Analysis of US EIA data: Crude oil stocks see sharp decline on slowed imports, increased refinery runs

New York - September 21, 2011

US crude stocks tumbled 7.336 million barrels during the week that ended September 16, as a recovery in production was trumped by a decline in imports and a jump in refinery operations, data released Wednesday by the US Energy Information Administration (EIA) showed.

US crude production rose 664,000 barrels per day (b/d) to 5.747 million b/d, as US Gulf of Mexico output returned following the passing of Tropical Storm Lee, which hit the area September 4-5. But refiners were also processing more crude, operating at 88.3% of capacity, up from 87% the prior week. US Atlantic Coast (USAC) refiners were operating at 79.1% of capacity, up from 75.5% the prior week and 58.3% the week ending September 2, as the industry recovered from Hurricane Irene, which arrived over the August 27-28 weekend.

The Midwest led the rise in refinery utilization, with operators running at 95% of capacity, up 3.7 percentage points, the EIA data showed. This is the highest level since the week ending July 22.

Midwest refining margins have fallen in recent weeks, but remain strong enough to lure crude barrels into processing units. The increase in Midwest runs caused crude stocks in the region to draw 1.511 million barrels to 95.831 million barrels, despite an 82,000 b/d rise in imports to 1.479 million b/d.

Stocks at Cushing, Oklahoma, the New York Mercantile Exchange (NYMEX) crude oil futures contract delivery point, fell 231,000 barrels to 31.998 million barrels, having declined by 9.888 million barrels since early April.

The US Gulf Coast (USGC) saw a 1.1-percentage-point jump in operations to 89% of capacity during the week that ended September 16. USGC crude stocks tumbled 7.748 million barrels to 165.665 million barrels, leaving stocks 5.783 million barrels less than the five-year average. On the week, crude imports fell just 48,000 b/d to 4.542 million b/d.

But USGC imports are unusually low for this time of year. On a four-week moving average imports at 4.617 million b/d were down from 5.549 million b/d during the same period in 2010.

In oil products, US gasoline stocks rose 3.295 million barrels to 214.075 million barrels, well above analysts’ expectations of an 800,000-barrel rise and far from the American Petroleum Institute data released late Tuesday, which showed a modest 62,000-barrel rise.

Stocks were 5.3% lower than a year ago, while demand for gasoline at 8.858 million b/d was slightly above year-ago levels of 8.847 million barrels, but on a four-week moving average were 1.7% below the same period in 2010.

Gasoline stocks rose across the US with the exception of the USAC, where inventories fell 200,000 barrels to 53.9 million barrels. On the USGC, stocks rose 1.7 million barrels to 77.7 million barrels. An increase was also seen in the Midwest, where stocks were up 1.2 million barrels to 47.9 million barrels.

The rise in stocks came as gasoline imports increased 33,000 b/d to 692,000 b/d, mostly to the USGC, where imports rose 41,000 b/d to 82,000 b/d. Imports to the USAC fell 26,000 b/d to 587,000 b/d.

US distillate stocks fell 874,000 barrels to 157.606 million barrels, the EIA data showed, counter to analysts’ expectations of a 1.2-million-barrel rise. API data showed an 81,000-barrel build in distillate stocks.

The bulk of the decrease was along the West Coast, where stocks fell 800,000 barrels to 12.8 million barrels. The drop was slightly offset by increases of 100,000 barrels and 200,000 barrels in the USAC and Midwest, respectively.

Total distillate stocks were 9.9% lower than year-ago levels.

Of the drop in distillate stocks, ultra-low-sulfur-diesel stocks fell 400,000 barrels to 106 million barrels, while heating oil stocks declined 300,000 barrels to 41.6 million barrels.

Demand for distillates was up 217,000 b/d to 3.875 million b/d, some 185,000 b/d above year-ago levels and 0.5% higher on a four-week average. Jet fuel product demand was 3.3% lower throughout the last four weeks compared to the same period a year ago.

Total product demand over the last four-week period averaged about 19.2 million b/d, down by 0.9% compared to the same period last year.

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