Analysis of U.S. EIA data
New York - September 30, 2009
U.S. crude inventories climbed 2.8 million barrels to 338.404 million barrels the week ending September 25, according to the U.S. Energy Information Administration (EIA), although a draw at the New York Mercantile Exchange (NYMEX) delivery point put a bullish spin on the data.
Crude stocks climbed 1.8 million barrels to 53.023 million barrels on the U.S. West Coast (PADD V), which is largely dislocated from the rest of the country. Crude stocks also climbed 2.1 million barrels to 177.51 million barrels on the U.S. Gulf Coast (PADD III), the result of a drop in U.S.GC crude inputs to 7.024 million barrels per day (b/d) from 7.313 million b/d.
U.S. Gulf Coast (USGC) crude imports fell by a similar amount -- by 277,000 b/d to 5.571 million b/d -- which should have balanced out the drop in runs. But looking at the overall trend, the stock build made sense. USGC inputs have been falling for several weeks, while imports, while down on the week, were still up from the first half of the month.
Total U.S. crude imports at 9.533 million b/d the week ending September 25 were down from 9.794 million b/d the prior week, but were still high compared to the 9 million b/d level seen during the first two weeks of September. The rise in imports has been blamed on a narrowing NYMEX crude contango, which has lured barrels from off-shore floating storage. Contango is the condition whereby prices for nearby delivery are lower than prices for future-month delivery.
That contango is expected to narrow further as stocks at Cushing, Oklahoma fell another 1.54 million barrels to 26.53 million barrels last week. Since the week ending August 7, Cushing stocks have fallen 7.08 million barrels.
Last week's build put total U.S. crude inventories at 43.94 million barrels greater than year-ago levels, but down from the prior week's 45.42 million barrel surplus.
Total U.S. gasoline inventories fell 1.657 million barrels to 211.452 million barrels, contrary to analyst expectations of a 1.1 million barrel build. The draw came despite an increase in gasoline production, to 9.098 million b/d from 8.886 million b/d.
U.S. gasoline imports fell to 851,000 b/d from 1.028 million b/d, while implied demand inched higher, to 9.126 million b/d from 8.790 million b/d. Implied demand is the amount of product that moves through the U.S. distribution system, not actual end consumption.
The gasoline stock draw followed three consecutive weeks of builds. U.S. gasoline stocks were 31.812 million barrels more than year-ago levels, but down from the prior week's 34.37 million barrel surplus. Whether or not that surplus can be further chipped away remains to be seen. While it is doubtful gasoline demand will increase much as the market heads into winter, output typically declines as refiners enter maintenance season.
The most bearish element of the report remained in the distillates category. U.S. distillate inventories rose 323,000 barrels to 171.08 million barrels the week ending September 25, the EIA reported. The bulls likely grabbed onto the fact that the build fell short of analyst expectations of a 1.1 million barrel build.
Still, for the most part, distillate stocks have been climbing since the week ending April 10, when inventories were at 139.63 million barrels. Inventories are currently 47.98 million barrels above year-ago levels, a healthy cushion as the market heads into winter heating season.
High sulfur heating oil stocks along the U.S. Atlantic Coast -- the key heating oil demand center -- rose 216,000 barrels last week, and at 42.09 million barrels were just 4.15 million barrels below the high of the five-year range.
U.S. distillate production fell 236,000 b/d to 3.937 million b/d, which in itself might not seem so bullish. But the draw came after five consecutive weeks of production increases. Also, a 106,000 b/d U.S. distillate demand increase to 3.409 million b/d came after three weeks of declines.