In Oil & Companies News 01/07/2016
U.S. Energy Information Administration (EIA) data this week showed that a reduction in U.S. crude oil imports and an increase in refinery utilization pulled more crude out of storage during the latest reporting week. U.S. commercial crude oil inventories declined 4.053 million barrels to 526.573 million barrels.
Imports fell by 884,000 barrels per day (b/d) to 7.56 million b/d in the week ended June 24, while refinery utilization rose 1.7 percentage points to 93% of operable capacity — an increase of 190,000 b/d of throughput to 16.695 million b/d. The U.S. West Coast accounted for the majority of the increase in refinery throughput, rising 148,000 b/d to 2.515 million b/d and the highest level since October 2015.
Imports from Saudi Arabia posted a sharp drop of 747,000 b/d to reach 738,000 b/d.
Inventories typically shrink in the summer as refiners ramp up to meet peak summer demand, and analysts were expecting crude stocks to have fallen by 2.4 million barrels and the refinery utilization rate to have increased 0.6 percentage point to 91.9% of capacity.
Crude stocks declined 3.1 million barrels on average for the same time of year the last five years (2012-15), according to EIA data. Crude inventories were down across all regions, with Midwest stocks drawing by 2.658 million barrels to 151.014 million barrels.
Regional refinery throughput was up 81,000 b/d to 3.751 million b/d, while imports were down by 151,000 b/d at 2.138 million b/d.
U.S. oil production fell 55,000 b/d to 8.622 million b/d, with the decline roughly split between Alaska and the Lower 48 states. U.S. output is now down 597,000 b/d from the start of 2016 and 988,000 b/d lower than the peak reached in June 2015.
The Baker Hughes oil drilling rig count fell by seven to 330 active rigs in the week ended June 24, down 298 from the same time last year and 1,279 from the peak reached in October 2014.
Crude futures settled sharply higher on the larger-than-expected draw and signs of falling U.S. output. New York Mercantile Exchange (NYMEX) August light sweet crude settled $2.03 higher at $49.88/b, while ICE August Brent moved in lockstep to settle $2.03 higher at $50.61.
A rally across financial markets and a weaker dollar also served as catalysts for higher prices.
Gasoline stocks post surprise build
U.S. gasoline stocks rose 1.367 million barrels to 238.998 million barrels, with imports rising for a second consecutive week, up 28,000 b/d to 904,000 b/d and well above the year-to-date average of 687,200 b/d, as inventories grew by 1.367 million barrels to 238.998 million barrels.
As usual, the U.S. Atlantic Coast (USAC) accounted for the lion’s share of gasoline imports, rising by 155,000 b/d to 839,000 b/d.
Arbitrage economics to send gasoline to from Northwest Europe to the U.S. Atlantic Coast have been favorable in recent months. Delivered European blend stock for oxygenate blending (Eurobob) gasoline cargoes on the USAC have averaged a discount of $31.13 per metric ton (/mt) discount to front-month NYMEX reformulated blend stock for oxygenate blending (RBOB) so far in June. But this is still less than the discounts seen in each of the three previous months.
The gasoline stock build came as a surprise after analysts predicted a decline of 600,000 barrels. As a result, NYMEX July RBOB was lagging the gains made across the oil complex, settling just 1.48 cents higher at $1.5248 per gallon (/gal).
Gasoline supplied — a proxy for implied demand — remained at elevated levels, virtually flat at 9.714 million b/d on a four-week average. Product supplied reached an all-time record of 9.815 million b/d in the week ended June 17.
Record gasoline demand in the U.S. has been met by robust refinery gasoline output, which reached 10.02 million b/d last week.
U.S. gasoline stocks are now 11.46% above the five-year average, after being roughly in line with the average until the end of 2015. As U.S. gasoline stocks have broken above the five-year average and global gasoline inventories have swelled, crack spreads have come under pressure, potentially capping significant upside in crude futures.
The NYMEX RBOB-West Texas Intermediate (WTI) crack price spread has averaged $16.74/b so far in June, compared to $19.61/b in May and $21.56 in April, and $26.61/b last June.
With the relative weakness of RBOB futures Monday, the crack spread was trading at $14.67/b, down $1.232.
Distillate stocks drew by 1.8 million barrels to 150.51 million barrels after increasing for the previous three reporting weeks. The draw exceeded analysts’ expectations of a 1-million-barrel reduction, as NYMEX July ultra-low sulfur diesel (ULSD) settled 6.24 cents higher at $1.5335/gal.
U.S. distillate stocks are now 17.73% above the five-year average, less than the 27.97% cushion seen in April.
As distillate stocks have declined relative to gasoline in recent months, the spread between NYMEX RBOB and ULSD futures has tightened significantly, with ULSD trading at a premium to RBOB on Monday for the first time since February 29.
*Implied demand is the amount of product that moves through the U.S. distribution system, not actual end consumption.
Source: S&P Global Platts
