Analysis of U.S. EIA data
New York - October 7, 2009
Inventory data released by the U.S. Energy Information Administration (EIA) Wednesday was bearish for the New York Mercantile Exchange (NYMEX) heating oil and RBOB, but constructive for NYMEX crude, according to a Platts analysis of the EIA data just released.
Notably bearish was a 2.937 million barrel increase in U.S. gasoline stocks for the week ending October 2. Analysts were looking for a build of just 1.3 million barrels.
U.S. gasoline imports climbed to 1.011 million per day (b/d) from 851,000 b/d, while production jumped to 9.417 million b/d from 9.098 million b/d.
The rise in production and imports trumped a rise in implied demand, to 9.269 million b/d from 9.126 million b/d. Implied demand is the amount of product that moves through the US distribution system, not actual end consumption. The bulls may latch onto the demand figure, as it is the second weekly increase in a row. The bulls may also point out that while gross refinery inputs climbed 99,000 b/d to 15.02 million b/d, that increase may be short-lived as more refiners close units and plants for maintenance or for economic reasons.
Most recently, on Tuesday Sunoco said it was shutting its 145,000 b/d Eagle Point refinery because of low margins.
Gasoline inventories have risen 9.3 million barrels since the end of August, putting stocks at 27.574 million barrels above year-ago levels, and 16.439 million barrels above the five-year average, the EIA data shows. Still, it should not take long to deplete that surplus once refinery run cuts materialize, especially if demand continues to improve.
The EIA reported a 679,000 barrel distillate stock increase to 171.756 million barrels, slightly exceeding expectations of a 400,000 barrel build. The figure may have been seen as especially bearish considering that some analysts had been looking for a draw, and the American Petroleum Institute (API) had reported a 2.913 million barrel decline in distillate stocks on Tuesday.
U.S. distillate production rose 105,000 b/d to 4.042 million b/d, while demand rose 118,000 b/d to 3.527 million b/d. Distillate demand has risen two weeks in a row, and is now at its highest level since early June, according to the EIA's statistics.
U.S. distillate imports climbed to 214,000 b/d from 150,000 b/d, also contributing to the stock build.
The bulls may have a harder time using the rise in distillate demand as ammunition considering the surplus in inventories. Distillate fundamentally remains the most bearish part of the complex. Inventories have climbed 32.127 million barrels since the week ending April 10, although the bulls may point out that the size of those increases has declined the last couple of weeks from the builds seen in late August and September.
U.S. low sulfur diesel inventories climbed 259,000 barrels the week ending October 2 to 120.152 million barrels, at a time of year when stocks typically decline.
Heating oil inventories along the key consuming Atlantic Coast region (PADD I) rose 1.543 million barrels to 43.632 million barrels. A rise is considered normal this time of year as the market prepares for winter heating season.
Atlantic Coast heating oil stocks are currently 15.238 million barrels above year-ago levels and just 3.158 million barrels below the top of the five-year range for the week.
U.S. crude inventories fell 978,000 barrels to 337.426 million barrels the week ending October 2, as crude inputs rose slightly while imports slipped, the EIA showed.
Crude inputs edged up to 14.607 million b/d from 14.591 million b/d. The EIA showed refiners running at 85% of capacity, up slightly from the prior week's 84.6%.
U.S. crude imports fell 435,000 b/d to 9.098 million b/d, with the bulk of the decrease seen in the US Gulf Coast and US West Coast. Gulf Coast (PADD III) imports fell to 4.707 million b/d from 5.571 million b/d, while West Coast (PADD V) imports fell to 1.117 million b/d from 1.414 million b/d.
The West Coast drop should have come as no surprise given the unusually large size of the prior week's figure. However, the decline in Gulf Coast imports was unexpected as analysts were looking for additional barrels to get lured from off-shore storage as a result of a tightening NYMEX crude futures contango. Contango describes the condition whereby prices for nearby delivery are lower than prices for future-month delivery.
Crude stocks at the NYMEX delivery point for physical delivery against futures contracts, Cushing, Oklahoma, fell 1.406 million barrels to 25.124 million barrels. The bulls will likely note that Cushing inventories have fallen 8.482 million barrels since the week ending August 7. Last week's decline will likely tighten the NYMEX crude contango further.
Gulf Coast crude inventories fell just 692,000 barrels to 176.818 million barrels despite the large decline in imports, and despite a 24,000 b/d uptick in crude runs to 7.048 million b/d.