Extract from crude oil:
Cushing built by 0.82 mb w/w, taking stocks to 46 mb. While we expect stocks to rise over May, the build is above our expectations and was driven by an upset with the 0.2 mb/d Plains All American’s Diamond pipeline. The 20-inch, 440-mile line from Cushing to the 0.2 mb/d Valero Memphis refinery hit a technical glitch last week, which reduced throughput to zero and forced the refinery into hot circulation. Just before the pipe issue, the plant suffered a brief upset on its 70 thousand b/d FCC and neighbouring alkylation units, adding to last week’s Cushing build. Now those same units are undergoing 60 days of maintenance, starting late April. Although the CDU maintenance was pushed to 2020, limiting VGO containment from the FCC and alkylation work should reduce CDU throughput by 25-30% in sympathy in any case. The line was entirely shut at times last week, and while resolved, any additional issue at the refinery or on the pipeline could extend the drop in Cushing outbound flow. The Memphis refinery cemented its importance to Cushing after the joint venture Diamond pipeline with Plains was brought online in December 2017. Before 2018, Memphis was one of the last shippers on the 1.2 mb/d Capline pipeline from St. James, from which the refinery sourced grades similar to LLS and Bakken supplied by rail into St. James when economics supported. With Memphis throughput lost, Capline is now being reversed and is expected online in southbound service late next year. Currently, we expect May builds of 1.3 mb, mainly on the back of increased flows from West Texas and the original Memphis FCC turnaround.
Extract from oil products:
US gasoline stocks fell by 0.6 mb w/w to 226.1 mb, some 5.5 mb below the five-year average. Stocks in PADD 2 fell by 0.5 mb w/w to 50.2 mb, 5.7 mb lower y/y. Low inventory levels in PADD 2 have boosted Chicago gasoline differentials, led by premium conventional and regular RBOB. Gasoline stocks in PADD 2 have fallen for the past 11 weeks, as the inter-regional spread for RBOB between the Buckeye Complex and the USGC has reached is widest level in the past 12 months, with Buckeye trading at a 32.75 c/gal premium to the USGC. Despite a w/w decrease of 0.5 mb in PADD 3 stocks, USGC differentials traded weaker, improving arbitrage conditions along the Colonial pipeline. However, RBOB is the only grade with a premium that exceeds the cost of shipping. VOC-controlled premium RBOB lagged losses in the rest of the gasoline markets, allowing for the octane premium to reach its widest level since 5 March, currently exceeding 20 c/gal. The forward structure for both A2 and M2 has transitioned from backwardation to contango, as prompt cycle 27 now trades at a discount of 0.75 c/gal to cycle 28. Stocks in PADD 5 fell by 0.4 mb w/w to 27.1 mb, falling 1.8 mb below the five-year average. CARBOB differentials in Los Angeles have fallen by 18 c/gal w/w, as the intra-month curve remains backwardated, with trading activity limited to cycle-specific May barrels or second-month June barrels. The North/South CARBOB fell by 11 c/gal on 7 May after the spread peaked on 6 May on news of the Carson refinery fire. San Francisco CARBOB differentials have fallen on news that the Benicia refinery is planned to restart mid/late May.