Conclusion: Mixed bag of statistics this week. Total stocks continued to decline on a seasonal basis, but only slowly. Implied demand collapsed once more but that is likely a data issue. Net imports fell to extremely low levels and if that is correct, we would view it as bearish that stocks didn’t decline more. But part of the reason for the low implied demand number is likely that the net import data is not accurate. The market rallied anyway on the back of a sharp decline in output. Importantly though that decline is not price/drilling related but temporary. We don’t expect the price impact to show up that materially for another couple weeks at least.
Nevertheless we think inventories should continue to decline going forward.
- Total petroleum stocks built 2.1mb less than normal but more than expected.
- Crude stocks were flat wow while they typically decline at this time. The main draw occurred in gasoline - 0.9mb vs seasonal +1.5mb. This was offset by a large build in propane (+3.9mb, 2.2mb more than normal). Ex propane, total petroleum stocks drew 4.3mb vs normal
- Product supplied (demand) has again collapsed this week, down 1.4mb/d wow vs seasonal increase of +0.2mb/d. It is important to notice that products supplied is an implied number: Production (+adj.) + net imports – changes in stocks. Thus when demand collapses like it did now several times over the past weeks, often this simply reflects bad data somewhere else. Given that there are no other indications of a collapse in US demand, we think this is the case here
- Net imports also declined, down 1mb/d wow and now a whopping 2.3mb/d below last years level. The decline in net imports happened mainly on the back of increased exports
- Refinery utilization dropped 1.5% this week but still remains at a very high 92.5%
- US output dropped 100kb/d this week. However, half of that is Alaska, the other half was driven by storm related issues in the GoM. In fact, shale output likely continued to increase last week
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