Analysis: US crude inventories likely lower as refinery runs remain high

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US crude exports to Asia tumble

Refinery maintenance to peak in October

Analysts look for gasoline stock draw

New York —
US crude oil inventories likely fell 2.7 million barrels last week, as refinery runs remained high, an S&P Global Platts analysis showed Monday.

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Analysts polled by Platts were looking for refinery runs to be unchanged last week at 96.4% of capacity, on average.

Net crude inputs for the week ending August 2 were at 17.8 million b/d, up year-on-year, and above the five-year average, led by increases on the US Gulf Coast and Midwest, US Energy Information Administration data showed.

Refining margins have slipped this month, but are still strong enough to encourage refiners to keep runs high. The USGC Mars coking margin has averaged $8.48/b so far in August, and the WTI cracking margin has averaged $11.87/b, Platts data shows.

A 2.7-million barrel draw would put US crude inventories at 436.2 million barrels, roughly a 2.5% surplus to the five-year average.

Crude inventories typically decline this time of year heading into fall refinery maintenance season, which is expected to peak in October.

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USGC refiners are expected to take down 1.36 million b/d of distillation capacity in October, up from 200,000 b/d in August, according to S&P Global Platts Analytics.

That maintenance is expected to be short-lived, with just 291,000 b/d expected to be down for maintenance in November.

Last week’s EIA data showed an unexpected build in US crude inventories for the week ending August 2 because of a slowdown in exports. The stock build helped pull crude futures lower, although prices bounced back by the end of the week.

Still, concerns of an economic slowdown have weighed on crude futures lately, and while geopolitical tensions remain supportive, a lack of fresh bullish headlines could be setting crude futures up for another fall should crude inventories climb counter to expectations.


That US crude exports have slowed should be a concern for the bulls.

US crude exports to Asia fell to 4.74 million barrels last week, from 5.17 million barrels the week ending August 2, and 10.02 million barrels the week ending July 5, according to cFlow, Platts trade flow software.

Crude exports to Europe, Latin America and Canada were also lower last week, cFlow data shows.

Analysis: US crude inventories likely lower as refinery runs remain high

Despite last week’s dip, base load exports to Europe are expected to remain stable, with the arbitrage open for US light sweet crude into Northwest Europe and the Mediterranean, according to Platts Analytics calculations.

While the crude arbitrage into Asia appears to be open, the supply of VLCCs has tightened, and exports to Asia are dependent on ballasters. Currently, the only US port able to fully load a VLCC is the Louisiana Offshore Oil Port (LOOP), which according to cFlow data has not exported crude over the past four weeks.

In refined products, analysts polled by Platts were looking for US gasoline inventories to have fallen by 700,000 barrels last week, on average. Analysts were looking for distillate stocks to have climbed by 870,000 barrels.

With refiners keeping runs high, production of both gasoline and distillate should remain strong. Low unemployment in the US should help bolster gasoline demand, as should lower year-on-year retail gasoline prices.

A slowdown in the industrial sector could pull on distillate demand, however. According to Platts Analytics, a drop in container traffic stemming from the US-China trade war, combined with slowing rig activity, points to lower distillate consumption.

— Jeff Mower,

— Edited by James Bambino,