Extract from crude oil:
After four straight weeks of larger-than-seasonal draws, amounting to 24.4 mb, US crude stocks built by 1 mb last week (led by PADD 3 at 2 mb) to 417 mb, only marginally higher than the five-year average rise of 0.3 mb. Given the start of refinery maintenance (0.81 mb/d of planned CDU capacity offline in September and 1.4 mb/d in October, albeit both are lower y/y), which pushed runs down by 0.79 mb/d w/w to 16.7 mb/d, crude stock builds are to be expected. But high exports (3.2 mb/d) and still muted imports (7 mb/d) kept builds to a minimum.
As sour supplies are growing rarer, concerns over quality misalignment between US production and indigenous refinery demand continue. PADD 3 imports were just 2.05 mb/d in June according to the most recent monthly data, the lowest level of imports into the USGC since the late 1980s, even while June runs averaged 9.15 mb/d. The biggest reduction in imports came from OPEC countries, hitting a record low of 0.46 mb/d, versus the 2018 average of 1.4 mb/d. We do not expect imports to rebound anytime soon, especially following the weekend attacks on Saudi oil facilities. While most of the disrupted output will resume by end-September, full capacity will only be restored by end-November and exports to the east will be prioritised. Saudi Arabia had already decided to supply refiners 0.7 mb/d less crude than they nominated for October, with flows to US refiners to be cut by 0.3 mb/d. In short, we expect imports from OPEC to drop even further, with imports from the Kingdom potentially at 0.2 mb/d from November. The US remains starved of heavy crudes amid sanctions on Venezuela and with Mexican exports to the USGC low at 0.5 mb/d amid natural declines. A mandatory 10 mb SPR sale of sour crudes over October and November should help USGC refiners at the margin, but the recent price spike means that emergency SPR releases cannot be ruled out either.
Extract from oil products:
US gasoline stocks rose by 0.8 mb w/w as PADD 3 inventories rebounded by 2.6 mb w/w, offsetting draws on the USEC and Midwest. USGC inventories, which had been surprisingly weak over the last two weeks, closed to within 1.9 mb of year-ago levels despite regional refinery runs falling by over 0.44 mb w/w. A sharp drop in gasoline imports to 0.5 mb/d, from nearly 0.8 mb/d a week earlier, and falling refinery runs due to turnarounds suggests that gasoline inventories will continue to draw in the coming weeks. The attacks on Saudi Arabia’s oil infrastructure have disrupted some refinery operations, which may provide additional outlets for European supply as well, which may keep imports low in the coming weeks.