Crude oil stocks on the USGC fell 6 million barrels the week ended May 30 as the region’s refinery utilization rates rose and crude oil imports plunged, data from the U.S. Energy Information Administration (EIA) showed.
Total U.S. crude oil stocks fell 3.4 million barrels to 389.5 million barrels during the May 30 reporting week, putting inventories at a 3.92% surplus to the EIA five-year average. That surplus, however, has narrowed from more than 13% in November 2013.

The total stock draw outpaced analysts’ expectations of a 2 million-barrel decline.

Movements on the USGC accounted for the bulk of the stock decline, with inventories in that region dipping 6 million barrels to 207.1 million barrels. That's partly due to refiners there ramping utilization rates up to 90.1% of capacity, from a previous 89.9%.

Refinery runs in the region rose despite the idling of a crude oil unit at Marathon Petroleum's 522,000 barrels per day (b/d) Garyville, Louisiana, refinery which was shut after a tornado damaged the plant May 28.

The company expects the unit to be back online by mid-June and noted it "does not expect total refinery throughputs to be significantly impacted, projecting less than a 5% reduction to the company's prior throughput guidance for this quarter."

Total U.S. refinery utilization rates climbed 2.2 percentage points to 90.8% of capacity.

At the same time, crude oil imports to the USGC fell 1.05 million b/d to 2.87 million b/d.

Total imports to the U.S. were down 686,000 b/d to 7.12 million b/d, led by a 338,000 b/d drop in Colombian imports to 64,000 b/d and a 326,000 b/d decline in Venezuelan imports to 527,000 b/d.

Crude oil stocks in the U.S. Midwest fell 300,000 barrels to 89.7 million barrels.

At the New York Mercantile Exchange (NYMEX) delivery hub at Cushing, Oklahoma, crude oil stocks fell for the eighth straight week to 21.37 million barrels, from a previous 21.69 million barrels. The decline puts stocks there at a 47.8% deficit to the five-year average.

Tim Evans, commodity analyst at Citi Futures Perspective, noted there has been some talk in the market that Cushing inventories might recover during the second half of the year, saying it’s "a plausible development that would remove one of the market's critical fundamental supports of the past four months."

U.S. OIL DEMAND FALLS, DISTILLATE STOCKS BUILD

Total U.S. implied oil demand* fell 977,000 b/d to 18.59 million b/d the week ended May 30, prompted by a 206,000 b/d decline in gasoline demand to 9.1 million b/d.

Still, gasoline demand is some 280,000 b/d above the same reporting week in 2013.

Torbjorn Kjus, an oil market analyst at DNB Bank, noted that U.S. oil demand in the second half of 2013 averaged 19.5 million b/d. So far in 2014, average oil demand has been 18.7 million b/d, leading Kjus to doubt that demand will grow another 800,000 b/d to match 2013 levels.

"The problem for the headlines about U.S. oil demand for the coming six months will be that unless we see this massive increase in demand for the second half of the year, the demand [comparisons] with the prior year will be negative," Kjus said. "We believe that is the most plausible scenario for the average of the remaining weeks of 2014."

U.S. distillate stocks rose 2 million barrels to 118.1 million barrels, putting inventories at a 13.7% deficit to the five-year average. That deficit has narrowed from more than 20% in mid-March.

Distillate production was up 237,000 b/d to 5.23 million b/d – the highest level since December 27, 2013.

Analysts were anticipating a 1 million-barrel draw in distillate stocks.

U.S. gasoline stocks rose a moderate 200,000 barrels to 211.8 million barrels, far less than expectations of a 2 million-barrel increase.

Gasoline stocks on the USAC -- home to the New York Harbor-delivered NYMEX RBOB contract -- rose 1.4 million barrels to 60.6 million barrels. Gasoline stocks also rose 700,000 barrels on the U.S. West Coast.

The builds were mostly offset by a 1.5 million-barrel draw in gasoline stocks in the U.S. Midwest.

* Implied demand is the amount of product that moves through the U.S. distribution system, not actual end consumption.
Source: Platts