S&P Global Platts Preview of U.S. EIA Data: Likely to Show Crude Stocks Fell 3.6 Million Barrels

By S&P Global Platts Oil Futures Editor Geoffrey Craig

New York - August 14, 2017

Oil futures have become lodged in a tight price range this month as traders await the autumn maintenance period that typically brings with it a seasonal drop in refinery demand and resulting build in crude stocks, according to an S&P Global Platts preview of this week’s pending U.S. Energy Information Administration (EIA) oil stocks data.

Survey of Analysts Results:
  • Crude stocks expected to fall 3.6 million barrels
  • Refinery utilization expected to decrease 0.6 percentage points
  • Gasoline stocks expected to drop 400,000 barrels
  • Distillate stocks expected to decline 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)

U.S. crude inventories have fallen almost continuously since April, showing a drawdown of 60.1 million barrels lower to 475.4 million barrels, the lowest since October 2016, according to Energy Information Administration data.

The size of the declines has been larger than usual, cutting the surplus to the five-year average to 23% in the week ended August 4, down from more than 34% at the end of March.

Analysts surveyed Monday by S&P Global Platts expect crude stocks fell 3.6 million barrels in the week ended August 11. From 2012-16, stocks fell by 2.2 million barrels on average the same week.

Falling U.S. crude oil inventories were a major catalyst behind last month's rally that lifted prompt-month New York Mercantile Exchange (NYMEX) crude oil futures off a year-to-date low of $42.05 per barrel (/b) in late June to more than $50/b July 31.

Term structure also strengthened. The front-month/second-month spread remains in contango* -- where it has been since October 2014 -- but has been less than 20 cents/b since July 20.

Even though U.S. crude stocks have continued falling, last month's rally has since stalled, leaving prompt NYMEX crude stuck in the high $40s and structure sitting on the precipice of backwardation.

One likely reason is that traders have begun looking ahead to the seasonal slowdown in U.S. refinery activity that usually starts in mid-August and causes crude stocks to stop drawing and eventually build.

That will mark a reversal from the record-high refinery demand of late that has been the main engine behind crude stock draws.

The amount of crude processed by refiners averaged 17.574 million b/d in the week ended August 4, a record, beating the previous mark of 17.51 million b/d in the week ended May 26, according to EIA data.

A pullback in the weekly refinery utilization rate therefore seems likely. Analysts expect the utilization rate fell 0.6 percentage point to 95.7% of capacity in the week ended August 11.

For the same period a year ago, the utilization rate equaled 93.5% of capacity, the highest level of 2016. By October, however, refiners were operating at around 85% of capacity for most of the month.


A headwind for crude prices is concern that refinery utilization could plummet after the U.S. Labor Day holiday, similar to last year, which would mean a big reduction in demand.

Conversely, with crack spreads outperforming 2016 levels, refiners could be persuaded to delay or at least keep at a minimum the extent of planned repairs they perform.

The front-month NYMEX reformulated blend stock for oxygenate blending (RBOB) crack spread has averaged $19.30/b so far this month, versus $14.60/b during the same period a year ago. The ultra-low sulfur diesel (ULSD) crack has averaged $19.70/b this month, compared with $13.50/b last year.

A string of refinery upsets have supported cracks. Chevron shut a 55,000-barrels-per-day (b/d) catalytic reformer at its 360,000 b/d Pascagoula, Mississippi, refinery, becoming the fifth Gulf Coast reformer to be taken offline last week.

The other problems occurred at Shell's refinery in Norco, Louisiana; Citgo's refinery in Lake Charles, Louisiana; and Phillips 66's refinery in Borger, Texas.

In addition, Valero's Meraux, Louisiana, refinery was shut because of a power failure. That facility was heard to have restarted Thursday.

Refinery problems likely contributed to an expected draw in gasoline stocks of 400,000 barrels last week. If confirmed, that would fall short of the nearly 1.7 million-barrel decline seen on average from 2012-16.

Gasoline stocks had been narrowing the surplus to the five-year average until the week ended August 4, when a surprise build lifted that figure to 5.7%, up from around 3.5% the week prior.

Inventories had been at a surplus to the five-year average of nearly 11% in early June, but then stocks fell for seven straight weeks by 14.8 million barrels at a time of year when inventories are little change.

Even though refinery activity has recently set record highs, so too has gasoline implied** demand, tilting the balance in favor of drawdowns.

Gasoline implied demand averaged 9.797 million b/d the week ended August 4, which was 45,000 b/d below the level from the week prior. This represented an all-time high, according to EIA data going back to 1991.


Distillate stocks have been below year-ago levels the last four reporting periods, while the surplus to the five-year average fell below 10% in the week ended August 4 for the first time this year.

One factor helping eat away at the surplus -- which had been above 20% in early March -- has been exports amid refinery woes in Europe.

U.S. Gulf Coast exports of distillates to Northwest Europe and the Mediterranean set to arrive in August tally around 2 million metric tons (mt), according to data from cFlow, S&P Global Platts trade flow software.

That represents the most since April 2016, and reflects the need for supply from a few weeks ago exacerbated by a fire that erupted at Europe's largest refinery in Rotterdam.

Shell shut most units at the 404,000 b/d Pernis refinery July 30 because of the fire. A company spokesman said last week those units should be restarted before the end of August.

Another factor luring U.S. cargoes to Europe has been shortness of supply in the eastern Mediterranean following an outage at the 100,000 b/d Elefsis refinery in Greece combined with peak Turkish demand.
The delivered price of Gulf Coast diesel, including freight, has been mostly at a discount to cost, insurance and freight (CIF) Mediterranean since mid-April, according to S&P Global Platts assessments, indicating favorable arbitrage economics.

Analysts surveyed Monday by Platts expect distillates stocks to show a decline of 700,000 barrels in the week ended August 11. Inventories, on average, increased by approximately 860,000 barrels during the same period from 2012-16.

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.

Implied** demand is the amount of product that moves through the US distribution system, not actual end consumption.

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

About S&P Global Platts
At S&P Global Platts, we provide the insights; you make better informed trading and business decisions with confidence. We’re the leading independent provider of information and benchmark prices for the commodities and energy markets. Customers in over 150 countries look to our expertise in news, pricing and analytics to deliver greater transparency and efficiency to markets. S&P Global Platts coverage includes oil and gas, power, petrochemicals, metals, agriculture and shipping.

S&P Global Platts is a division of S&P Global (NYSE: SPGI), which provides essential intelligence for individuals, companies and governments to make decisions with confidence. For more information, visit

Copyright © 2018 S&P Global Platts, a division of S&P Global. All rights reserved.