Analysis of US EIA data: Crude oil stocks tumble on drop in imports, dip in crude runs

EIA data bullish across the board

New York - October 5, 2011

US crude oil stocks tumbled 4.679 million barrels last week to 336.284 million barrels as a drop in imports outweighed a dip in crude runs, data released by the US Energy Information Administration (EIA) showed Wednesday.

The stock draw was bullish for New York Mercantile Exchange (NYMEX) crude prices, confirming and surpassing the American Petroleum Institute's (API) 3.069 million barrel draw reported Tuesday evening.

US imports plunged 1.002 million barrels per day (b/d) to 8.7 million b/d, but that came off the prior week's unusually high 9.702 million b/d. On a four-week average, imports were 8.824 million b/d and down from 9.06 million b/d for the same period in 2010.

The largest drop in imports was seen in the US Gulf Coast (USGC), which fell 840,000 b/d to 4.257 million b/d. The drop contributed to a 5.237 million barrel draw in USGC stocks to 163.238 million barrels.

Stocks also fell on the US Atlantic Coast (USAC) and Midwest, while the Rockies and US West Coast (USWC) saw stock builds. A 1.348 million barrel USWC stock build to 49.93 million barrels came courtesy of a 108,000 b/d increase in imports and a 64,000 b/d decline in runs to 2.474 million b/d.

The draw put US crude oil stocks at just 6.116 million barrels greater the five-year average, narrowing the surplus from 13.741 million barrels the prior week and 21.9 million barrels the week ending September 2.

While Midwest crude oil stocks fell 506,000 barrels to 94.101 million barrels, continuing a nearly uninterrupted decline from 101.299 million barrels in mid-July, the region maintained a steep surplus to the five-year average. Midwest stocks were 21.726 million barrels, or up 30.02% from the five-year average, the weekly EIA data showed.

Stocks at Cushing, Oklahoma, the delivery point for the New York Mercanitle Exchange's (NYMEX) crude oil futures contracts, fell another 831,000 barrels to 30.089 million barrels last week. Stocks have fallen 11.807 million barrels since mid-April as Midwest refiners have kept run rates high, lured by attractive margins.

The Midwest West Texas Intermediate (WTI) cracking margin averaged $31.03 per barrel the week ending September 30, according to Platts data and Turner, Mason & Co. yield formulas, compared to a USGC Light Louisiana Sweet margin of $7.71/b.

Midwest refiners were operating at 93.8% of capacity the week ending September 30. While that is down from 95.2% the prior week it is still the highest operating rate, percentage-wise, in the country.

USGC refiners were operating at 89.7% of capacity, up 1.5 percentage points on the week, while USAC refinery operations sank 4.4 percentage points to 71% of capacity, likely reflecting the shutdown of ConocoPhillips' 185,000 b/d Trainer, Pennsylvania refinery.

In contrast to the Midwest, USGC crude stocks are at a deficit to the five-year average. Stocks have fallen 19.874 million barrels since the end of August, putting inventories at 13.068 million barrels below the five-year average, from a slight surplus in mid-September.

US gasoline stocks fell 1.137 million barrels to 213.729 million barrel last week as imports slowed and demand was near flat, EIA data showed.

Domestic gasoline stocks, which fell the most in the USGC by 7 million barrels to 74.9 million barrels and the USAC by 1 million barrels to 55.3 million barrels, remain 4.2 million barrels below year-ago levels.

The stock decline reiterated a drop in a report late Tuesday by the API, which showed a nearly 5 million-barrel draw in gasoline stocks, although the EIA's decline was less pronounced. Independent analyst Jim Ritterbusch said much of the large decline in the API'S gasoline stock data "looked like an adjustment to the EIAs."

Stocks of gasoline rose across the remaining regions of the US with the Midwest registering a 4 million-barrel increase to 49.3 million barrels.

EIA data showed that imports slowed by 36,000 b/d to 505,000 b/d, with the main decrease seen in the USAC where imports fell 124,000 b/d to 397,000 b/d.

The drop in stocks and import decline came as demand was little changed at 8.959 million b/d, compared to 8.964 million b/d the week prior. Demand is about 30,000 b/d below the year-ago level of 8.989 million b/d.

Over the last four weeks, gasoline demand has averaged 8.9 million b/d, down by 1.7% from the same period last year.

In distillates, stocks fell 744,000 barrels to 156.934 million barrels, less than the API's decline of 1.966 million barrels, as demand rose by 282,000 b/d to 4.1 million b/d.

The drop in distillate stocks was as heating oil stocks fell 7 million barrels to 40.1 million barrels. Within that, USAC heating oil stocks fell 3 million barrels to 31.5 million barrels during a time of the season when stocks typically build ahead of the winter.

At the same time, stocks of ultra-low sulfur diesel rose 4 million barrels to 107 million barrels, with all regions reporting increases except the USAC, where stocks fell 2 million barrels to 26.2 million barrels.

Total products demand over the last four-week period have averaged just under 19 million b/d, down by 1.3% compared to the similar period last year.

Distillate fuel demand has averaged about 3.9 million b/d over the last four weeks, up by 2% from the same period last year. Meanwhile, jet fuel demand is 2.9% lower over the last four weeks compared to the same four-week period in 2010.

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