U.S. commercial crude oil stocks are expected to have fallen 2.5 million barrels during the reporting week ended July 12, according to a Platts analysis and survey of oil analysts. The U.S. Energy Information Administration (EIA) is scheduled to release its weekly data at 10:30 a.m. EDT (1430 GMT) Wednesday.
At 373.92 million barrels, U.S. crude oil stocks are coming off the sharpest two-week draw ever reported in EIA data. Stocks have fallen more than 20 million barrels from 394.14 million barrels during the reporting week ended June 21.
Despite recent declines, U.S. crude oil stocks remain 8.2% above the five-year average of EIA data. That said, another decline is likely as five-year average data shows crude oil stocks typically fall around 800,000 barrels during this reporting week.
"I know that there's been a lot of refinery issues the past week, but the only difference is that we won't be topping 16 million barrels per day (b/d) in runs," Oil Outlooks President Carl Larry said, suggesting that, despite a decline, runs are still strong. U.S. crude oil runs have been blazing at pre-recession levels during the past two reporting periods, breaching the 16 million b/d mark for the first time since July 2007.
Refinery utilization is expected to decline 0.2 percentage point.
BP Thursday said it shut a 105,000 b/d crude oil distillation unit at its Whiting, Indiana, refinery for maintenance. Also during the week ended July 12, BP-Husky started planned maintenance on a 7,500 b/d coker unit at the Toledo refinery in Oregon, Ohio.
Valero on Friday said it would shut a 75,000 b/d fluid catalytic cracker at its Port Arthur, Texas, refinery. This follows reduced throughput as of Tuesday morning. And Philadelphia Energy Solutions shut a 20,000 b/d alkylation unit at its 330,000 b/d refinery in Philadelphia on Friday, but it is unlikely that API or EIA data will include this in the weekly calculation window.
This is offset by some additional capacity. During the week ended July 12 a major unit was restarted at Phillips 66's 76,000 b/d refinery in Rodeo, California. And Valero started up its new 60,000 b/d hydrocracking unit at the 270,000 b/d St. Charles refinery in Louisiana.
Stocks at the storage hub at Cushing, Oklahoma – delivery point for the New York Mercantile Exchange (NYMEX) crude oil futures contract – will likely also draw, Larry said.
At 46.97 million barrels, Cushing stocks are ample, but likely to continue to draw as long as the IntercontinentalExchange (ICE) Brent/NYMEX crude oil spread remains narrow. The Brent/WTI spread has narrowed steadily to around $3 per barrel (/b) since February, when it was trading around $23/b.
"We're going to have imports still sucking wind," Larry said. "Domestic production might taper off to prevent any bottle-necking because of the Canadian shale oil derailment ... losing the BP Whiting unit was too late last week to see this drop off too much."
U.S. gasoline stocks are expected to have stayed flat as analysts remain mixed on the fundamentals. At 221 million barrels, U.S. gasoline stocks are nearly 4% above the five-year average. Stocks on the U.S. Atlantic Coast (USAC) – home to the New York Harbor-delivered NYMEX RBOB contract – are more than 10% above the five-year average.
Despite ample supplies, the U.S. is firmly entrenched in its summer driving season, and gasoline demand remains strong. On a four-week moving average, U.S. implied demand* for gasoline was 9.08 million b/d as of the week ended July 5. At 9.3 million b/d during the week ended July 12, outright demand is at its highest in nearly a year.
On one hand, imports to the USAC are sharply lower at 482,000 b/d for the week ended July 5 – nearly half of year-ago levels. A sharp upturn in the RBOB/Brent crack spread could see European refiners sending more gasoline westward.
The front-month RBOB crack spread to ICE Brent has jumped to more than $22/b Friday from under $12/b at the beginning of July.
On the other hand, gasoline imports to the USAC could be a thing of the past, according to analysts, as demand is met from local refining and the Colonial pipeline, which ships gasoline to the region from the U.S. Gulf Coast.
U.S. gasoline imports have averaged 655,000 b/d over the past two years, and since June 2011, the U.S. has imported more than 1 million b/d in a week only three times, according to Oil Outlooks data. Between January 2009 and June 2011, the U.S. averaged 922,000 b/d in gasoline imports, and imported more than 1 million b/d in a week 44 times.
"Imports are a lost cause, and good luck trying to find those numbers getting much better the rest of the year," Larry said.
U.S. distillate stocks are expected to have increased 1.8 million barrels during the week ended July 12, about half the build shown in the week-on-week change to the EIA five-year average.
Source: Platts