NEW YORK (December 4, 2017) – Increased U.S. refinery utilization following autumn maintenance likely drew crude barrels out of storage and pushed product inventories higher last week, consistent with seasonal norms for this time of year, according to an S&P Global Platts preview of this week's pending U.S. Energy Information Administration (EIA) oil stocks data.
Survey of Analysts Results:
(The below may be attributed to the S&P Global Platts survey of analysts)
* Crude stocks expected to show a drawdown of 4.1 million barrels
* Gasoline stocks expected to increase 2.7 million barrels
* Distillate stocks expected to rise 1.5 million barrels
* Refinery utilization expected to rise 0.7 percentage points
S&P Global Platts Analysis:
(The below may be quoted in part or full, with attribution to S&P Global Platts Oil Futures Editor Geoffrey Craig)
With OPEC's highly anticipated meeting last week in Vienna now complete, traders might pay more attention to supply-demand fundamentals.
But if the data conforms to expectations, a mixed US inventory report might look too neutral to dislodge the oil complex from the range it has settled into recently.
Prompt-month NYMEX crude oil futures have been around $57-$59 per barrel (/b) and ICE Brent roughly $62-$64/b as the market awaits the next catalyst.
Analysts surveyed Monday by S&P Global Platts expected crude stocks fell 4.1 million barrels the week ending December 1, compared with an average draw of 2.5 million barrels from 2012-16 for the same week.
Crude inventories typically decline from late November through early January as refinery demand picks up.
The utilization rate exceeded 90% in early November for the first time since before Labor Day, and was expected to have risen 0.7 percentage point last week to 93.3% of capacity.
One factor helping offset the impact of autumn maintenance on crude stocks was exports, which have been elevated since late September because of the relatively wide ICE Brent/WTI spread.
The four-week moving average for exports topped 1 million b/d at the end of September for the first time, and has since stayed above that mark.
On a weekly basis, however, PIRA Energy -- a unit of Platts -- estimated exports averaged 1.19 million b/d last week, based on data from cFlow, Platts' trade-flow software. Exports averaged 1.412 million b/d the week prior.
Crude stocks have fallen seven of the last 10 weeks by 19.1 million barrels to 453.71 million barrels, reducing the surplus to the five-year average to 13.3% from 25%.
Saudi Arabia's energy minister, Khalid al-Falih, said lowering global stocks to the five-year average remains a goal of OPEC-led supply cuts, which were extended last week by nine months until the end of 2018.
U.S. PRODUCTION AT RECORD LEVELS
Asked about U.S. shale output growth, Falih said those producers represent a "small to moderate challenge" and could help fill any supply deficits that could occur next year.
But some observers see OPEC's supply cuts as having been undermined by US production, which has risen by 983,000 b/d over the last year to a record-high 9.682 million b/d, according to EIA weekly estimates.
With NYMEX crude touching a two-year high in late November near $59/b, producers likely locked in prices, ensuring output growth.
One sign of increased hedging activity could be seen in the Commitment of Traders report from the US Commodity Futures Trading Commission.
Steady increases since September have put the short position held by swap dealers in NYMEX crude at an all-time high 702,808 contracts the week ending November 28, according to CFTC data that goes back to 2006.
Swap dealers serve as counterparties to producers for over-the-counter transactions, and sell futures to mitigate their own price risk.
NYMEX RBOB CRACK KEEPS FALLING
The flip side of more refinery activity is greater product supply, which tends to push gasoline and distillate stocks higher this time of year.
Gasoline inventories were expected to have risen by 2.7 million barrels last week, compared with an average build of 4.4 million barrels for the same reporting period from 2012-16.
On the Atlantic Coast, home to the NYMEX RBOB futures contract, gasoline stocks have risen the last three weeks by 3.6 million barrels to 56 million barrels, a surplus of 4.7% to the five-year average.
Rising inventories have weighed on the NYMEX RBOB crack spread, which was trading Monday afternoon at $13.90/b, down from $19-$20/b a month ago.
On the Gulf Coast, gasoline differentials strengthened last week even though EIA data showed Gulf Coast production averaging a record-high 2.725 million b/d the week ending November 24.
The region's gasoline stocks still fell 119,000 barrels to 3.627 million barrels, a surplus of 0.3% to the five-year average, after exports rebounded 431,000 b/d to 1.213 million b/d.
DISTILLATE BUILD EXPECTED
Analysts are looking for distillate stocks to have increased 1.5 million barrels last week. For the same reporting period, the five-year average shows inventories building 3.75 million barrels.
New York Harbor diesel barges reached their highest point of the year last week at nearly $1.95/gal. High prices have already begun to result in unusual diesel flows.
A tanker carrying ultra-low sulfur diesel (ULSD) from Saudi Arabia to New York was spotted last week, according to cFlow. The last time a Saudi-origin diesel cargo arrived in New York was February 2015, according to EIA data.
Demand for heating fuel reaches its seasonal peak in the U.S. Northeast as temperatures drop, though the region looks well-supplied relative to the five-year average.
Stocks of low and ultra-low sulfur diesel were 23% above the five-year average at 44.369 million barrels the week ending November 24.
* Reformulated blend stock for oxygenate blending (RBOB) futures contract, the biggest premium to the front-month contract since late August.
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