EIA Weekly Report week ending September 21st, 2018
Highlights:
- For the week ending September 21, US Crude inventories built by 1.9 Mbbls, while API was forecasting a build of 2.9 Mbbls and analysts were expecting a 1.3 Mbbls draw.
- Gasoline inventory built by 1.5 Mbbls, which is larger than analyst expectations of 788 Kbbls and API’s forecast of 949 Kbbls.
- Distillate inventory drew by 2.2 Mbbls, while API was showing a smaller draw of 944 Kbbls.
- Total Refinery Utilization decreased by 5.0% to 90.4%.
- Cushing inventory saw a meager build of 461 Kbbls.
- Crude Imports decreased by 222 kbpd, while exports are higher WoW by 574 kbpd.
- Lower 48 crude production increased by 100 kbpd.
- Real crude supply declined by 340 kbpd, with an adjustment factor of 517 kbpd.
- Finished gasoline production decreased by 438 kbpd to 9.8 Mbpd and total distillate production also declined by 462 kbpd to just under 5.0 Mbpd.
- Total Product demand declined by 1,135 kbpd. Gasoline demand dropped 547 kbpd, while Distillate demand increased another week by 139 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 (+/-) |
| -1 | -1 | 0 | -1 | 1 | 1 | 1 | -1 | -1 |
-2 |
- We are slightly bearish on this week’s stats due a build in US crude inventories, weaker product demand but more importantly the build in gasoline stocks.
- Since we were anticipating turnarounds, the build in crude inventories was not totally unexpected, but what is surprising is the substantial loss in PADD II’s refinery utilization. This can be attributed to BP Whiting, Marathon Detroit, Valero Ardmore and WRB Wood River refineries and as a result major products production dropped by 3.6% WoW or 619 kbpd. We should see a slight recovery as WRB Wood River resume from its TAR in the next week or so.
- Distillate demand increased another week this time by 139 kbpd and distillate exports are once again lower. The lower distillate exports may suggest weaker demand from Mexico and Latin America. The 2.2 Mbbls draw in distillate inventory is in line with loss in refinery utilization rate. Distillate inventory is being watched closely as we might experience harsh winter across the Northern Hemisphere raising concerns surrounding the sufficiency of heating requirement.
- Gasoline inventory build is quite alarming as it hovers and marks five year high levels even during a period when refinery turnarounds are rising. This will become a drag on refinery margins even if distillate demand rises during Q4 2018. The gasoline – distillate price spreads are likely to get crushed further.
- The market should start paying attention to Q1 2019 fundamentals. We believe the current pricing environment is reflecting the fundamental in Nov/Dec time frame when refineries return from turnarounds. Looking further out, refinery turnarounds are expected to rise again in Jan/ Feb time frame resulting in weakness in WTI Dec and Jan contracts.
