Extract from crude oil:
US crude stocks fell by an impressive 7.6 mb last week (with USGC stockdraws accounting for a total 6 mb of this), even after absorbing the last of the SPR drawdowns (3.15 mb). Thus, total commercial US inventories went below 500 mb for the first time since January and were higher y/y by only 4.2 mb. A combination of lower imports (-0.13 mb/d w/w at 7.6 mb), stellar exports above 0.9 mb/d (+0.15 mb/d w/w) and robust runs (+0.1 mb/d to 17.2 mb/d) dragged stocks lower. US sour crude balances are likely to remain strong over July and August, and may beat our expectations in September. Saudi arrivals are tracking marginally lower m/m in July at 0.85 mb/d (after falling by 0.18 mb/d in June) and comments today suggest a further decline is possible in August. On the other side of the trade balance, export demand for August and September loadings of US sour crude has piqued despite closed arbs for those months. This comes as Indian state-owned refiners launch tenders for US sour crude following a government mandated push to strengthen India’s trade relationship with the US, and in part also to send OPEC a signal about India’s ability to diversify supply. Two refiners have already tendered for a cargo apiece, with IOC’s tender filled by PetroChina and BPCL’s tender results imminent. We estimate that a further two state-owned refiners (HPCL and MRPL) will follow-up with tenders, potentially removing another 4 mb of sour crude from the USGC across August and September, bringing total Indian tender-related volumes to around 8 mb. We understand the next round of tenders may be for light crudes. Thus, we have upped our US export projections from August.
Extract from oil products:
US gasoline stocks fell by 1.6 mb w/w to 235.7 mb as operational problems on the US Gulf Coast, including a reformer outage at MPC Garyville, cut into gasoline output, offsetting builds in other parts of the country. PADD 1 gasoline stocks rose by 0.1 mb w/w to 66.3 mb despite imports falling by 0.25 mb/d w/w to 0.46 mb/d. USGC gasoline stocks may draw again in the next EIA report given the number of operational problems that have occurred in the last week, including outages at the Convent, Texas City, and Beaumont refineries. The relative tightness in the USGC continues to attract import cargoes that would normally go to the New York Harbor, which should help USEC stocks continue to trend lower. Alkylate from India, for instance, is regularly offered in the USGC at present, rather than in New York, its usual market. Propane exports jumped by 0.43 mb/d w/w to 0.91 mb/d, the highest export volume since mid-May despite poor arbitrage economics. Stocks built by 1.7 mb w/w to 62.2 mb, leaving the y/y deficit at 25.2 mb.