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S&P Global Platts Commentary of U.S. EIA Data: Rising Output Mitigates Drops in Crude, Gasoline, Distillates


By S&P Global Platts Oil Futures Editor Geoffrey


NEW YORK - August 03, 2017


U.S. stocks of crude, gasoline and distillates all declined the week ended July 28, while domestic production climbed higher, Energy Information Administration data showed Wednesday, according to an S&P Global Platts commentary of this week’s pending U.S. Energy Information Administration (EIA) oil stocks data.



EIA Data:


  • Saudi imports back above 1 million b/d
  • Refinery utilization highest since August 2015
  • Gasoline implied demand sets record high



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)

Crude oil inventories fell for the fifth straight week, although the size of last week's draw missed expectations and represented the smallest decline since the ongoing streak of declines began.

Analysts surveyed Monday by S&P Global Platts were looking for a draw of 2.8 million barrels, but the actual decline was 1.527 million barrels.

Inventories now stand at 481.888 million barrels, the fewest since the last week of 2016. The surplus to the five-year average edged up slightly to 24.65%, which is still down from nearly 40% in mid-February.

By region, the biggest draw last week occurred on the West Coast, which saw inventories fall 2.846 million barrels to 50.74 million barrels.

Traders downplay movements in West Coast stocks as the region is largely disconnected from the rest of the country's pipeline network.

U.S. Gulf Coast (USGC) imports increased 272,000 b/d to 3.173 million b/d, driving USGC stocks 1.753 million barrels higher to 249.429 million barrels, mitigating the size of the total drawdown.

Total imports rose 209,000 b/d to 8.253 million b/d. Over the last five weeks, imports have averaged 7.9 million b/d, compared with 8.3 million b/d during the same period a year ago.

Last week saw imports from Canada rise 251,000 b/d to 3.269 million b/d. Imports from Saudi Arabia increased 242,000 b/d to 1.174 million b/d, and imports from Iraq were up 273,000 b/d to 1.096 million b/d.

Market participants will be eager to see if imports from Saudi Arabia fall back below 1 million b/d where they had been the previous six weeks.

That drop in imports since mid-June was consistent with remarks by the country's energy minister in late May to expect fewer cargoes arriving in the U.S. from Saudi Arabia.

Another factor offsetting the size of last week's crude draw was production, which rebounded 20,000 b/d to 9.43 million b/d, a high going back to July 2015, according to EIA estimates.

Output declined the week ended July 21, which was a rare occurrence, as EIA has pegged weekly production at higher levels nearly non-stop this year.



CRUDE RUNS STAY ABOVE 17 MILLION B/D


The biggest driver pulling crude barrels from storage remains refinery demand, which remains not far off the record-high of 17.51 million b/d set the week ended May 26.

Refinery activity tends to peak in the summer, so the concern was that utilization had peaked perhaps too early setting the stage for a pullback that would sap crude demand.

But that scenario has not materialized, as product demand has proved strong enough to support crack spreads, which in turn, have incentivized refiners to keep cranking out supply.

The NYMEX RBOB crack spread against WTI averaged $18.75/b in July, compared with an average of $13.21/b in July 2016. On Wednesday, the crack was $20.03/b, versus around $15/b last year at this time.

Since the week ended June 2, the amount of crude processed by refiners has averaged 17.191 million b/d. By comparison, the 17 million b/d mark was never broached in 2016.

Crude runs rose 123,000 b/d last week to 17.408 million b/d, lifting the refinery utilization rate 1.1 percentage points to 95.4% of capacity, the highest level since August 2015.

Analysts were looking for utilization rate to have declined 0.1 percentage point. A year ago the rate stood at 93.3% of capacity.



GASOLINE DEMAND AT ALL-TIME HIGH


Gasoline implied demand rose 21,000 b/d to 9.842 million b/d, a record-high according to EIA data going back to 1991.

Since the week ended June 2, implied demand has averaged 9.6 million b/d, which was about 400,000 b/d above the five-year average for the same period.

As a result, gasoline stocks have drawn seven of the last nine reporting periods, despite high levels of refinery utilization.

Last week saw gasoline stocks draw 2.517 million barrels to 227.679 million barrels. Analysts expected a decline of 1.3 million barrels.

Inventories have fallen by nearly 14.8 million barrels over the last seven weeks, compared with an average build of 1.535 million barrels during the same period from 2012-16.

Those counter seasonal drawdowns have shrunk the surplus to the five-year average to 3.48% from nearly 11%.

Stocks on the Atlantic Coast, delivery point for the NYMEX RBOB futures contract, rose 434,000 barrels to 62.597 million barrels, raising the surplus to the five-year average to 3.4% from 1%.

Distillates stocks declined for the fifth time in the last six reporting periods, down 150,000 barrels to 149.414 million barrels, but fell short of an expected draw of 900,000 barrels.

The surplus to the five-year average inched up to 10.98% after having fallen the week prior to its lowest level of the year.

Implied distillates demand fell 236,000 b/d to 4.14 million b/d. Demand has averaged 4.2 million b/d the last five weeks, versus 3.7 million b/d during the same period in 2016 and the five-year average of 3.79 million b/d.


CONTACT
Kathleen Tanzy, + 1 917 331 4607, kathleen.tanzy@spglobal.com



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