Platts analysis of U.S. EIA oil stocks data:
Weak demand keeps relentless stock-building intact
New York, NY - May 20, 2009
U.S. gasoline stocks declined for the fourth consecutive week, dropping 4.337 million barrels to 203.954 million barrels, as a pick-up in demand ahead of Memorial Day weekend offset increases in production and imports, an analysis of the weekly data from the U.S. Energy Information Administration (EIA).
At 203.954 million barrels, U.S. gasoline stocks were 2.642 million barrels less than the five-year average and 5.459 million barrels below year-ago levels.
A seasonal pick-up in implied demand as product moved through the distribution system ahead of the Memorial Day weekend was behind the drop in gasoline inventories. Implied demand is the amount of product that moves through the US distribution system, not actual end consumption. On a week-over-week basis, implied gasoline demand jumped 321,000 b/d to 9.232 million barrels per day (b/d). But compared to the four-week moving average, gasoline demand was still down 113,000 b/d at 9.054 million b/d and down 2% from year-ago levels.
Failing to take advantage of a favorably-priced crack spread, refiners only upped production by 25,000 b/d to 8.735 million b/d, a potential sign of problems with upgrading units. The crack spread is the difference between the price of the raw barrel of crude oil and the products that can be refined from that crude. The June RBOB crack spread on the New York Mercantile Exchange (NYMEX) averaged $12.84 per barrel (/barrel) the week ending May 15, compared to $4.50/barrel for the heating oil crack.
Gasoline imports climbed 191,000 b/d to 938,000 b/d, a fairly low level for this time of year and insufficient to meet an uptick in demand.
Refiner demand for crude barrels remained abysmal, falling 315,000 b/d to 14.109 million b/d with almost all the decline occurring along the U.S. Gulf Coast. Despite the drop in crude inputs, stocks fell 2.105 million barrels to 368.524 million barrels with low levels of imports behind the inventory decline.
Crude imports edged up 83,000 b/d to 8.791 million b/d, an exceptionally low level of imports given that the U.S. is currently refilling the Strategic Petroleum Reserve, the federal government's safety-net stockpile. Another 700,000 barrels of crude were deposited into the SPR the week ending May 15. But import levels should rebound shortly as the narrowing of the price spread in the nearby oil futures contracts will provide the incentive to land floating storage.
The strengthening of the curve has already started to discourage additional stock-building. Total U.S. commercial oil inventories have dropped a cumulative 6.734 million barrels during the past two weeks. While total U.S. stocks declined, inventories at the NYMEX oil futures contract delivery point in Cushing, Oklahoma increased 794,000 barrels to 29.62 million barrels. At 368.524 million barrels, U.S. commercial crude stocks were 40.569 million barrels greater than the five-year average and 48.082 million barrels more than year-ago levels.
Another bearish piece of information in this report is total U.S. oil demand, which at 18.255 million b/d, is still 7.6% below year-ago levels on a four-week moving average.