Extract from crude oil:
Takeaway capacity is the topic de jour as we make our way through earnings season. While many of the pipelines are still years away, two announcements stood out as having an immediate effect on the markets and a near-term change to our balances. Enterprise announced that they would be adding DRA to Seaway 2 in September, increasing flows on the line by 0.1 mb/d. The timing of the increase lines up with a large amount of Midwest refinery turnarounds. With lower runs in the Midwest, Enbridge nominations will come off, lowering apportionment and allowing more barrels to flow down Flanagan South. The Seaway DRA allows these barrels to continue to the Gulf Coast (as the Enbridge international joint tariff (IJT) includes Flanagan South and Seaway). While currently spot walk-up arbs to Houston out of Cushing are shut, the Enbridge IJT to the Gulf Coast remains open. In addition, the forward curve is currently pricing an open arb out of the hub to the USGC as early as October. With this change, we anticipate a smaller build at Cushing in September and October by 0.30 mb and 0.35 mb respectively.
Extract from oil products:
US gasoline stocks increased by 2.9 mb w/w to 234 mb, as stocks in all regions, except for PADD 4, built for the week ending 8 August. PADD 3 builds were the largest at 1.3 mb, finishing the week at 79.6 mb. Low inventories and summer gasoline demand are finally driving New York Harbor differentials higher, opening the arbitrage allowing RBOB to ship on the Colonial pipeline. This is the first time in six weeks that the arbitrage has been workable on paper, although gasoline linespace is still trading at negative values. Nevertheless, Line 1 has now been allocated for two consecutive cycles, which has not occurred since June. US regular gasoline prices increased by 47 cents per gallon y/y to $2.85 per gallon for week to 6 August.