U.S. crude oil inventories fell 7 million barrels the week ended December 27, as refinery runs edged higher and companies acted to limit taxes on stocks, an analysis of U.S. Energy Information Administration (EIA) data showed. Total U.S. crude oil inventories have fallen 30.85 million barrels since November 22 to 360.57 million barrels, with the bulk of that decline -- 21.96 million barrels -- coming from the U.S. Gulf Coast (USGC). Crude oil inventories on the USGC fell 3.8 million barrels to 172.43 million barrels the week ended December 27, the EIA data showed.

USGC crude oil inventories typically decline at the end of the year. On its website, the EIA showed an average draw of 8 million barrels during December between 1981 and 2012.

"The reason for this sharp decline: December 31 is the typical assessment date for taxes on crude oil stocks that are collected by many states/counties/municipalities in regions where the bulk of U.S. crude oil and petroleum product inventories are stored," the agency said.

U.S. crude oil production edged up 10,000 barrels per day (b/d) to 8.12 million b/d the week ended December 27, up 1.14 million b/d from last year. U.S. crude oil imports slipped 40,000 b/d to 7.5 million b/d.

Imports into the USGC climbed 515,000 b/d to 3.88 million b/d. But December imports into the USGC averaged 3.58 million b/d, down 364,000 b/d from the average of the November weekly data, the EIA data showed. This is likely related to refiners reducing supply for tax purposes.

Likewise, USGC refiners upped crude oil runs in December. An average of 8.45 million b/d was processed in the four weeks ended December 27, up 305,000 b/d from the November average, the EIA data showed.

USGC crude oil stocks typically recover during the first quarter, with the five-year average showing an increase of roughly 30 million barrels by mid-April.

Despite the crude oil stock draws, the U.S. remains well supplied. USGC stocks were 8.5% above the five-year average the week ended December 27, while Midwest stocks at 108.89 million barrels were 15.4% above the five-year average. Stocks at Cushing, Oklahoma -- the delivery point for New York Mercantile Exchange (NYMEX) crude oil futures -- at 39.63 million barrels were down 552,000 barrels the week ended December 27. The surplus to the five-year average has narrowed to 10.6% from 26.4% in mid-November.

Lower Cushing stocks seem to have tightened the prompt NYMEX crude oil contango*, although not by a large degree. The front/second month spread settled at minus 18 cents per barrel (/b) Thursday, down from minus 65 cents/b November 15.

U.S. refiners, while processing more crude oil, have also boosted distillate production and inventories. Distillate production at 5.23 million b/d the week ended December 27 was up 162,000 b/d. As a result, distillate stocks jumped 5.04 million barrels to 119.15 million barrels, the EIA data showed.

The largest increase was seen in the U.S. Midwest, where distillate stocks jumped 2.42 million barrels, followed by a 1.43 million-barrel climb on the USGC.

Combined low- and ultra-low sulfur diesel (ULSD) stocks climbed 306,000 barrels to 25.26 million barrels on the U.S. Atlantic Coast (USAC), which could prove bearish for the New York-delivered NYMEX ULSD contract. Still, the deficit to the five-year average has widened slightly to 5.4% from 0.1% December 6.

The deficit has narrowed on the USGC, as exports have not kept up with the increase in refinery runs. Combined low-sulfur and ULSD stocks on the USGC climbed 1.6 million barrels to 34.21 million barrels the week ended December 27, putting inventories at 4.6% below the five-year average. That was up from a 12.8% deficit in mid-November, when stocks were 3.69 million barrels lower.

U.S. gasoline stocks climbed 844,000 barrels to 220.72 million barrels the week ended December 27, with the USAC leading the rise with a 1.02 million-barrel increase.
Source: Platts