U.S. commercial crude oil stocks fell 3.97 million barrels during the reporting week ended July 18 to 371.07 million barrels, U.S. Energy Information Administration (EIA) oil data showed.Analysts surveyed Monday by Platts had been looking for a 2.6 million-barrel decline.Steady refinery runs, amid no real rebound in imports , likely contributed to the draw, which was well-distributed across much of the U.S.

Even though crude oil runs at U.S. refineries came off slightly, down 28,000 barrels per day (b/d) to 16.6 million b/d, they were backing off a record high of 16.63 million b/d. The negligible decline left U.S. refinery utilization rates level at 93.8% of capacity.

Analysts had been looking for a 1 percentage-point decline.

The draw was felt most in the U.S. Midwest, where stocks dropped 2.02 million barrels to 86.01 million barrels the week ended July 18. The draw came amid a 28,000 b/d decline in Midwest crude oil runs, which fell slightly to 3.79 million b/d. This reduced the region's run rates to 99.5% of capacity.

The still-strong runs were enough to overshadow a 105,000 b/d boost in imports, which rose to 2.03 million b/d.

But stocks at Cushing, Oklahoma -- delivery point for the New York Mercantile Exchange (NYMEX) crude oil futures contract -- fell 1.45 million barrels to 18.82 million barrels. This is the lowest Cushing stocks have been since November 2008.

Much of this decline likely prevented an even larger draw in U.S. Gulf Coast (USGC) crude oil stocks.

USGC stocks fell 910,000 barrels to 196.94 million barrels amid a 23,000 b/d drop in crude oil runs, which fell to a still-laudable 8.62 million b/d.

USGC crude oil runs -- which account for around 51% of total U.S. operable capacity -- have been above 8.6 million b/d for the past three reporting weeks, EIA data shows. Crude oil runs for the week ended July 4 were at a record-high 8.65 million b/d. This time last year, USGC refineries were processing closer to 8.4 million b/d.

Gross refinery inputs, which include feedstocks other than crude oil, were at a record-high 8.69 million b/d the week ended July 11.

IMPORTS FAIL TO RALLY

But flows to the USGC failed to rally the week ended July 18, despite an improved outlook for refining margins for imported grades. Imports actually fell 138,000 b/d to 3.43 million b/d the week ended July 18, putting them 415,000 b/d below year-ago levels.

Even though USGC cracking margins for Nigerian Bonny Light the week ended July 18 averaged around $7.50 per barrel (/b) -- steady to a 60-day, moving average -- margins for comparable North American grades such as Louisiana Light Sweet (LLS) have come off. LLS cracking margins averaged just $9.50/b the week ended July 18, down from a 60-day, moving average of more than $13/b.

This signal, as well as discounted freight rates for ex-West African voyages during much of late-June/early-July, should point to higher imports. That said, EIA data shows U.S. imports of Nigerian crude oil the week ended July 18 were nil for the third straight reporting week, while imports of Angolan crude oil fell to just 67,000 b/d from 137,000 b/d.

Platts margins reflect the difference between a crude oil's netback and its spot price. Netbacks are based on crude oil yields, which are calculated by applying Platts product price assessments to yield formulas designed by Turner, Mason & Co.

U.S. GASOLINE STOCKS JUMP

EIA data shows the U.S. is well-supplied with gasoline. Stocks rose 3.38 million barrels to 217.87 million barrels the week ended July 18, almost three times the build analysts had been expecting.

While stocks on the U.S. Atlantic Coast (USAC) drifted 359,000 barrels lower to 60.23 million barrels, supply remains more than 4% above the EIA five-year average. The USAC is home to the New York Harbor-delivered NYMEX RBOB contract.

Stocks on the USGC, however, jumped 2.62 million barrels the week ended July 18 to 73.53 million barrels.

U.S. distillate stocks rose 1.64 million barrels to 125.93 million barrels, largely in line with analysts' expectations. Production, much of which comes from the USGC, continued to surge above 5 million b/d to 5.21 million b/d.

A build in supply in the USGC itself -- where combined low- and ultra-low-sulfur diesel stocks rose 971,000 barrels to 35.03 million barrels - likely points to weaker exports.

The EIA estimates U.S. distillate exports held steady at 1.15 million b/d for the fifth consecutive week. The EIA revises its weekly estimate and publishes a more definitive export figure in its monthly data, due out next week.
Source: Platts