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US crude oil stocks keep falling

Published Thursday, June 30th, 2016

This time around there was no differing view between the API and the EIA as far as crude oil inventories were concerned. The former saw them dropping by 3.9 million bbls and the latter matched it. The hefty draw was largely due to the 1.7% increase in refinery utilisation which now stands at 93%, the highest since the beginning of December 2015, and the nearly 1 mbpd fall in crude oil imports. Domestic production fell by another 55,000 bpd week-on-week and at 8.622 mbpd is the lowest since September 2014. The biggest draw (-2.66 million bbls) took place in PADD 2 where crude run rates reached 95.7% last week, up 2.1% from the week before. Of course, the 62,000 bpd decrease in oil imports from Canada also contributed to the large fall in crude oil inventories in the Midcontinent. It is also worth pointing out that imports from Saudi Arabia halved last week to 738,000 bpd, according to the EIA’s preliminary estimate.

The surprise 1.37 million bbl build in gasoline inventories hindered NYMEX RBOB to match the daily gain in WTI. It finished the day only 148 points higher whilst the US crude oil benchmark gained $2.03/bbl on the day. The RBOB/WTI crack fell $1.41/bbl yesterday and is now $14/bbl below last year’s level. US gasoline stocks are 10% above last year’s level ahead of the Independence Day weekend.

Distillate, on the other hand, was bullish. Stocks in this product registered a drop of 1.8 million bbls against expectations of unchanged inventory levels. Stocks are now 13 million bbls or 8% lower than in April and the year-on-year surplus has been reduced to 10%. The front-month Heating Oil discount to RBOB has fallen drastically from more than 12 cents/gallon at the beginning of the month and this contract settled at an 87 points premium to RBOB yesterday, up 624 points on the day. If the relative Heating Oil strength does continue refiners will likely ramp up distillate production at the expense of gasoline, as pointed out in yesterday’s report, thereby reversing the current trend.

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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.