Analysis: US crude inventories likely lower as refiners maintain high runs

US crude inventories likely fell last week as refiners maintained high runs while imports fell, an S&P Global Platts analysis showed Monday.

Crude stocks are expected to have drawn 4.7 million barrels, according to analysts polled by Platts. That would put inventories at roughly 433.08 million barrels, based on the most recent US Energy Information Administration data.

US crude inventories typically draw this time of year, until fall maintenance kicks in, reducing refinery runs.

Refinery runs likely edged lower last week by 0.7 percentage points, putting operations at 95.2% of capacity, near the five-year high for the week. Refining margins have fallen from July, but should remain high enough to encourage refiners to keep runs high. The US Gulf Coast coking margin has averaged $7.65/b so far in August, down from $9.37/b in July, Platts data shows.

On the supply side, US crude production will likely hold at around 12.3 million b/d. However, crude imports are expected to have declined, which would exacerbate the inventory draw.

CRUDE IMPORTS, EXPORTS LIKELY DOWN
US customs data shows a drop in crude imports to 5.68 million b/d last week from 7.07 million b/d the week ending August 16.

Crude exports were expected to have fallen, but have held up from the dip in early August. Platts cFlow ship tracking software shows the US Gulf Coast exported 17.98 million barrels last week, down from 19.4 million barrels the week ending August 16. However, that’s up from just 12.9 million barrels the week ending August 2.

Crude exports to China fell to zero again last week, from 2.61 million barrels the week ending August 16. Exports to China will likely remain low considering the ongoing trade dispute between the US and China, with China last week threatening to place tariffs on imports of US oil.

However, crude exports to Asia remained relatively high last week, at 8.45 million barrels, the cFlow data showed.

While the arbitrage for US medium sour crudes, such as Mars, into Asia remained closed last week, the arbitrage for light US crudes remained open, Platts Analytics data showed Monday. The arbitrage for light crudes into Europe was also open last week.

The capacity to move more crude barrels out of the USGC has been expanded, with the first US crude cargo originating from the new Cactus II pipeline loaded onto an Aframax last week.

The 670,000 b/d Cactus II pipeline began service to Ingleside, Texas earlier this month. Service to Corpus Christi, Texas is expected to start in the first quarter of 2020, Plains All American has said.

Cactus II will be joined by the 400,000 b/d EPIC crude pipeline and the 900,000 b/d Gray Oak pipeline, both expected to start up by year’s end.

REFINED PRODUCTS OUTPUT STRONG
US gasoline inventories likely declined by 530,000 barrels last week, while distillate stocks likely climbed by 700,000 barrels, according to analysts polled by Platts.

With refiners maintaining high runs, production of both products should remain high. US distillate production for the week ending August 16 at 5.34 million b/d was just 86,000 b/d below the five-year high for the week, EIA data showed.

However, US distillate implied demand has slipped. The US-China trade war has reduced container imports into California ports, while lower crude prices have reduced drilling, pulling diesel demand lower, according to Platts Analytics.

Still, an increase in trucking demand ahead of the Labor Day weekend may bolster distillate consumption. Gasoline consumption also might have risen last week as downstream marketers bolster supplies ahead of the Labor Day weekend, according to Analytics.
Source: Platts