EIA Analysis: Commercial crude oil stocks tumble despite SPR release

NYMEX crude futures jumped Wednesday, brushing off big losses in equities in favor of a surprise stock draw reported by the US Energy Information Administration. Crude stocks fell 7.719 million barrels. Some of that draw came from an SPR release, but a sizable portion was a result of higher refinery runs. Linda Rafield’s take on this week’s numbers can be found here.

US crude stocks dropped 7.719 million barrels in the week that ended August 5, with 2.495 million barrels moving out of the Strategic Petroleum Reserve (SPR) and commercial stocks falling another 5.225 million barrels, an analysis of data released Wednesday by the Energy Information Administration (EIA) showed.

Analysts polled by Platts had projected a build in crude stocks of 1.8 million barrels.

At 349.750 million barrels, US commercial crude stocks were 15.79 million barrels above the five-year average, but 5.242 million barrels below year-ago levels.

But with crude oil inputs to refineries climbing 135,000 barrels per day (b/d) to 15.624 million b/d, imports of 9.1 million b/d weren’t enough to prevent a stock draw.

Crude imports to the Gulf Coast tumbled 518,000 b/d to 4.241 million b/d, the lowest level since December 4, 2009. But the steep drop in imports onto the Gulf Coast may have reflected the presence of Tropical Storm Don and just temporary delays in cargoes being able to offload.

Imports to the Midwest edged up 92,000 b/d to 1.422 million b/d, but the increase failed to prevent a stock draw in that region.

In particular, crude oil stocks at the New York Mercantile Exchange (NYMEX) futures contract delivery point in Cushing, Oklahoma, declined 1.372 million barrels to 34.581 million barrels, reflecting the narrow front-month price spread in the futures curve and the current lack of economic incentive to store at Cushing. This is the lowest crude stocks at Cushing have been since the week ending November 26, 2010.

But refinery inputs in the Midwest also declined, falling 111,000 b/d to 3.494 million b/d and a three percentage-point drop in utilization rates from the previous week’s exceptionally high – compared with other regions and historically – 96.9%.

Product stocks also declined, falling 3.017 million barrels to 729.667 million barrels and the first decrease in four months.

Both a drop in gasoline and middle distillate inventories contributed to the overall decline in product stocks.

Gasoline inventories fell 1.588 million barrels, while stocks of middle distillates decreased 737,000 barrels.

Exceptionally low gasoline imports continue to erode inventories. Gasoline imports fell 212,000 b/d to 645,000 b/d. On a four-week moving average, gasoline imports at 755,000 b/d were 357,000 b/d less than year-ago levels, likely a response to slowing demand. Gasoline demand on a four-week moving average at 9.122 million b/d was 323,000 b/d fewer than year-ago levels.

But margins were attractive enough to make gasoline, given that refiners pushed output up 387,000 b/d to 9.533 million b/d.

While refiners pushed gasoline yields higher, output of middle distillates dropped 109,000 b/d to 4.52 million b/d, contributing to the decline in inventories, particularly with implied demand* for middle distillates holding up better than that for gasoline. On a four-week moving average, demand for middle distillates at 3.701 million b/d was 246,000 b/d greater than year-ago levels in the most recent week.

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

Platts