Extract from crude oil:
Cushing stocks drew by 0.15 mb, taking stocks at the hub to 41.2 mb, with month-to-date draws of nearly 1 mb, contrary to our expectations of a 3.3 mb January build that we had put out at the start of the year. Indeed, the lack of builds at Cushing is the market’s main talking point. Both WTI structure and the WTI-Brent spread have traded in a relatively narrow range this month, masking a number of offsetting shifts across North America. On the bullish side, we count many developments. The disposition of the Permian basin has cleaned up earlier than anticipated, partially due to weather-related supply disruptions and production cuts that were long predicted by service companies, but also on the prospect that takeaway capacity may improve earlier than expected with Enterprise’s 0.25 mb/d NGL line conversion now expected as early as late Q1 19. The February WTI-Midland differential to Cushing expired at a 50-cent premium and the March contract has rallied inside the Basin Pipeline walk-up tariff of 80 cents per barrel.
Extract from oil products:
US gasoline stocks fell by 2.2 mb w/w to 257.4 mb, although US inventories remain 15.3 mb higher y/y. Inventories in PADD 3 fell by 3.9 mb w/w, while all other PADDs reported w/w increases. Despite PADD 2 stocks remaining 6.1 mb above the five-year average, gasoline prices in the Midcon have gained strength, driven by refinery outages at Whiting and Wood River, with cash differentials in Chicago reaching their highest levels since December. Dangerously cold conditions will reduce gasoline demand for the week ending 1 February, however, as concerns for safety are prompting business to suspend services in the region. Gasoline line space on the Colonial Pipeline fell by 25 cents per gallon w/w, as lack of demand to ship gasoline from the USGC to USEC has kept line space (8th cycle) trading in negative territory since 16 January. The arb to ship gasoline from the USGC to USEC remains closed for all grades, as the inter-regional spread remains below the cost of shipping threshold of 5.49 cents per gallon. The VGO market remains under pressure, as unplanned FCC outages at the Baytown and Corpus Christi refineries are combining with poor FCC margins to curtail demand for the feedstock.