Although remnants of Hurricane Sandy effects still exists in the latest EIA release, the data nonetheless augers a slow return to normality. Crude inventories built by 1 mb, taking the difference to the five year average higher by 1.1 mb to 42.7 mb, with all regions except the Gulf Coast registering w/w builds. Imports fell below 8 mb/d, but lower refinery runs and higher domestic production resulted in the larger than usual build last week. Product stocks, however, drew, by 2.8 mb, relative to the five year average, and are currently 33.7 mb lower than that average. Within products, the stand-out was distillate inventories which fell by 2.5 mb over the week; a consequence of both the effects of Hurricane Sandy (as some refineries in the East Coast remained offline while demand recovered) and seasonally higher demand due to the cold weather. Distillate inventories, at 115.6 mb, are now at their lowest levels since June 2008, and stand 29.1 mb lower than the five-year average, with the deficit widening w/w by 0.9 mb. Meanwhile, gasoline inventories drew counter-seasonally by 0.4 mb although, as with distillates, the draws were in the East Coast and the Midwest, with the Gulf Coast remaining awash with products. Indeed, PADD 1 gasoline inventories are at their lowest since September 2008, but PADD 3 stocks are at their highest since September last year. With the resumption of the Colonial pipeline and the Jones Act waivers that have been granted, some of that Gulf Coast inventory is being moved to the East Coast. At the same time, imports to the East Coast, which rose sharply to above 0.5 mb/d last week, are also likely to have continued this week, potentially pointing to builds in gasoline stocks in the East Coast in the coming weeks.
Elsewhere, inventories at Cushing built by 0.7 mb, with the difference to the five year average at 19.2 mb, following a cumulative 1.1 mb/d draw over the previous two weeks. With Syncrude and Bakken differentials to WTI falling sharply in recent weeks, together with BP Whiting refinery being under maintenance, the flows into the Midwest increased, as we have highlighted in the past few weeks. We believe that the short term balances of WTI continue to look weak, and hence prices are likely to remain under pressure.
Demand recovered strongly, particularly for gasoline, with part of the strength due to pent up demand following Hurricane Sandy. Gasoline demand increased to 8.9 mb/d, with the distillate reading of 4.1 mb/d the highest for the year. Total US demand recovered, to move back above 19 mb/d, with November-to-date demand running higher y/y by 0.8%, led by gasoline, higher y/y by 3.5%. Despite Hurricane Sandy severely curtailing East Coast demand for a week, the overall effects on demand seem far more limited than Katrina or Rita. Moreover, demand in the rest of the US seems to be picking up, buoyed by improving macroeconomic conditions.