EIA Weekly Report week ending October 26th, 2018
Highlights:
- For the week ending October 26, US Crude inventories built by 3.2 Mbbls, while API was reporting a larger build of 5.7 Mbbls and analysts were expecting a 4.1 Mbbls build.
- Gasoline inventory drew by 3.2 Mbbls, which is in line with API’s 3.5 Mbbls draw.
- Distillate inventory fell by 4.1 Mbbls, larger than API’s draw of 3.1 Mbbls, while analysts were expecting a draw of 1.4 Mbbls.
- Total Refinery Utilization is up slightly by 0.2% to 89.4%.
- Cushing inventory built by 1.9 Mbbls.
- Crude Imports decreased by 344 kbpd and Crude Exports is higher by 305 kbpd. Total product exports is higher by 414 kbpd.
- Lower 48 crude production is higher by 300 kbpd.
- Real crude supply decreased by 338 kbpd, with an adjustment factor of 597 kbpd.
- Finished gasoline production increased by 336 kbpd to 10.3 Mbpd and total distillate production increased by 23 kbpd to 4.9 Mbpd.
- Total Product demand decreased by 494 kbpd. Gasoline demand decreased 62 kbpd, while Distillate demand increased by 420 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 | 0 | 1 | 0 | -1 | 1 | 1 | 0 | -1 |
1 |
- We are neutral to slightly bullish on this week’s stats due to larger draws in distillate inventory, lower crude imports, and higher crude exports. However, we want to raise the concern that lower crude import and higher crude export could also be perceived as bearish. The US market has been saturated with crude and need an outlet that is apparent. However, the world may not be able to absorb the additional crude from the U.S. especially when global margins are under tremendous pressure. US production is not subject to any agreement thereby challenging the OPEC’s effort in controlling the output which could lead to another production cut in 2019 and forward.
- PADD I and PADD III saw the lowest amount of crude imports last week at -194 kbpd and -220 kbpd, this was likely due to a less attractive WTI / Brent Arb.
- Refinery utilization was higher in both PADD II and PADD III, which signals that refining turnarounds are slowing down, but PADD II still has a long way to go since it is only at 75.4%. YoY PADD II is 11.3% lower and also exceptionally lower when compared to historical averages. If PADD II’s refinery utilization is expected to return to levels around the 5 year average in this climate of weakening refining margins, we could see an influx of refined products flooding a market that doesn’t want anymore. Major product productions has already been at the 5 year highs or slightly above for majority of the year, so we could potentially see it spike even higher for Q4 resulting in a worsening refining picture.
- While L48 production is up 300 kbpd WoW, for the month of October based on the past 4 reports, L48 production rates have actually been flat. This is in line with EIA’s own prediction from last month where they were forecasting a October slowdown.
