Extract from crude oil:
Cushing stocks drew by 0.8 mb w/w to 68.6 mb, taking the total Cushing draw across April to 0.5 mb so far. The weekly draw was driven by surging flows on BP1, a pipeline carrying crude oil from Cushing to BP’s Whiting refinery. The gyrations of BP1 flows are a long-standing US crude market mystery and flows are notoriously difficult to rationalise. With various potential injection and delivery points along the system, the origin, destination and grade of crude moving on BP1 is often difficult to ascertain. However, there were some clear signals that BP1 flows may ramp up aggressively this month and that flow could remain high in May. The well documented outage at Syncrude’s Mildred Lake upgrader tightened up Midcon light sweet supplies—a situation usually solved by running more Clearbrook Bakken. However, linefill and the imminent start-up of DAPL/ETCOP means the availability of Bakken at Clearbrook, as a substitute for synthetic crude, is likely to be tight. As a result, BP likely looked to Cushing for light sweet re-supply, where it can source wellhead quality Bakken crude (via Pony Express), Niobrara crude (via Saddlehorn), and WhiteCliffs condensate (via WhiteCliffs) as well as WTI-Midland via Basin or Centurion. Given Whiting’s complexity, some observers may question the decision to run more light sweet in a coking refinery at a time where US light crude values are rallying at the prompt. Indeed, during the wildfires last year, when synthetic crude oil production fell to just 0.35 mb/d (and synthetic crude exports dropped to virtually zero, supporting Bakken light crude values), flows on BP1 did not signal a shift in Whiting’s buying patterns towards Cushing light sweets. However, planned maintenance on the 55 thousand b/d distillate hydrotreater at Whiting in the first half of May will limit the volume of heavy sour Canadian crude BP can process. Thus, the company may be looking to lighten up the slate ahead of this work. Next, high apportionment on Enbridge’s mainline system means some Midcon refiners have struggled to ship their full nomination each month. A way to circumvent this apportionment is to purchase Canadian heavy and medium crudes at Cushing (either from tanks or from Keystone) and ship them up BP1 to Whiting. With the availability of synthetic and Bakken likely to remain tight through May, and apportionment expected to continue as US runs rise, BP1 flows can remain high for the remainder of April and in May—helping to support our forecasted 3.4 mb of Cushing draws across the two months.
Extract from oil products:
US gasoline stocks built by 1.5 mb to 237.7 mb after eight consecutive weekly declines, but stocks fell again on the East Coast by 1.3 mb, leaving regional inventories at a y/y deficit for the first time since mid-November 2016. East Coast stocks managed to draw despite higher imports, which increased overall by 0.36 mb/d w/w to 0.84 mb/d. But with both May and June RBOB futures trading just around 8 cents per gallon over European gasoline swaps, imports are likely to struggle in the short term. Local supplies, however, will increase once the 65 thousand b/d FCC at PBF’s Delaware plant comes back online early next week after undergoing routine work since mid-March. With refineries largely out of maintenance, higher output precipitated a 2.5 mb build on the USGC, although regional stocks are still lower y/y by 3.4 mb. PADD 3 stocks should continue to recover as refineries complete turnaround work, which will weigh on USGC cash prices, allowing exports to increase and lessening the pull on European barrels into LatAm.