A rise in refined product inventories reported by the U.S. Energy Information Administration (EIA) Wednesday for the week ended August 2 trumped a drop in crude oil stocks.U.S. crude oil stocks fell 1.32 million barrels to 363.3 million barrels during the week ended August 2, but New York Mercantile Exchange (NYMEX) petroleum futures were bearish following the report, with RBOB and ultra low sulfur diesel (ULSD) leading the way lower on gasoline and distillate stock builds.
Even another fall in stocks at Cushing, Oklahoma – the delivery point for NYMEX crude oil – failed to spark a bullish reaction. Cushing stocks fell 2.245 million barrels to 39.87 million barrels during the week ended August 2. Since the week ended May 24, Cushing stocks have fallen 10.63 million barrels, causing the surplus to the five-year average to tighten to 18% from 43%.
Cushing stocks have fallen as Midwest refiners have increased runs. Midwest refiners processed 3.54 million barrels per day (b/d) of crude oil during the week ended August 2, according to the EIA, down slightly on the week, but up 524,000 b/d from the week ended May 24. Midwest refiners were operating at 94% of capacity during the week ended August 2, the highest region, percentage-wise, in the U.S.
The U.S. is well-supplied with crude oil. U.S. production averaged 7.56 million b/d during the week ended August 2, up 18,000 b/d. U.S. imports fell 254,000 b/d to 7.91 million b/d, but the largest decrease – 451,000 b/d – was seen on the U.S. West Coast.
Crude oil imports into the Midwest – which are mostly from Canada – rose 131,000 b/d to 1.89 million b/d, while imports into the U.S. Gulf Coast (USGC) slipped 94,000 b/d to 3.67 million b/d.
Imports into the U.S. Atlantic Coast (USAC) jumped 238,000 b/d to 1.1 million b/d, the EIA data showed. The EIA does not report regional imports by country of origin on a weekly basis, although Platts’ vessel tracking software cFlow showed some of that crude oil may have come from West Africa.
The Ephesos, for instance, entered Delaware Bay on July 27, after loading crude oil from Pointe-Noire, Republic of Congo. The ship was on its way to Philadelphia.
EIA monthly data shows BP has imported Congolese crude oil in the past. In May, for instance, the company imported crude oil matching the specification for N'Kossa into PBF's 190,000 b/d Delaware City, Delaware, refinery, and to the 185,000 b/d Monroe Energy, Pennsylvania, refinery. Delta airlines, which owns Monroe Energy, purchased the refinery from BP more than a year ago.
U.S. gasoline stocks climbed just 140,000 barrels during the week ended August 2 to 223.6 million barrels. A 1.37 million-barrel stock build on the USAC looked bearish for the New York-delivered RBOB contract. USAC stocks at 61.66 million barrels were 8.8% above the five-year average, the EIA data showed.
USAC gasoline imports slipped 65,000 b/d to 635,000 b/d. But on a four-week moving average, imports at 594,000 b/d were higher for the second week in a row.
Platts cFlow showed the Atlantic Queen arrived in Bayonne, New Jersey, August 2, fixed by Valero to ship gasoline from the U.K. Continent (UKC). That followed the Politisa Lady, fixed by JP Morgan, which arrived July 29 in Portland, Maine.
Other imports were fixed recently that should show up in future EIA reports. The Abu Dhabi Star, fixed by CSSSA, the shipping arm of Total, arrived in Bayonne August 4. The Conti Equator, fixed by Shell, arrived in Boston August 3.
Other unspecified clean tankers possibly carrying gasoline due to arrive in Bayonne include the Repsol-fixed Unique Harmony on August 7 and the Conoco-fixed Challenge Pearl on August 8.
Several other ships carrying unspecified clean products left the UKC earlier this week, scheduled to arrive in Bayonne, Boston and Providence by the middle of the month.
The product is likely gasoline, considering historic flows. According to the EIA's monthly data, for instance, in May out of 1.05 million b/d of refined product imports into the USAC, 648,000 b/d were gasoline blending components. Of the remaining 402,000 b/d, 113,000 b/d were distillate fuel sent exclusively from Canada.
USAC gasoline sources said Tuesday they expect gasoline imports to rise as prices for renewable credits, also called RINs, continue to fall.
It's worth pointing out that recent imports were fixed when RINs prices were high. The Atlantic Queen, for instance, departed on July 17, when current year ethanol RINs reached $1.44/RIN. Current year RINs have since fallen to be assessed at 90 cents/RIN Tuesday.
But USAC gasoline prices were much higher as well in mid-July, likely opening up the arbitrage for trans-Atlantic imports. NYMEX front-month RBOB settled at $3.1101 per gallon (/gal) July 17, but has since fallen to trade around $2.8768/gal midday Wednesday.
The higher RINs prices may have sparked an increase in diesel exports, however. Platts cFlow data shows an increase in clean tankers exiting the USGC bound for the UKC – a common diesel route – between July 25 and August 3. The seven vessels were due to arrive in the UKC August 12-18.
USGC refiners were producing ULSD at near-record-high levels the week ended August 2, at 2.53 million b/d. ULSD stocks climbed 641,000 barrels to 33.49 million barrels.
Total U.S. distillate stocks were higher in the week ended August 2, rising 469,000 barrels to 126.46 million barrels.
Combined low and ULSD stocks on the USAC fell 1.69 million barrels to 30.27 million barrels. Continued draws could be bullish for the New York-delivered NYMEX ULSD contract. Stocks were 10.5% above the five-year average, narrowing from 20% above the week ended July 5.
NYMEX crack spreads were looking bearish, however. The front-month NYMEX ULSD crack against ICE Brent was trading around $17.15 per barrel (/b) midday Wednesday, down from $18.17/b Tuesday and $20.61/b on July 31.
The RBOB crack against ICE Brent was trading around $13.18/b midday Wednesday, having fallen from $18.15/b on July 31.
Source: Platts