U.S. commercial crude oil stocks are expected to have declined 1 million barrels for the reporting week ended June 14, 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. The expected decline is more than double seasonal norms, as the EIA five-year average shows U.S. crude oil stocks typically fall around 400,000 barrels during this reporting period.
Analysts expect the stock draw to be supported through a reduction in crude oil imports. Weekly import volumes have been volatile lately and were 7.850 million barrels per day (b/d) for the reporting week ended June 7. That is up from 7.268 million b/d for the week ended May 31, but down from 8.13 million b/d as recently as May 17.
"It was nice while it lasted," Oil Outlooks President Carl Larry said of higher import numbers. "But it's just not going to stay [this way] for the rest of summer."
Larry expects crude oil stocks to have declined 2.25 million barrels the week ended June 14.
"Firstly, if Motiva can't pull barrels from the Saudis because it's not working consistently, well then we can just move on," he said. "There are barrels coming up from the Middle East, but they are minimal barrels headed to the East Coast and are replacing West African barrels.
Citi Futures Perspectives energy analyst Tim Evans also expects U.S. crude oil imports to decline. Evans sees imports down around 300,000 b/d, supporting a stock draw of between 1 million-2 million barrels.
Meanwhile, refinery runs are expected to have increased by 1 percentage point.
"We'll expect runs to kick it up a notch in PADD2," Larry said. "[M]argins aren't all that bad, and we think that the mechanical issues weren't all that bad during the week ended June 14."
Midwest West Texas Intermediate (WTI) cracking margins averaged around $26 per barrel (/b) the week ended June 14, down sharply from just over $41/b the prior week, according to Platts data and Turner, Mason & Co. yield formulas. West Texas Sour (WTS) margins in the region fell to around $29/b from near $45/b over the same time period.
According to Platts data for the week ended June 14, ExxonMobil's 238,000 b/d Joliet, Illinois, refinery completed planned maintenance, as did the 306,000 b/d Phillips 66/Cenovus Wood River refinery in Roxana, Illinois. In the Gulf Coast, Valero completed maintenance on the older of two hydrocrackers at its 290,000 b/d Port Arthur, Texas, refinery.
Increased refinery utilization supports builds in both gasoline and distillate stocks. The Platts analysis shows U.S. gasoline stocks are expected to build by 1.2 million barrels, almost three times the seasonal norm shown by the EIA five-year average.
"Yeah, we're going to build, but it's summer and that's what we do," Larry said, expecting gasoline stocks to rise 1.75 million barrels. "We used to actually increase demand during this time, but that's been absent for a while, too. So we think demand nudges a little higher, but overall runs dominate with imports fading once again."
Meanwhile, analysts polled were mixed about U.S. distillate stocks. The Platts analysis suggests a build of around 300,000 barrels – around one-quarter of the seasonal norm shown in the EIA five-year average.
Sentiment that exports to Latin America have faded should be disregarded, Larry said.
"We're going to see exports continue to head south, and we now are hearing more about barrels headed to the EU," he added, noting that U.S. stocks should have increased by 1 million barrels on a reduction in domestic implied demand*.
* Implied demand is the amount of product that moves through the U.S. distribution system, not actual end consumption.
Source: Platts