Extract from crude oil:
US crude stocks built counter-seasonally by 0.8 mb to 448 mb—compared to a five-year average draw of 2.2 mb—thanks largely to a 0.9 mb/d w/w jump in imports as fog-affected cargoes cleared the Houston Ship Channel from the prior week. Driven by margins weakness across PADDs 1, 3 and 5, as well as planned and unplanned refinery works at Husky Lima and Exxon Beaumont, refinery runs fell w/w to below 16.6 mb/d, further contributing to crude stockbuilds. Builds were kept in check by a jump in US exports to 3.4 mb/d and the continuing pullback in production.
After November’s Petroleum Supply Monthly we peg Williston crude production lower by 40 thousand b/d m/m to 1.44 mb/d in September, cementing our crude growth forecast for the basin at 0.15 mb/d y/y for 2019 and 97 thousand b/d y/y for 2020. The ongoing reduction in DUC wells from the highs seen in March will weigh on production going into next year. Bakken differentials at Clearbrook have averaged -$0.63 per barrel versus WTI-CMA for the January 2020 trade month, down by around 10 cents m/m, and the Bakken spread from Clearbrook to Nederland (where Bakken is exported) is currently around $3.5. Foreign demand for Bakken continues due to the grade’s more favourable properties vs WTI due to a higher distillate cut and more reliable quality than Eagle Ford. Domestic consumption will rise with the start-up of the 50 thousand b/d North Dakotan Davis refinery in late 2020 and with the restart of the 56 thousand b/d lubricants unit at Phillips 66’s Wood River refinery in Q3 19. We believe the new Wood River unit will process Bakken crude, likely supplied from ETP’s 0.57 mb/d DAPL line into Patoka. Wood River could also source Bakken from the Enbridge system (after the SAX extension), as the system has Bakken (UHC) injection points at Regina, Cromer and Clearbrook.
Extract from oil products:
US gasoline stocks jumped by 5.4 mb w/w as imports into PADD 1 recovered and as gasoline output continued to climb despite refinery runs falling back on poor margins and refinery outages. Gasoline stocks now stand at 234.8 mb, higher y/y by 6.4 mb and nearly 10 mb above the five-year average. USEC inventories rose by 1.7 mb to 62.4 mb, 2.9 mb higher y/y, as imports rose to 0.58 mb/d, higher w/w by 0.19 mb/d. PADD 3 gasoline inventories rose by 0.5 mb w/w to 83.5 mb, leaving regional stocks at a 0.3 mb y/y deficit. However, US gasoline stocks are likely to continue to rise as refinery utilisation on the USGC was only 93.3% of capacity in the week to 6 December, more than 2 ppts lower y/y.