In Oil & Companies News 15/01/2016
U.S. gasoline stocks continued to drive higher last week even as more U.S. refiners entered seasonal maintenance, U.S. Energy Information Administration (EIA) oil data showed Wednesday.
While some analysts suspect rising stocks amid a decline in production should equate to falling U.S. gasoline demand, much of the data points in a different direction.
Gasoline stocks increased well beyond analysts’ expectations, rising 8.44 million barrels to 240.43 million barrels in the week ended January 8. It was the second week in a row gasoline stocks have soared. For the week ended January 1, gasoline inventories rose 10.576 million barrels.
But refinery activity slowed last week amid sweeping seasonal maintenance — especially on the U.S. Gulf Coast (USGC) — with the amount of crude processed falling 194,000 barrels per day (b/d) to 16.423 million b/d. This helped drag refinery utilization rates 1.3 percentage points lower to 91.2% of capacity, in line with analysts’ expectations.
The drop in runs helped keep U.S. crude oil stocks well-supplied. Total U.S. crude inventories edged slightly higher, up 234,000 barrels to 482.59 million barrels. USGC stocks, however, fell 2.87 million barrels to 236.57 million barrels last week.
Refinery utilization rates on the USGC — home to more than 50% of U.S. refinery capacity — dropped 2.6 percentage points to 91% of capacity.
Despite this substantial decline, EIA data showed production of unfinished gasoline blending components was again greater than the amount blended with ethanol to make finished gasoline, according to Rob Merriam, manager of petroleum supply statistics at EIA.
Less blending activity at the terminal level, rather than changes in refinery activity or weak motor gasoline demand, has caused inventories to balloon, Merriam said. Refiners might be chasing healthy margins, while blenders are trying to store components ahead of the spring refinery maintenance season, he added.
Despite weak product prices, refining margins are largely positive. For example, Louisiana Light Sweet (LLS) cracking margins on the USGC averaged over $4/b last week, with gasoline largely driving cracking yields.
This suggests those refiners who have not cut runs due to seasonal turnarounds are likely still maximizing blending component production, rather than the comparatively weaker distillates.
Platts margin data reflects the difference between a crude’s netback and its spot price. Netbacks are based on crude yields, which are calculated by applying Platts product price assessments to yield formulas designed by Turner, Mason & Co.
Furthermore, much of the build in blending components appears to be seasonal in nature. Merriam said that the pace of blending activity usually declines from late December to early January.
EIA data shows that the US refiner and blender net input of gasoline blending components have also been negative the last two reporting periods.
This statistic is usually positive during the year, but turns negative in late December and early January.
A negative net input means blending component production exceeds the amount required for blending, which for the week ended January 8 came out to the tune of 691,000 b/d.
What is unusual is the size of the build. Gasoline stocks have increased a total of 19 million barrels the last two reporting periods, while the EIA five-year average for the same two-week stretch shows gasoline stocks rising only 9.5 million barrels.
Distillate stocks built 6.136 million barrels last week to 165.554 million barrels. Analysts were looking for distillate stocks to have decreased 1.2 million barrels last week.
Combined stocks of low- and ultra-low sulfur diesel on the Atlantic Coast increased 1.494 million barrels to 56.053 million barrels, exceeding the five-year average for the same reporting period by 102%.
Implied* demand dropped 202,000 b/d to 2.832 million b/d, which was 28% below the year-ago level. Production dropped 216,000 b/d to 4.76 million b/d.
Source: Platts
