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Commentary on US Oil Inventories 27/06/2012

Published Wednesday, June 27th, 2012

This week’s report from the EIA on US oil stocks are more on the bearish side. Although distillate inventories registered a surprise draw, gasoline stocks increased and crude oil inventories were broadly unchanged. What tips the scale to the negative side is that total commercial stocks jumped by 2.6 mln bbls, the 10th consecutive weekly rise. This build takes inventories 37 mln bbls or 3.4% above last year’s level and 32.6 mln bbls or 3% above the 5-year average.

Whilst the tiny draw in crude oil stocks is more positive than the API build one should not be misled. PADD5 drew 1.6 mln bbls and PADD3 built 3.2 mln bbls (the highest since May 2009) therefore crude oil inventories are more on the negative side. It is true eventhough stocks at Cushing dropped by 339,000 bbls. This significant build in PADD3 came despite crude oil imports dropped by 327,000 bpd to 9.079 mbpd and refinery runs in the US Gulf Coast  fell 0.9%, (although nationwide refinery utilization rose to its highest level since July 2007). Nationwide crude oil inventories are ample; they are 27.7 mln bbls or 7.2% higher than this time of last year and 34.1 mln bbls or 8.8% above the 5-year average.

If anything can support the market based on the inventory stats then it is distillates. This product drew much more than the the API thought. It was mainly due to a hefty 2 mln bbls decrease in PADD3. This fall had stocks in this product drop 23 mln bbls or 19.7% below last year’s level and 19.55 mln bbls or 16.4% below the 5-year average..

On the other hand the increase in gasoline stocks is a negative surprise. Again, the USGC saw the biggest jump with PADD2 increasing by nearly 1 mln bbls. Despite this increase gasoline stocks are still 8.4 mln bbls or 4.1% lower than a year ago and 5.9 mln bbls or 2.9% below the 5-year average.

Total product demand fell 0.9% to 18.82 mbpd compared to a year ago on the 4-week average basis. Gasoline demand was down 4.8% at 8.83 mbpd. There is something to cheer about on the distillate front. Hunger for this product rose 0.1% to 3.60 mbpd.

All in all the relatively uneventful figures hide the fact that PADD3 took a centre stage in the latest report with a big crude and gasoline build and a hefty distillate draw. On balance it is more bearish than bullish so if the market rallies today it will probably not be because of the current state of US oil stocks.

Posted by Tamas Varga

Tamas Varga has been in the oil industry since 1992 and with PVM for 18 years. During his time in the industry he has gathered a range of experience in the oil markets. At PVM Tamas is in charge of data collection and analysis.