Extract from crude oil:
Despite an enormous total commercial inventory build (12 mb), crude stocks managed to draw by 3.1 mb to 455.9 mb, although this was less than the five-year average draw of 6.9 mb. Next week’s data is likely to show a continuation of draws given this week only captures two days of impact from Hurricane Barry. PADD 3 stocks built, likely due to a combination of exports falling back to 2.5 mb/d and runs dropping to 9.2 mb/d, but a reverse to draws should occur next week.
Indeed, Hurricane Barry’s quick march through the GoM started shutting in crude production from 10 July, peaking at 1.4 mb/d (over 70% of offshore production) on 14 July. Operations are gradually returning to normal, and we expect full production restored only by the end of the week. We estimate 8 mb of lost production since 10 July, reducing July’s monthly average output by 0.26 mb/d of mostly sour crudes. On the crude demand side, P66’s 0.26 mb/d Alliance refinery was the most impacted, with the entire plant shut from 10 July. Additionally, runs were trimmed at the 0.21 mb/d Shell Norco, the 0.23 mb/d Shell Convent and the 0.19 mb/d PBF Chalmette, which, together with minor reductions at other refineries, reduced July average runs by 81 thousand b/d. The crude production loss has far outweighed declines in refinery runs, boosting crude differentials (particularly sours) in the USGC (see E-mail alert, 15 July 2019). Lost supplies should accelerate PADD 3 stockdraws for the month, especially as we expect imports to have been curtailed by the storm as well. The Mars differentials has risen w/w by $1.58 to $5.23. However, lost runs from Alliance will weigh on sweet differentials as the refinery’s crude slate is comprised mainly of HLS and Eagle Ford grades, so we expect LLS-Mars to remain narrow. Still, the overall supply loss on the USGC will help maintain an open arbitrage from the Midwest and provide support to walk-up arbs from Cushing.
Extract from oil products:
US gasoline stocks rose by 3.6 mb w/w to 232.8 mb as heavy imports continued to pour into the USEC, offsetting the shutdown of the 0.35 mb/d Philadelphia Energy Solutions (PES) refinery, and production at USGC refineries continued to rise. USEC gasoline stocks edged up by 0.3 mb w/w to 59.5 mb on imports of 0.73 mb/d. RBOB gasoline prices have come off as traders anticipate a wave of imports from Europe due to the PES shutdown. But with PADD 1 inventories still 5.5 mb below the five-year average and European gasoline exports likely to tail off towards the end of August ahead of the transition to winter grade gasoline, low stocks will provide support for prices and leave the market vulnerable to price spikes. PADD 3 gasoline inventories rose by 2.1 mb w/w to 83.8 mb to stand at a 7.5 mb surplus to the five-year average.