U.S. commercial crude oil stocks likely slid during the reporting week ended May 17 amid further increases in refinery utilization, according to a Platts analysis and a survey of oil analysts. The American Petroleum Institute (API) will release its weekly report on U.S. fuel inventories at 4:30 p.m. EDT (2030 GMT) Tuesday, while the U.S. Energy Information Administration (EIA) numbers are due at 10:30 a.m. EDT (1430 GMT) Wednesday.
Analysts polled Monday by Platts anticipate a 1.2 million-barrel decrease in crude oil inventories, slightly less than twice the 693,000 barrel decline predicted by the EIA's rolling five-year average.
Data released by the EIA on Wednesday and covering the reporting week ended May 10 showed U.S. crude stocks at 394.890 million barrels, down 624,000 barrels from the week previous.
U.S. crude stocks typically begin a long spring/summer drawdown period in mid-May as U.S. refineries continue to return from maintenance, increasing demand for crude oil as utilization rates ramp up across the country.
"What usually happens is you see a gradual ramping up of gasoline supply and a rise in [refinery] run rates," said Bill O'Grady, chief market strategist at Confluence Investment Management. "[Product gets shoved] out into the system to meet anticipated consumption, and the combination of that shoving and the need to build product requires an increase in run rates, and consequently, some decline in crude."
O'Grady anticipates a 1.5 million-barrel decrease in U.S. crude inventories during the week ended May 17 in conjunction with a 1 percentage-point increase in refinery utilization rates.
Analysts polled by Platts anticipate a 0.7 percentage-point increase in refinery utilization rates.
Crude oil inputs have risen steadily over the last three reporting weeks, jumping by 765,000 barrels per day (b/d) since the week ended April 19. During the week ended May 10, crude inputs were nearly 3% above the rolling five-year average, a Platts analysis showed.
"This week we continue on with our return to refineries running, and we're going to see [the Midwest] make some changes," Oil Outlooks President Carl Larry said. "We'll get a decent draw out of Cushing, and overall, we'll get runs up higher."
Larry, who expects weak crude imports during the week ended May 17, also anticipates a 1.5 million-barrel decline in crude inventories.
U.S. domestic crude production has hovered above 7.3 million b/d since mid-April, clocking in at multi-decade highs and displacing crude imports. According to the EIA data, crude oil imports have averaged below 8 million b/d for 13 of the last 15 weeks.
"It's tricky because although lots of oil is being drilled in the U.S. and Canada, it's not completely fungible, which is why the NYMEX crude-Brent spread is as wide as it is," O'Grady said.
The increase in refinery utilization is likely to either boost product inventories or slow drawdowns, even as demand – for gasoline in particular – is expected to tick higher.
Analysts expect a 200,000-barrel decrease in U.S. gasoline stocks, less than a quarter of the 960,000-barrel drop predicted in the EIA's five-year average. U.S. gasoline inventories rose an unanticipated 2.59 million barrels during the week ended May 10.
At 8.341 million b/d during the week ended May 17, implied demand* for the road fuel was more than 8% below the five-year average, even though demand is typically expected to increase in May ahead of the peak-demand summer driving season.
U.S. distillate stocks are expected to increase by 1.1 million barrels over the week amid increases in refinery production, counter to the mild draw seen in the EIA's five-year average. At 119.864 million barrels, however, U.S. distillate inventories are 10.57% below the rolling five-year average.
* Implied demand is the amount of product that moves through the U.S. distribution system, not actual end consumption.
Source: Platts