Platts : Analysis of U.S. EIA Data: U.S. gasoline, distillate stocks build 19 million barrels on week

U.S. gasoline, distillate stocks build 19 million barrels on week
Platts Oil Futures Editor Geoffrey Craig
New York - January 07, 2015

U.S. gasoline and distillate stocks rose a combined 19 million barrels the week ended January 2, far outpacing a 3 million-barrel draw in crude oil stocks, U.S. Energy Information Administration (EIA) data showed Wednesday.

Combined refined product stocks have increased seven weeks in a row, while crude oil inventories have fallen in four of those weeks.

With crude oil runs at or above 16 million barrels per day (b/d), refineries have been pulling crude oil from inventory, and churning out refined products.

But the accumulation of gasoline and distillate stocks indicates demand has been insufficient, highlighting underlying weakness that has been dragging oil prices lower.

Analysts surveyed by Platts expected gasoline and distillate stocks to rise a combined 4.3 million barrels, which is in line with historical movements.

Gasoline and distillate stocks typically rise the week after Christmas, according to the EIA five-year average.

On the U.S. Gulf Coast (USGC), crude oil runs increased 272,000 b/d to 8.64 million b/d. The region's refinery utilization rate reached 95.9% of operable capacity, up 1 percentage point.

While USGC gasoline crack spreads* have been less than stellar, distillate cracks have risen over the past week, giving refiners plenty of opportunity to keep runs high.

The ultra-low-sulfur diesel (ULSD) crack against Light Louisiana Sweet (LLS) crude oil closed at $16.52 per barrel (/b) Tuesday, up from $9.15/b on December 24, according to Platts data. The USGC jet crack against LLS has risen to $16.84/b from $9.43/b over the same period.

In contrast, the USGC conventional 87 gasoline crack against LLS closed at $2.52/b Tuesday, although that was up from minus $5.85/b December 24.

DISTILLATE STOCKS RISE

Total U.S. distillate stocks rose 11.21 million barrels to 136.93 million barrels.

Domestic distillate production decreased 127,000 b/d, but remained over 5 million b/d. For the same reporting week, domestic distillate production averaged 4.64 million b/d from 2009-13.

Distillate stocks increased in the U.S. Midwest (USMW), U.S. Atlantic Coast (USAC) and USGC. In all three regions, current levels are above the EIA five-year average for the same reporting week.

USAC combined low- and ULSD stocks rose 3 million barrels, USMW combined stocks were up 4.3 million barrels and USGC combined stocks rose 3 million barrels to 39 million barrels.

U.S. gasoline stocks increased 8.12 million barrels to 237.16 million barrels.

Gasoline production fell 1.5 million b/d to 8.7 million b/d. However, that change was based on production over 10 million b/d in the prior week, ended December 26.

On the USAC, home to the New York Harbor-delivered New York Mercantile Exchange (NYMEX) futures contract, gasoline stocks rose 4.7 million barrels to 62.4 million barrels, a 4.7% surplus to the EIA five-year average.

USGC gasoline stocks were up 1.2 million barrels to 81.5 million barrels, a 7.3% surplus to the EIA five-year average. USMW stocks rose 2 million barrels to 52.7 million barrels, which was 0.2% above the EIA five-year average.

CRUDE OIL STOCKS DRAW

The biggest crude oil draw occurred on the USGC, where stocks fell 4 million barrels to 194.670 million barrels.

USMW crude oil stocks built 2.9 million barrels to 109.3 million barrels, helping mitigate the draw.

Stocks in Cushing, Oklahoma -- delivery point for the NYMEX crude oil contract -- increased 1.3 million barrels to 32.1 million barrels.

Cushing stocks have increased 8.2 million barrels in the last five weeks. A contango** term structure in NYMEX crude oil futures incentivizes companies to store crude oil, a factor that could be driving Cushing stocks higher.

Crude oil imports fell 205,000 b/d to 6.9 million b/d, helping crude oil stocks draw lower. The moving four-week average for imports was 7.5 million b/d.

* The crack spread is the simultaneous purchase or sale of crude oil against the sale or purchase of refined petroleum products.

** Contango is the industry vernacular for the condition whereby prices for nearby delivery are lower than prices for future-month delivery.

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