Extract from crude oil:
US crude stocks once again built by more than the 4.9 mb five-year average, rising by 9.3 mb to 434.9 mb. The build was driven by refinery runs falling by another 0.22 mb/d w/w, to 15.4 mb/d, with PADD 3 runs dropping to just 8.2 mb/d, although low runs helped total commercial stocks to draw by 1.6 mb. While the EIA pegged crude exports at a still-hefty 3.3 mb/d, we believe this data is likely overstated given the surge in freight rates, which has closed the export arb and forced cargo cancellations. This likely underpinned the 5.5 mb crude stockbuild in PADD 3.
Freight rates remain at elevated levels despite having retreated from record highs. Shipowners have seen an almost perfect alignment of bullish factors since the start of Q3 19. Freight rates had started to move up when almost 60 supertankers left service for scrubber refitting ahead of IMO 2020. But the real increase came on 25 September when President Trump sanctioned two subsidiaries of Chinese firm COSCO for alleged involvement in Iranian crude transportation. While the affected subsidiaries control 21 VLCCs and 20 smaller vessels, charterers have, until recently, avoided the entire fleet of nearly 150 ships associated to the COSCO parent company (see below). Meanwhile, Iran’s inability to sell its crude has meant that it has tied up around 20 VLCCs in floating storage service, temporarily removing them from the market. Near Singapore, another 24 VLCCs are in floating service with VLSFO or other bunker fuel cargoes, hoping to take advantage of the contango in VLSFO curves. Finally, since the turn of the month both Exxon and Unipec have reportedly avoided any tanker that has called at Venezuelan ports over the past year, although the former has since relaxed this policy. Each of these developments materialised just as weather-related delays began to rise in the Baltics. All told, over 10% of the world’s fleet of 700 VLCCs was not available for charter.
Extract from oil products:
US gasoline stocks fell by 2.6 mb w/w as stocks dropped in PADDs 1, 2 and 3 due to refinery maintenance. PADD 1 inventories fell by 0.5 mb w/w to stand at a 7.1 mb deficit y/y as refinery utilisation in the region dropped to 84.5% of installed capacity with refinery works nearing their autumn peak.