Extract from crude oil:
Cushing stocks have finally begun to build—albeit at a slower pace than many had thought back in January—adding 0.73 mb over the last two weeks. The builds reflect a recovery on Pony Express (which is flowing over 0.35 mb/d now that winter freeze-offs in the Bakken are behind us), a strong throughput near 0.5 mb/d on Flanagan South, with ExxonMobil Joliet and BP Whiting both conducting work, and maintenance at the 0.2 mb/d Valero Memphis refinery. The latter suffered a brief upset on its 70 thousand b/d FCC and neighbouring alkylation units on 23 April, and those units will now undergo 60 days of maintenance, starting this week, which will result in lower crude unit rates to avoiding hitting VGO containment limits. Reduced runs at Memphis triggered throughput reduction on the 0.2 mb/d PAA Diamond pipeline from Cushing, and those supplies left at the hub probably consist of deliverable-grade material (or at least preferred blendstocks). Meanwhile, Permian production is now rising—despite mixed signals, with frac spread counts up at 165 two weeks ago before falling to 157 last week, but production is almost certainly rising. The EIA’s Drilling Productivity Report shows well completions in the Permian rising from 396 in December to 505 in March, and we estimate a strong performance in April. This output increase, alongside delays to the EPIC NGL pipeline, helped weaken WTI-Midland crude discounts to CME WTI to around $5.50 per barrel last week, pushing flows on the Basin and Centurion pipes to full into Cushing.
Extract from oil products:
US gasoline inventories rose by 0.9 mb w/w to 226.7 mb, some 5.3 mb below the five-year average. Stocks in PADD 5 fell by 0.4 mb w/w to 27.5 mb, falling 1.5 mb below the five-year average. USWC refiners continue to struggle to return to normal operations, with Phillips 66 reporting a unit upset at its 0.12 mb/d refinery in San Francisco that resulted in flaring that lasted for over an hour. As a result, CARBOB differentials in both San Francisco and Los Angeles, which had started to soften mid-week, returned to the elevated levels reported in mid-April. The activity around the North/South trade remained muted, with San Francisco remaining at a 2 c/gal premium. Stocks in PADD 2 rose by 0.2 mb w/w to 50.8 mb, although still 3.2 mb below the five-year average. Low stock levels in the Midcon have allowed for profitable arbitrage opportunities from the USGC along the Explorer pipeline. Despite the impending arrival of shipments along the pipeline, Chicago regular CBOB market remains heavily backwardated going into May’s second and third cycles. Stocks in PADD 1 fell by 0.6 mb w/w to 59.5 mb, some 3.7 mb below the five-year average. The Colonial pipeline continues to trade in negative territory, as valuations drift lower. Although RBOB has maintained a healthy 12 c/gal premium over the cost of shipping, the arbitrage for conventional gasoline remains slightly open, while the arb for CBOB is slammed shut. Rising European gasoline prices due to worries that refinery throughputs there may be reduced due to contamination of Urals crude could reduce the flow of imports to PADD 1.