U.S. commercial crude oil stocks are expected to have increased 1 million barrels in the week ended Friday, May 1, a survey of analysts showed.The U.S. Energy Information Administration (EIA) is scheduled to release its weekly data at 10:30 a.m. EDT Wednesday.The EIA five-year (2010-2014) average shows inventories increasing 1.7 million barrels for the reporting week.

Inventories tend to rise steadily through the winter and early spring as refineries shut for seasonal repairs. As refineries return from maintenance, more barrels tend to leave storage than enter, reversing the net flow.

The most recent EIA weekly inventory suggested the seasonal change could be underway. For the week ended April 24, crude stocks increased 1.9 million barrels, the second smallest build since a string of continuous increases that began January 9.

Refinery demand has been strong, with the utilization rate averaging 91.2% the last four weeks ended April 24, compared with 89.6% the same period a year ago. Analysts expect the refinery utilization rate to increase 0.6 percentage point to 91.9% of operable capacity.

One question for this week is whether stocks at Cushing, Oklahoma -- delivery point for the New York Mercantile Exchange (NYMEX) crude futures contract -- will rise or fall.

Cushing stocks dropped 514,000 barrels to 61.7 million barrels the week ended April 24, snapping a streak of weekly increases that began early December.

Analysts and traders are wondering whether that decline was an aberration or marked the start of a drawdown phase.

Tanks at Cushing began filling last October as traders took advantage of later-dated futures contracts being more expensive than near-term delivery, making storage profitable.

However, later-dated futures' premium to near-term delivery has been shrinking, eroding the ability to make money through storage.

The 12-month-out futures contract's premium averaged $5.23 per barrel (/b) last week, down from $6.11/b the week prior which was itself the smallest premium since late December.
A secondary question relates to inter-regional crude movements. If Cushing stocks fell last week, yet Gulf Coast stocks rose, this would suggest surplus crude simply flowed from one region to the next, rather than actual drawdown.

That appeared to be the case for the week ended April 24, because Gulf Coast stocks built 1.32 million barrels, offsetting the Cushing decline.

Gasoline Stocks Seen Falling

U.S. gasoline stocks are expected to have decreased 250,000 barrels last week, the analysts surveyed said.

The EIA five-year average shows inventories falling 341,000 barrels in the comparable reporting week.

U.S. distillate stocks are expected to have fallen 430,000 barrels over the latest reporting week, compared with the EIA five-year average for the same reporting week showing a 542,000-barrel decrease.

Chevron began work last week on a hydrocracker at its 269,000-barrels-per-day (b/d) El Segundo, California refinery, West Coast, sources said.

A Chevron spokesman declined to comment, citing company policy. A hydrocracker converts heavy feedstock into refined products, including jet fuel and diesel.

Tesoro began work last week on an unspecified unit at its 363,000-b/d Los Angeles-area refinery complex, according to a company spokeswoman.

Spokeswoman Tina Barbee declined to comment on which unit was affected by the unplanned work, citing company policy.

Phillips 66 said it completed maintenance last week at its 200,000-b/d refinery in Ponca City, Oklahoma.

The company did not offer specifics on which unit was being worked on. A Midwest source familiar with operations at the plant said it was a hydrotreater. A hydrotreater reduces sulfur and nitrogen to produce high specification distillates.
Source: Platts