USGC stocks surged 5.7 million barrels the week ended April 25 to 215.3 million barrels as refiners in the region dialed back utilization rates, U.S. Energy Information Administration (EIA) data showed.Total U.S. crude oil stocks rose 1.7 million barrels to 399.4 million barrels, with the jump in USGC stocks partially offset by declines in inventories across the rest of the country.

Analysts polled by Platts were anticipating a 2.1 million-barrel build in total crude oil stocks.

The USGC stock total is another record for the region and puts stocks there at a 14% surplus to the EIA five-year average.

USGC stocks rose amid a drop in refinery utilization rates to 92.9% of capacity, down from 94.1% of capacity the week ended April 18.

Torbjorn Kjus, an oil market analyst at DNB Bank, said the large build in crude oil stocks does not bode well for Light Louisiana Sweet (LLS) crude oil values.

LLS fell to a $6.77 per barrel (/b) discount to Brent on Tuesday, according to Platts data, more than double the discount seen at the beginning of April. At the same time, the LLS-WTI spread moved to $2.15/b on Tuesday. A year earlier, the spread was at $10.85/b.

The continued flow of crude oil into the USGC has been due in part to pipelines connecting the USGC to the New York Mercantile Exchange (NYMEX) delivery point at Cushing, Oklahoma, like TransCanada's 590,000 barrels per day (b/d) Cushing Marketlink pipeline and the 400,000 b/d Seaway pipeline. The greater flow of crude oil into the USGC, analysts have noted, has been matched by higher refinery throughputs.

But as USGC stocks continue to rise and reach fresh records, inventories are moving closer to total storage capacity held in the region.

Commercial crude oil total storage capacity in the USGC stood at 303.4 million barrels as of September 2013, based on the latest EIA data, including refiners, terminals and tank farms.

Economist Phil Verleger, in a recent research report, noted that 70% of the storage capacity is at terminals and tank farms, not refiners. Of the storage held at terminals and tank farms, 65% is for the exclusive use of owners.

Only 35% of the storage is available for others to use, Verleger noted, adding that the "ownership of storage capacity for exclusive use is almost certainly creating a problem for those seeking to move oil to Houston and the Gulf."

By comparison, at Cushing, where storage capacity is 77.3 million barrels, some 85% of that is available for lease by others.

Cushing crude oil stocks, for the April 25 reporting week, fell 600,000 barrels to 25.4 million barrels, widening its deficit to the five-year average to 35.6%.

Also the week ended April 25, the U.S. Strategic Petroleum Reserve (SPR) fell 1 million barrels to 693.6 million barrels. This reduction reflects part of the 5 million-barrel test sale of SPR crude oil by the U.S. government, announced March 17. The SPR is the U.S. government's safety-net of oil supply.

U.S. CRUDE OIL IMPORTS FALL, USAC DOWN

U.S. crude oil imports fell 313,000 b/d to 7.48 million b/d. The decline was from a 350,000 b/d drop in Venezuelan imports and a 302,000 b/d drop in Mexican imports. A 229,000 b/d rise in Canadian imports lessened the overall decline in imports.

On the USAC, crude oil imports fell 136,000 b/d to 742,000 b/d the week ended April 25. This comes after imports surged to 878,000 b/d in the April 18 reporting week.

On a four-week moving average, USAC crude oil imports at 689,000 b/d were higher for the fourth week in a row. The increase follows a general upward trend in USAC imports this time of year, as refiners exit spring maintenance.

It is also possible the higher imports were related to a recent narrowing of the Brent-WTI spread, which gave Brent-priced West African crude oils the advantage over WTI-priced Bakken crude oil during the first half of April.

The delivered cost of Nigerian Bonny Light fell to a $2.31/b discount to the delivered cost of Bakken on April 10, for instance. The EIA's preliminary country of origin import data showed a rise in both Nigerian and Angolan crude oil imports over the past two weeks, although that data is not broken down by region.

The Bonny Light advantage was short-lived, though, with delivered Bonny rising to a $3.02/b premium to delivered Bakken by April 25.

GASOLINE STOCKS RISE, OUTPUT DROPS

U.S. gasoline stocks rose 1.6 million barrels to 211.6 million barrels the week ended April 25, counter to expectations of a 1.75 million-barrel draw.

The weekly build was the first since early February and came despite a 268,000 b/d reduction in gasoline production.

Implied demand* for gasoline rose 263,000 b/d to 8.69 million b/d, EIA data showed.

Kjus noted that the gasoline yield was at a low level the week ended April 25, and was not likely to be sustainable, adding that it should be easy to increase gasoline output without increasing crude oil runs in coming weeks.

"Gasoline has now provided the price signal to see exactly this kind of movement as gasoline in April is more expensive than heating oil for the first time since last summer," Kjus said in a note. "We expect a much higher gasoline yield to help increase the output of gasoline in the coming weeks."

U.S. distillate stocks rose 1.9 million barrels to 114.4 million barrels the week ended April 25, outpacing expectations of a 1 million-barrel build.

* Implied demand is the amount of product that moves through the U.S. distribution system, not actual end consumption.
Source: Platts