Conclusion: This weeks DOE statistics look very bullish at first sight with large counter-seasonal draws in total petroleum and – contrary to initial concerns after the storm – those draws occurred mainly in crude. However, half of the draw occurred in PADD 5 and we expect this to reverse going forward. In addition, record low net imports clearly helped to accelerate the inventory draws. While this will likely continue given the >USD5/bbl Brent-WTI arb, this crude will show up somewhere else. We do believe that globally the oil market remains in deficit and stocks draws will accelerate in 4Q2017.
- Total stocks drew 7.1mb, 7.2mb more than normal. The main draw occurred in crude oil stocks (-6mb). A large share of the draw (3.3mb) occurred in PADD 5 (west coast), which will most likely reverse over the coming weeks.
- Implied demand was sharply lower again (-1.3mb/d), the 4 week average remained well above last years levels
- Exports were sharply higher, particularly crude (record 2mb/d), imports took a dip lower which brought net imports down 1.5mb/d to an extremely low 2.75mb/d. We are not surprised by this given the huge arbitrage incentive to export US crude. However, this is the main reason why se saw the large draw in US crude stocks. While this is bullish for Us balances, that crude will show up somewhere else. As the Brent-WTI arb remins at USD5/bbl, we expect these low net imports to continue.
- Refinery utilization declined 0.5% this week, leaving total input at relatively low levels given the record inputs ytd.
- Crude output up another 14kb/d, pushing production to 1.06mb/d year-over-year. However, as we have highlighted before, these weekly production numbers are likely heavily overstated.
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