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S&P Global Platts Preview of U.S. EIA Data: Likely to Show Gasoline Stocks Drop of 1 Million Barrels


Geoffrey Craig, S&P Global Platts oil futures editor


NEW YORK - November 14, 2017


Analysts surveyed Monday by S&P Global Platts are looking for U.S. Energy Information Administration (EIA) data to show a gasoline inventories decline of 1 million barrels for the latest reporting week, compared with an average build of 302,000 barrels for the same reporting period from 2012-16.



  • Gasoline, distillate inventories expected to draw again
  • Refinery utilization seen rising post-maintenance
  • Demand rises for moving products along Colonial Pipeline

Steady declines have lowered U.S. inventories of gasoline and distillates below their respective five-year averages, keeping aloft crack spreads that should motivate refiners to run hard.



After three straight weekly draws, U.S. gasoline stocks sit at 209.537 million barrels, a deficit of 0.2% to the five-year average, according to Energy Information Administration data.



Distillate inventories have drawn nine of the last 10 weeks by 3.359 million barrels to 125.562 million barrels, a deficit of 2.2% to the five-year average for the same time of year.



Distillate stocks likely fell by 2 million barrels last week. If confirmed, such a drop would exceed the average drawdown of 1.1 million barrels for the same week from 2012-16.



Product stocks have been falling despite greater refinery activity. U.S. refinery utilization equaled 89.6% of capacity in the week ended November 3, up from a low of 84.5% three weeks earlier.



Analysts are looking for the utilization rate to have increased last week by 0.8 percentage point to 90.4% of capacity. By comparison, the utilization rate averaged 89.2% a year ago.



Greater refinery demand helps draw crude stocks lower. Analysts expect crude Inventories fell 1 million barrels last week, compared with an average build of nearly 2.4 million barrels from 2012-16.



Refinery activity should increase for another few weeks as autumn maintenance concludes, particularly given solid NYMEX product cracks that provide a further incentive.



The NYMEX ultra-low sulfur diesel (ULSD) crack has been steady since September at around$23/b-$25/b. A year ago the ULSD crack was roughly $15/b-16/b.



The NYMEX RBOB crack spread against WTI rose from a low of $14.50/b in early Ootober to roughly $19/b-$20/b so far this month. The RBOB crack averaged $12/b during the first half of November from 2014-16.

USAC GASOLINE IMPORTS FROM EUROPE



Gasoline stocks in the Central Atlantic, a region that encompasses the New York Harbor, fell to 24.02 million barrels in the week ended November 3, the fewest since April 2011.



One factor driving stocks lower has been fewer imports. The U.S. Atlantic Coast (USAC) did not receive a single European gasoline cargo from October 28 to at least November 6, according to U.S. Customs data.



That was the longest stretch without imports since S&P Global Platts started tracking the data in August 2015.



Ongoing maintenance at major refineries, including Europe's largest in Rotterdam, have pushed stocks lower in Northwest Europe.



Gasoline stocks in the Amsterdam-Rotterdam-Antwerp hub fell to 769,000 metric tons (mt) in the week ended October 26, a year-to-date low, and were up to 917,000 mt in the week ended November 9, according to PJK International data.



But at least six cargoes carrying refined products from the U.K. were scheduled to deliver into the USAC starting November 7, according to data from cFlow, S&P Global Platts' trade-flow software.



Another factor that should help replenish stocks around the New York Harbor is improved arbitrage opportunities from the Gulf Coast.



On Thursday, the value of space on Colonial Pipeline's Line 1, which carries 1.37 million b/d of gasoline from the Gulf Coast to Linden, New Jersey, turned positive for the first time since August.



Conventional gasoline in Linden averaged a 10.46 cent/gal premium to the Gulf Coast from Tuesday through Friday, inclusive of linespace cost, according to S&P Global Platts' calculations.



The last time that spread was above 10 cents/gal for more than a single day was from September 5-15 after Colonial needed to reduce flows because of Hurricane Harvey's impact on USGC refiners.



USGC-USAC ARBITRAGE OPPORTUNITY



Likewise, falling diesel stocks on the Atlantic Coast have driven demand for shipping product up Colonial's Line 2 pipeline, which carries distillates from the Gulf Coast to the New York Harbor.



S&P Global Platts assessed Colonial Pipeline's Line 2 space Friday at plus 1 cent/gal, the highest level since December 2016. Line 2 space value turned positive October 27 for only the second timesince January, and has been strengthening since then.



ULSD barrels delivered into Linden on Friday were at a 1.15 cents/gal premium over USGC barrels after an estimated 5.5 cents/gal in transportation and fees costs.



Stocks of low and ultra-low sulfur diesel on the Atlantic Coast have been 40 million-41 million barrels the last four weeks, their lowest level since July 2015 and nearly 29% below a year ago.



The winter of 2016-17 was warmer than normal in the U.S. Northeast, which depressed heating fuel demand and kept stocks well-supplied.



U.S. Gulf Coast combined stocks equaled 36.528 million barrels in the week ended November 3, a surplus of 13% to the year-ago level.



An uptick in Gulf Coast distillate exports to Europe this month could help draw USGC stocks lower. The amount of distillate expected to arrive in Northwest Europe and the Mediterranean from the USGC is around 1.2 million mt, according to cFlow. That would mark the first time the monthly flow has topped 1 million mt since Hurricane Harvey's arrival in late August.



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



** Reformulated blend stock for oxygenate blending (RBOB) futures contract, the biggest premium to the front-month contract since late August.



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