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S&P Global Platts Preview of U.S. EIA Data: Likely to Show Crude Oil Stocks Fell 1.4 Million Barrels


U.S. crude oil stocks likely saw a counter-seasonal decline last week, driven by potentially record-high exports and more refinery activity that could mark the end of the autumn turnaround season, 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 oil stocks expected to drop 1.4 million barrels
  • Gasoline stocks expected to fall 1.7 million barrels
  • Distillates stocks expected to decline 2.5 million barrels
  • Refinery utilization expected to rise 0.8 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)

Analysts surveyed Monday by S&P Global Platts are looking for a drawdown in U.S. crude oil stocks of 1.4 million barrels the week ending October 27. That compares with an average build of 3.9 million barrels in 2012-16 during the same reporting period. If confirmed, that would further squeeze the surplus to the five-year average, which equaled 16.4% the week ending October 20. That figure stood at 25% just five weeks prior.

A streak of four straight draws helped drain inventories, providing support for New York Mercantile Exchange (NYMEX ) crude futures, which have rallied this month to the mid-$50s, the highest level since late February.

Despite that, NYMEX crude's discount to Intercontinental Exchange (ICE)/ Brent has widened roughly a dollar since last month to $6 per barrel (/b) to $7/b, providing a clear price signal to U.S. crude producers to export more crude.

The blowout of the Brent/WTI spread began mid-August, so the impetus to ship crude abroad has already materialized in the weekly Energy Information Administration inventory report.

U.S. crude exports averaged 1.693 million b/d in the five-weeks starting September 22, versus a year-to-date average prior to that of 763,000 barrels per day (b/d).

According to S&P Global Platts analytics, U.S. crude oil exports averaged 2.24 million b/d the week that ended October 27, based on cFlow, Platts trade-flow software.

For the week ending October 20, U.S. exports averaged 1.924 million b/d, which was just 60,000-b/d shy of the all-time high set the week ending September 29.

Despite the persistently wide Brent/West Texas Intermediate (WTI) price spread, stronger freight rates for tankers leaving the Gulf Coast could begin to work against the arbitrage.

S&P Global Platts does not currently assess Gulf Coast dirty tanker freight rates, but calculations based on Worldscale annual rates pegged Houston to Lavera Suezmax rates around $1.91/b on Friday, up from around $1.40/b at the beginning of the month.

With freight at these levels, WTI delivers into the Med near parity with Azeri Light, compared to a $2-$2.50/b discount in early October.

Conversely, a wide Brent/WTI spread discourages U.S. crude imports, helping lower inventories. Imports likely fell last week after having averaged 8.1 million b/d the week prior, the most since the week ending August 18.

S&P Global Platts analytics forecasts crude imports at 7.45 million b/d last week in its U.S. Department of Energy Weekly Report. The S&P Global Platts analytics regression model, based on one-day lagged customs data, suggests that imports will be 7.515 million b/d.

REFINERY DEMAND

With U.S. refinery activity ebbing for autumn maintenance, the volume available for export has increased, but the tide could be turning. Analysts surveyed by S&P Global Platts are looking for the utilization rate to have increased 0.8 percentage point to 88.6% of capacity. By comparison, the utilization rate equaled 85.2% a year ago. The utilization rate fell as low as 84.5% the week ending October 13, which may have marked the low point this autumn as refiners took units offline for seasonal repairs.

In early September, the utilization rate fell to 77.7% of capacity, but that downturn was related to Hurricane Harvey. An uptick in refining activity represents another factor pulling crude barrels from storage, but also means additional refined product supply for demand to absorb.

For distillates, demand typically rises at this time of year as temperatures drop and the need for heating fuel rises. The loss of supply stemming from the shutdown of Gulf Coast refiners after Hurricane Harvey can still be felt in U.S. distillates stocks. After drawing seven of eight reporting periods, distillate stocks sit 1.8% below the five-year average at 129.2 million barrels. Analysts are looking for a decline last week of 2.5 million barrels. The five-year average shows a draw of 1.4 million barrels.

GASOLINE DRAW EXPECTED

The impact of Harvey can also be seen in U.S. gasoline stocks, which stood at 216.869 million barrels the week ending October 20, which was 13 million barrels less than the week ending August 25.

During that same stretch, inventories fell by an average of 2.6 million barrels in 2012-16, according to EIA data. Analysts expect gasoline stocks drew by 1.7 million barrels last week. The five-year average shows a decline of 2.6 million barrels. One factor helping keep a lid on U.S. gasoline stocks has been relatively few imports, as supply from Europe has been diverted to West Africa.

Last week saw three medium-range tankers leave Northwestern Europe for North America, according to cFlow. One of those tankers was headed to New York, while the others were going to Canada. The volume of gasoline exports from Northwest Europe and the Baltics to North America looks set to total 897,000 metric tons (mt), less than half of September. This could be changing, with the New York cargo premium over barges -- an indicator of import demand -- at a higher-than-usual 2.35 cents per gallon (/gal) last week.

NYMEX RBOB* futures have rallied this month, pushing the crack spread above $19/b last week, up from $14.5/b in early October. The crack was around $11/b-$13/b for most of October 2016.

For more information on crude oil, visit the S&P Global Platts website.

* Reformulated blend stock for oxygenate blending (RBOB) futures contract, the biggest premium to the front-month contract since late August.


Visit source site

https://platts.com/commodity/oil

S&P Global PlattsS&PEIAEnergy Information Administration EIACrudeStocksRefineryGasoline

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