Analysis of US EIA data: Drop in US middle distillates pushes inventories below year-ago levels
New York - November 3, 2010
US stocks of middle distillates dropped a larger-than-expected 3.568 million barrels the week ending October 29. This drop caused inventories to fall to a deficit compared with year-ago levels for the first time in nearly two years, an analysis of the oil data released Wednesday by the Energy Information Administration (EIA) showed.This analysis and commentary is provided by Linda Rafield, Platts senior oil analyst and editor of the weekly Futures and Derivatives Review, a supplement to Platts Oilgram Price Report.
Analysts polled by Platts projected a 900,000-barrel decline in distillate stocks.
At 164.874 million barrels, middle distillate inventories were 26.854 million barrels above the five-year average, but 2.503 million barrels below year-ago levels.
Of the 3.568 million barrel draw in middle distillates, 3.407 million barrels was in ultra-low sulfur diesel. And of the 3.407 million barrel draw in ultra-low sulfur diesel, 2.542 million barrels was on the Gulf Coast, suggesting high levels of exports continue to skew the data.
EIA's Petroleum Supply Team lead analyst James Beck said the diesel stock draw was caused by higher exports, likely to Europe.
The gasoline stock draw could also partially be explained by exports, Beck said, as other blending components may have been sent to Europe.
"Other blending components – naphthas, ethanes, butanes – can be tasked for other things" in Europe, he said. "They don't have huge amounts of stocks of those things," but the U.S. does because it consumes so much more gasoline.
Stocks of other blending components fell 1.637 million barrels to 44.06 million barrels the week ended October 29. Stocks have fallen 3.185 million barrels the past two weeks.
Despite the draw in ultra-low sulfur diesel stocks the week ending October 29, nearly all the surplus against the five-year average was still in that product. Heating oil stocks fell 216,000 barrels to 53.172 million barrels.
A combination of low output, a falloff in imports and an increased in demand – in all likelihood attributable to exports – was behind the drop in middle distillates. Production declined 140,000 barrels per day (b/d) to 4.241 million b/d while imports fell 98,000 b/d to 92,000 b/d, the lowest level in two years.
Meanwhile, distillate demand climbed 42,000 b/d week-over-week to 4.106 million b/d and on a four-week moving average at 3.957 million b/d. This was the highest in about four months and 394,000 b/d above year-ago levels, a sign of the rebound in the U.S. economy.
Gasoline demand, however, slumped to 9.015 million b/d from the previous week's unseasonal 9.358 million b/d, suggesting the two blips in demand seen over the past six weeks were restocking at the tertiary level rather than actual end consumption.
Despite the falloff in demand, gasoline inventories declined 2.689 million barrels to 212.253 million barrels. Gasoline stocks were 11.486 million barrels above the five-year average and 3.976 million barrels above year-ago levels.
Total product stocks dropped 7.41 million barrels to 759.165 million barrels, which left inventories 46.748 million barrels above the five-year average and 5.765 million barrels above year-ago levels.
Like imports of middle distillates, imports of crude took a nosedive and fell 885,000 b/d to 8.578 million b/d. This demonstrates that the previous week's climb was a one-off event that resulted from a backlog of cargoes in the Houston Ship Channel. Despite the decline in crude imports, stocks jumped 1.95 million barrels as inputs to refineries dropped 233,000 b/d to 13.905 million b/d and domestic production edged up 53,000 b/d to 5.593 million b/d.
At 368.156 million barrels, U.S. crude stocks were 44.566 million barrels above the five-year average and 32.242 million barrels above year-ago levels.
*Editor’s Note: Linda Rafield’s commentary is based on her knowledge of market trends, information from industry sources, and her own views as a long-time energy analyst. Please contact Kathleen Tanzy if you require any additional information or would like to interview Linda Rafield.
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