U.S. commercial crude oil stocks are expected to show a build of 1.1 million barrels for the week ended Friday, according to a survey of analysts conducted Monday by Platts, a leading global energy and commodities information provider. The stockpiles are likely to have grown last week amid a surge in Iraqi imports and widening contango*, which offset the impact of greater refinery demand, a Platts analysis showed.

The U.S. Energy Information Administration (EIA) is scheduled to release its weekly data at 10:30 am EST (1530 GMT) Wednesday.

Iraqi crude totaling 12.8 million barrels is expected to reach U.S. ports in November, according to Platts vessel tracking software cFlow. That compares with 7.8 million barrels of Iraqi crude that arrived in October, EIA preliminary weekly data showed. Another 3.9 million barrels of Iraqi crude is en route and should arrive in December.

Better margins on the U.S. Gulf Coast (USGC) have helped to lure 5.7 million barrels away from Europe, which is facing a sour crude glut. The remainder was already destined for the United States.

Greater coking capacity has given USGC refiners greater flexibility to handle Iraqi Basrah Heavy. While Platts does not track Basrah Heavy margin data, coking margins for the similar Saudi Arab Heavy have averaged $10.33 per barrel (/b) so far in November. By comparison, cracking margins for Arab Heavy in Northwest Europe -- a region lacking in coking capacity -- have averaged just $4.59/b.

That said, the ability for the Gulf Coast to absorb sour crudes might have taken a slight setback following upsets at two delayed coking units last week at Motiva Enterprises' 600,000-b/d Port Arthur refinery.

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

IMPORTS PADDING STOCKS

U.S. crude oil imports have been on the rise, surging 434,000 b/d to 7.377 million b/d for the most recent reporting week ended November 6. This has helped U.S. stocks build for seven straight weeks.

The most recent EIA data pegs U.S. crude inventories at just more than 487 million barrels, nearly 32% above the five-year average. But on the Gulf Coast, inventories increased 25 million barrels over the last eight reporting periods, far outpacing the build a year ago.

This year's rise occurred even though USGC refiners underwent a relatively light maintenance season. Refinery utilization rates in the region have held above 90% since early September.

In fact, analysts surveyed by Platts expect total U.S. run rates to have increased last week, up 0.7 percentage points to 90.2% of operable capacity.

Shell finished unplanned maintenance last week at its Saudi Aramco joint venture 235,000-/d Convent, Louisiana, refinery. Marathon is also in the process of restarting a gasoline-making fluid-catalytic cracker (FCC) at its 451,000 b/d Galveston Bay, Texas, refinery, trade sources said Monday. The FCC had been offline for over a month.

On the Atlantic Coast, Delta Air Lines unit Monroe Energy last week restarted an FCC at its 185,000-b/d Trainer, Pennsylvania, and refinery after planned work.

CONTANGO SUPPORTS STORAGE

Lately, there has also been a growing financial incentive to store barrels on the Gulf Coast. The Mars front-month/third-month spread closed at minus $2.32/b Friday, out from minus $1.35/b October 1 and minus 80 cents/b September 1.

The widening contango could be attracting more waterborne barrels into storage. About 40 tankers sit offshore waiting to unload at US Gulf Coast locations, according to a Platts analysis Monday.

The amount of crude waiting off the Texas and Louisiana coastlines has nearly doubled since September, with about 30 million barrels onboard tankers in November, according to industry data.

DISTILLATE, GASOLINE SEEN DRAWING

Despite an expected uptick in refinery utilization, analysts surveyed by Platts expect draws in distillates and gasoline stocks.

U.S. distillate stocks are expected to decline 700,000 barrels during the latest reporting period. The EIA five-year average for the same reporting period shows inventories dropped 2.6 million barrels.

U.S. gasoline stocks are expected to have fallen 1.2 million barrels last week, the analysts surveyed said. The EIA five-year average shows gasoline stocks declining 505,000 barrels in the comparable reporting week.
Source: Platts