EIA Weekly Report week ending August 3, 2018
Highlights:
- For the week ending August 3, US Crude inventories saw a draw of 1.4 Mbbls, compared with analysts’ expectations of a 3.3 Mbbls draw and a 6.0 Mbbls draw from API.
- Gasoline inventory built by 2.9 Mbbls, compared with API reporting a build of 3.1 Mbbls while analysts expected gasoline to draw 1.7 Mbbls.
- Distillate inventory built by 1.2 Mbbls, compared with analyst expectations of 0.220 Mbbls build while API reported a 1.8 Mbbls build.
- Refinery Utilization increased by 0.5% to 96.6%.
- Cushing inventory saw a draw of 0.590 Mbbls.
- Crude Imports increased by 181 kbpd and Exports are higher by 1.5 Mbpd. Crude exports are higher WoW by 540 kbpd.
- Lower 48 crude production is lower by 100 kbpd WoW.
- Real crude supply is lower by 615 kbpd with an adjustment factor of 524.
- Finished Gasoline production decreased by 570 kbpd to 9.9 Mbpd and Distillate production increased by 78 kbpd to 5.2 Mbpd.
- Total Product demand is higher by 358 kbpd. Gasoline demand is lower by 532 kbpd and Distillate demand is higher by 391 kbpd.
Our Interpretation:
Bullish = +1
Bearish = -1
Scale = -9 to +9
| Crude Inventory | Gasoline Inventory | Distillate Inventory | Product Demand | Product Supply | Crude Imports | Crude Exports | Ref Utilization | L48 Crude Production |
Bullish/Bearish (+/-) |
| 0 | -1 | 0 | 0 | 1 | 0 | 1 | 0 | 1 |
2 |
- Stats suggest a moderate bullish report, but we feel more neutral based on a small than expected crude draw, softer product demand and weak crude imports WoW. Gasoline continues to drag the whole complex lower in terms of hefty inventory and signs of demand destruction amid elevated pricing environment.
- PADD III refinery utilization climbed 2.7% WoW to 97.3%, which could be an issue in the coming week(s) if they don’t slightly reduce their run rates. With the run rates being quite high, likely due to strong margins, PADD III is producing a lot of product, but seasonally gasoline demand is weakening as suggested by last week’s sharp decline of 600 kbpd. Another possible reason why PADD III is running quite high is due to strong jet fuel demand from Latin America with its high summer travel season. US jet fuel’s premium to ULSD reached its widest point for the year at 1.75 c/gal.
- The build in products last week is somewhat expected on a seasonal level, but distillate stocks are still quite low compared to the 5 year range and it is expected to remain low throughout this year, especially when factoring in the season uptick in the coming months. Gasoline stocks are still relatively high, but it is quite apparent that with strong margins PADD III has been able to heavily export gasoline, which has also affected gasoline production in PADD V where it is higher by nearly 4 Mbbls YoY.
- As expected from previous week, we anticipated the revision on L48 crude production following the release of monthly data. According the latest rig count and constraints surrounding Permian, we expect the production to grow at a slower pace into Q3 and Q4 2018, providing more bullish tone to the market.
- The build in PADD II product inventories is due to higher run rates, however we believe the build is in anticipation of elevated refinery turnaround that is set to start in September.
