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: At first sight the stats certainly seem less bullish or even bearish with inventories showing a counter-seasonal build and demand appearing much weaker; however, this is essentially due to one number: the large stock build in “other” petroleum products. By experience, this could very well reverse in coming weeks. We believe that inventory draws will continue, which should be constructive for time spreads.
- The counter-seasonal decline in total petroleum stocks took a break last week with total stocks up 4.3 mb ( 3.9 mb more than seasonal); however, crude stocks continue to decline, and are down 1.8 mb (-1.1 mb vs seasonal and -2.5 mb vs consensus expectations).
- Most products also drew more than normal, but residual fuel oil and certain “other” products showed a large build. We believe the build in residual fuel might be due to an accounting issue, as it also led to a large drop in implied demand, which fell to unreasonable levels. The large build in “other” products is harder to pin down. “Other” is the only category that is regressed rather than surveyed; we believe these apparent builds could very well reverse or the coming weeks.
- Total product demand dropped 1.1 mb/d week-over-week, while seasonality indicates it should be accelerating; however, demand for main product categories (mogas, distillates, kerosene) strengthened. Again, demand for residual fuel and particular “other” products is weak, but as mentioned above, this might be just a data issue.
- Net imports still hovering around -1 mb/d year-over-year.
- Refinery utilization reversed last week’s 1.8% drop (up 1.9% week-over-week), and is back to a very high 93.4%, which is more than 4% higher than last year.
- Crude output declined 9 kb/d week-over-week following weeks of relentless growth. Production remains up about 0.5 mb/d over last year.
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