Our quick take on the WEEKLY SUPPLY ESTIMATES published by the US Department of Energy (DOE) including detailed tables and charts. This week’s highlights:
Conclusion: Neutral stats at first sight as stock build was roughly in line with seasonal. However, after the large build last week, market had expected a reversal of that, meaning not just a resumption of the declines but particularly large one-off decline. Hence the sharp sell-off in oil and oil-spreads today. The reason why the downward trend in stocks has stopped is the apparent collapse in demand, particularly mogas demand, which is inconsistent with the start of the driving season. In our view such a collapse in demand would indicate a much larger problem in the economy. However, we haven’t seen any other evidence for this in other sectors such as rates. We think it is too early to conclude that the downward trend in stocks has ended, that would need a confirmation that there is a problem with demand. Importantly, while supply keeps growing, it is not growing fast enough to be the reason behind the last two weeks of weak inventory data.
- The large build in total petroleum stocks has not reversed this week. Total stocks built 6.8mb, 1.9mb more than seasonal average and 3.4mb more than expected
- Crude continued to draw in line with seasonal average, but mogas stocks built almost 2mb more than normal
- Implied demand recovered a bit from last weeks large drop, but is still 0.3mb/d below last years levels. Mogas demand is still down 0.3mb/d yoy but middle distillate and jet fuel demand is up considerably yoy. While the last two weeks have been very week, the 4 week average demand is down just 130kb/d y-o-y.
- Part of the low mogas demand number is most likely the large mogas adjustment factor of -0.3mb/d
- Net imports dropped by 0.8mb/d wow, offsetting half of the 1.5mb/d increase from last week.
- Refinery utilization increased 0.3% and is now at a seasonally very high 94.4%
- Crude output increased 12kb/d wow and is growing 0.6mb/d yoy
View the entire Research Piece as a PDF here.
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