Extract from crude oil:
Crude stocks rose counter-seasonally by 2.4 mb to 438.9 mb, the first build in eight weeks. Over the last eight weeks, US crude stocks have still fallen by 46.5 mb versus the five-year average draw of 21 mb. The builds were concentrated in PADD 3 (5.5 mb) even as runs there rebounded to 9.4 mb/d, and nationwide refinery runs rose to a 2019-high of 17.8 mb/d. Exports were the culprit, falling sharply to 1.9 mb/d, while imports rebounded marginally to 7.1 mb/d. The weekly adjustment factor swung by 1 mb/d to a 0.5 mb/d build this week, due to lower net movements out of the country. WTI-Houston responded in kind this week by falling below $4 per barrel.
Cushing crude oil stocks drew by 4.78 mb over July to 47.4 mb, their lowest since early May. Nearby WTI spreads (both structure and inter-crude spreads) have performed well recently, although we believe the upside to prompt WTI spreads is limited due to higher flows from Canada, with Cushing fundamentals due to truly tighten at year-end and into 2021. The strength in WTI-Cushing came as WTI-Midland differentials moved inside the Basin pipeline tariff this week (which, if sustained, will reduce flows into Cushing), despite significant Permian refinery works, hydrotests on West Texas Gulf and Mid-Valley pipelines, and lingering uncertainty around new Permian pipeline start dates. Furthermore, WTI spreads strengthened despite additional headwinds from the north. Notwithstanding the return of many Chicago and Northern Tier refineries, flows on Flanagan South into Cushing remain elevated and may be sustained by upcoming turnarounds at the St. Paul Park and Pine Bend refineries. Meanwhile, Enbridge plans to implement optimisations among the Mainline pipeline to increase throughput into Superior by 85 thousand b/d later this year. From Superior, flows will continue along the Enbridge system into Cushing via Flanagan. Enbridge is also continuing a 50 thousand b/d expansion on Express-Platte with an expected in-service date of early next year. Flows along these lines will be supported by incremental Canadian production, which is already on the rise.
Extract from oil products:
US gasoline stocks jumped w/w by 4.4 mb as inventories climbed in every major region. US East Coast gasoline stocks rose by 1.9 mb w/w on heavy imports, cutting the deficit to the five-year average to 2.4 mb. USEC gasoline imports surpassed 1.07 mb/d in the week to 2 August and with imports set to remain strong this week, RBOB markets will struggle to move higher in the short term. Tanker fixtures suggest European refiners will continue to aggressively export gasoline into the third week of August at least, which may limit the risk of a spike in prices at the end of the summer driving season. USGC gasoline stocks rose by 0.9 mb to 84.8 mb, taking regional inventories to a 7 mb surplus to the five-year average and underscoring the vulnerability of the light ends complex in the winter months, when demand will be structurally lower and supply is likely to be strong due to high refining margins ahead of IMO 2020.