U.S. crude oil stocks fell just 219,000 barrels to 359.99 million barrels during the week ended September 6, as high production offset a drop in imports, data released by the U.S. Energy Information Administration (EIA) showed. U.S. crude oil production climbed 124,000 barrels per day (b/d) to 7.75 million b/d during the week ended September 6, while imports dropped 238,000 b/d to 8.02 million b/d.
While crude oil imports into the U.S. West Coast climbed 118,000 b/d, U.S. Gulf Coast (USGC) imports declined 150,000 b/d, while Midwest imports were down 134,000 b/d.
The U.S. has grown less reliant on imported crude oil as domestic production has risen. Last year at this time, U.S. production was 5.54 million b/d, and imports were 8.57 million b/d, the EIA data showed.
Midwest crude oil imports at 1.68 million b/d the week ended September 6 were down 338,000 b/d from the reporting week ended August 23. The bulk of Midwest imports come from Canada. Total U.S. crude oil imports from Canada have fallen 346,000 b/d since August 23 to 2.31 million b/d, according to the EIA's weekly preliminary data.
Some traders, however, expect more Canadian supply to reach the U.S. soon as Enbridge Pipeline has concluded hydrostatic tests on its Line 14 this week. The 24-inch line has a 317,600 b/d capacity, and predominantly transports crude oil to the Chicago area.
The drop in imports, combined with steady refinery runs, has eroded crude oil stocks in the Midwest.
Midwest stocks at 97.25 million barrels the week ended September 6 were down 1.98 million barrels on the week, and down 21.13 million barrels since May 24, the EIA data showed. Stocks are now just 12% above the five-year average, down from a 30% surplus in June.
Stocks at Cushing, Oklahoma – the delivery point for New York Mercantile Exchange (NYMEX) crude oil futures – fell 639,000 barrels the week ended September 6. Stocks at 34.12 million barrels were just 6.5% above the five-year average, down from a 46% surplus at the end of June.
Midwest refiners were operating at 93.8% of capacity during the week ended September 6, as were USGC refiners, as refining margins remain healthy.
The Midwest WTI cracking margin averaged $15.83 per barrel (/b) the week ended September 6, while the Western Canadian Select coking margin averaged $33.04/b, according to Platts data.
The USGC WTI margin averaged $7.50/b the week ended September 6, although USGC margins have softened this week on a drop in gasoline prices. The USGC WTI cracking margin closed Tuesday at $2.60/b.
USGC gasoline stocks are well-supplied. At 77.88 million barrels the week ended September 6, stocks were up 2.31 million barrels on the week, and 13% above the five-year average, the EIA data showed.
Total U.S. gasoline stocks were up 1.66 million barrels the week ended September 6 at 217.65 million barrels, as the USGC build was offset by a 1.44 million-barrel decline on the U.S. Atlantic Coast (USAC) to 56.82 million barrels.
The USAC gasoline surplus has narrowed since spring. Stocks are now 5% above the five-year average, down from nearly 15% in mid-May.
This could be bullish for the New York-delivered RBOB futures, although peak summer demand has passed. Implied* U.S. gasoline demand at 8.61 million b/d the week ended September 6 was down 489,000 b/d.
U.S. refiners have shifted production to maximize distillate output ahead of winter heating season. Production at 5.05 million b/d was unchanged during the week ended September 6, but up 161,000 b/d from August 23. During the same two weeks, U.S. gasoline production has fallen 334,000 b/d.
As a result, U.S. distillate stocks jumped 2.59 million barrels during the week ended September 6 to 132.17 million barrels, with increases throughout the country offsetting a 426,000 barrel decline on the USAC.
Combined low and ultra low sulfur diesel (ULSD) stocks on the USAC at 32.55 million barrels were down 456,000 barrels on the week, but 19% above the five-year average, the EIA data showed.
In contrast, combined low and ULSD stocks on the USGC, while up 1.23 million barrels the week ended September 6 at 37.02 million barrels, were 6% below the five-year average.
* Implied demand is the amount of product that moves through the U.S. distribution system, not actual end consumption.
Source: Platts