hydrogen unit.
That helped push the premium for Mediterranean cargoes on a cost, insurance and freight (CIF) basis, versus low- sulfur gasoil futures to a two-month high. Still, the region has struggled to pull cargoes from the USGC because of more restrictive ports.

USGC exports of distillate have preferred to head to Northwest Europe, even though the Mediterranean held a $4.25/b metric-ton (mt) premium to Northwest Europe (NWE) on Friday, the highest since May 26.

Most vessels traveling from the USGC across the Atlantic have continued on their route to NWE, with expected arrivals of distillate into Europe and the Mediterranean at 1.2 million mt in July.

Combined stocks of low- and ultra-low sulfur diesel on the Gulf Coast equaled 42.9 million barrels the week ended July 7, which was nearly 3 million barrels less than two weeks earlier after consecutive draws.

Analysts are looking for distillate stocks to increase 500,000 barrels last week. The five-year average shows a build of 1.6 million barrels.

Despite an expected increase in refinery utilization, analysts expect gasoline stocks fell 700,000 barrels last week. Inventories typically rise 760,000 barrels at this time of year.

Gasoline stocks have fallen the last four weeks by 6.8 million barrels. That has lowered the surplus to the five-year average to 15.4 million barrels the week ended July 7, down from nearly 24 million barrels.

For more information on crude oil, visit the S&P Global Platts website.

*Contango is the industry vernacular for the condition whereby prices for nearby delivery are lower than prices for future-month delivery.

Global, Americas, Asia: Kathleen Tanzy, + 1 917 331 4607,

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