Analysis of U.S. EIA data
New York - April 28, 2010
U.S. crude oil stocks climbed 1.963 million barrels to 357.82 million barrels the week ending April 23, as a jump in crude refinery runs was outweighed by higher imports and production, data released by the U.S. Energy Information Administration showed Wednesday.
Crude inputs climbed 278,000 barrels per day (b/d) to 14.956 million b/d. Refinery operations, or the refinery run rate, jumped to 88.95% of capacity from 85.93% of capacity, exceeding 85.72% that analysts surveyed by Platts projected.
The largest increase in runs was seen in the U.S. West Coast (PADD V), where refiners processed 2.537 million b/d of crude oil, up 134,000 b/d on the week. U.S. Gulf Coast (PADD III) refiners processed 7.658 million b/d of crude, up 99,000 b/d.
Crude production inched 22,000 b/d higher to 5.488 million b/d, while imports were 68,000 b/d higher at 9.681 million b/d.
Crude inputs have been largely on an uptrend from the 13.461 million b/d level seen the week ending January 29. But production and imports have also risen, the net result being an increase in crude stocks.
U.S. crude inventories the week ending April 23 were up 31.143 million barrels from the week ending January 22, the EIA data showed. The surplus against the five-year average has narrowed recently, to 17.915 million barrels the week ending April 23 from 22.105 million barrels the week ending April 2.
This could be seen as somewhat supportive for New York Mercantile Exchange (NYMEX) crude oil futures contracts if not for the record high crude stocks in the Midwest (PADD II), and the mounting stocks at Cushing, Oklahoma, home of the NYMEX light sweet crude futures contracts delivery point.
Midwest stocks were up 874,000 barrels at 91.528 million barrels the week ending April 23, 18.253 million barrels above the five-year average. That's up from a 10.842 million barrel surplus in mid-March.
Cushing stocks were up 454,000 barrels at 34.565 million barrels. Cushing stocks have trended higher from 29.919 million barrels the week ending March 12, putting them closer to the all-time high 35.67 million barrel figure seen the week ending January 1.
A wide NYMEX crude contango* has lured barrels into Cushing storage. The front-month spread price settled at minus $2.56 per barrel (/b) Tuesday, although it was a few cents stronger Wednesday morning despite another build at Cushing. This could be a result of the market reacting to a slow but steady recovery in Midwest crude runs. Runs at 3.079 million b/d the week ending April 23 were up from 3.007 million b/d the week ending March 26, according to the EIA.
The sharp rise in U.S. refinery operations is viewed as a bearish consideration for NYMEX product futures contracts, especially the heating oil contract, considering distillates are the heaviest of the complex.
U.S. distillate production was up 106,000 b/d at 4.163 million b/d the week ending April 23. On a four-week moving average, production at 4.056 million b/d was higher for the fourth consecutive week.
But implied demand** at 3.57 million b/d on a four-week moving average was down for the fifth week in a row. Demand was 131,000 b/d higher on the week at 3.597 million b/d.
The net result, despite lower-than-average imports, has been a mounting surplus of distillate stocks. U.S. distillate stocks rose 2.937 million barrels the week ending April 23, widening the surplus against the five-year average by 2.442 million barrels to 34.733 million barrels. That's up from a 24.662 million barrel surplus the week ending March 19.
U.S. gasoline stocks fell 1.24 million barrels to 223.685 million barrels, as demand rose 108,000 b/d to 9.26 million b/d. On a four-week moving average, demand at 9.203 million b/d was up for the tenth week in a row, from 8.63 million b/d the week ending February 12.
This is seen as a bullish consideration for the NYMEX RBOB futures contract, although it would be more supportive were it not for the fact that refiners have been ramping up runs to meet that demand. U.S. production at 9.235 million b/d on a four-week moving average the week ending April 23 was up for the eighth consecutive week, from 8.561 million b/d the week ending February 19, the EIA data showed.
Gasoline imports have risen the past two week, although at 985,000 b/d the week ending April 23 they remained below the five-year average.
Despite the weekly stock draw, the surplus against the five-year average as grown, to 17.722 million barrels from 5.796 million barrels in mid-March.
*Contango is the industry vernacular for the condition whereby prices for nearby delivery are lower than prices for future-month delivery.
**Implied demand is the amount of product that moves through the U.S. distribution system, not actual end consumption.
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