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Extract from crude oil:
Total petroleum stocks rose by 22.4 mb (cumulative build since mid-March is a whopping 86 mb, although half the build is in ‘other oils’). Crude stocks rose by 6.8 mb, led by a 3.5 mb build in the USGC despite exports staying elevated at nearly 3.3 mb/d and refinery runs rising by 0.17 mb/d (although the bulk of the rise was in PADD 5). Imports jumped by over 1 mb/d w/w led by Canada (+0.68 mb/d w/w). The Memorial Day holiday could have affected reporting this week, but other factors such as potential surging production may have impacted petroleum statistics this week.
A large part of the builds seen recently has been linked to adverse weather that has weighed on demand and supply. Indeed, supply concerns took a volatile turn across North America over the last two weeks, with each incident casting new uncertainty on the early summer outlook. North American floods struck first, knocking offline both the 0.35 mb/d Ozark Pipeline (Cushing outbound) and the 0.40 mb/d Pony Express Pipeline (Cushing inbound). With those two pipes roughly offsetting each other, unplanned downtime at the 0.13 mb/d HollyFrontier Tulsa refinery swung the Cushing balance bearish—especially taken with initial reports suggesting that the Ozark pipeline could be down for an extended time. Ozark operators reportedly detected an anomaly near the Mississippi River that forced MPLX (the pipe’s relatively new owner, who recently bought the system from Enbridge and expanded it from 0.20 mb/d to 0.35 mb/d) to halt throughput in an abundance of caution, especially given historical problems on the line during prior floods. Expectations for a lengthy outage on Ozark spanning weeks proved inaccurate, and the pipeline was restarted by last Friday, just as Pony Express was restarting. Tulsa also restored its full refinery staff by late last week and began restarting the plant to service on 3 June. All told, an incremental 1.5 mb of crude built at the hub from the net of all of these events but was not able to shift the Cushing trajectory materially. The front WTI spread sold off to -$0.21 per barrel but has recovered to -$0.15 as of yesterday, while the WTI-Brent spread went well into double-digit territory before recovering to -$8.34 per barrel. Forecasts from National Oceanic and Atmospheric Administration (NOAA) into summer suggest we have not seen the last of floods, but unless further infrastructure downtime arises, there should be limited downside for WTI timespreads from here.
Extract from oil products:
US gasoline stocks increased by 3.2 mb w/w to 234.1 mb, taking inventories some 3.9 mb above the five-year average. PADD 1 inventories increased by 1.9 mb w/w and are just 0.2 mb shy of the five-year average. USEC gasoline differentials have weakened over the past three sessions, while USGC differentials have risen, tightening inter-regional spreads. Colonial pipeline gasoline linespace continues to trade in negative territory, as demand to ship gasoline from the USGC to the USEC dwindles with shut arbs for CBOB, RBOB and conventional 87 octane gasoline. Healthy ethanol demand in Brazil is pushing gasoline blending component cargoes to the USEC, which should further pressure the arb from the USGC. Two medium range vessels and one long range vessel are reportedly set to arrive in New York Harbor by 19 June. Chicago CBOB prices remain at a hefty premium of more than 11 c/gal to USGC prices, more than enough to cover the cost of shipping along the Explorer pipeline. The arbitrage to ship CBOB from the USGC to the Buckeye Complex has been open since 27 March. Although PADD 2 inventories increased by 0.3 mb w/w, regional stocks are 4.1 mb lower y/y and 2.8 mb lower than the five-year average.