US Department of Energy

Published at 17:55 26 Sep 2012 by . Last edited 09:29 20 Apr 2016.

Crude oil inventories have reversed their two week long increase, and in line with our view, have started to stabilise following the two large builds created by the bunching up off imports in the Gulf Coast during Hurricane Isaac. Following this week's counter-seasonal draw of 2.4 mb, crude oil inventories are now 36 mb above the five-year average, a reduction of 3.7 mb in the overhang. In contrast, product inventories (excluding the other oils category) increased by 2.7 mb relative to the five-year average, despite the combined effect of a counter-seasonal draw in distillate inventories and a draw in gasoline stocks that was in line with the seasonal average. Nonetheless, the disparity between crude and product stocks remains wide, with the latter still over 35 mb below the five-year average. Cushing inventories drew for the third straight week, the longest run of reductions since end December 2011, although inventories in the rest of the Midwest built by 0.3 mb over the week.

Crude oil imports fell back by 2.25 mb/d to 7.6 mb/d, following last week's surge to 9.85 mb/d, and from here we would expect imports to normalise around the four-week average of 8.5 mb/d. Refinery runs, however, fell back by 0.3 mb/d to 14.62 mb/d, despite strong margins in both the Gulf Coast and Midwest. The fairly large level of maintenance and unplanned outages in the US weighed on refinery runs, with close to 1.2 mb/d of refinery capacity currently offline. Earlier today, there was another addition to the list, with Irving Oil Corporation's St. John refinery in New Brunswick reporting a small explosion.

Meanwhile, US oil demand indications remain sloppy, with total demand running lower y/y in September-to-date by 664 thousand b/d (3.5%) at 18.227 mb/d. While gasoline demand growth is marginally negative (45 thousand b/d or 0.5%), it is diesel that is currently the Achilles heel of US oil demand. With economic activity fairly subdued, distillate demand has weakened considerably since June this year, although some revisions may be in the offing in tomorrow's Petroleum Supply Monthly. In the year-to-date, despite a retail price average of $3.7 per gallon (a record average thus far), gasoline demand is running lower y/y by just 31 thousand b/d (0.4%). In contrast, US diesel demand is running lower y/y by 186 thousand b/d (4.7%) in the year-to-date, and has been the second weakest product so far this year after fuel oil.

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