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US crude oil inventory draws extend amid rising refinery demand, lower production

US crude oil inventory declines extended in the week ended May 28, US Energy Information Administration data showed June 3, amid rising refinery demand and lower production.

Total commercial crude oil inventories drew 5.08 million barrels lower to 479.27 million barrels in the week to May 28, pushing them to the lowest since the week ended Feb. 19 and nearly 3% behind the five-year average.

NYMEX July WTI settled 2 cents lower at $68.81/b and ICE August Brent declined 4 cents to $71.31/b June 3.

The draw was concentrated on the US Gulf Coast, which saw a 5.64 million-barrel decline in inventories to 264.81 million barrels. This draw was offset in part by rising stock levels on the US Atlantic Coast and Midwest, which saw respective builds of 560,000-barrels and 590,000-barrels.

Stockpiles at the NYMEX delivery point of Cushing, Oklahoma, climbed 780,000 barrels to 45.54 million barrels in the week ended May 28, a 2% increase from the week prior. The counter-seasonal Cushing build left inventories around 15% behind the five-year average, the narrowest deficit since early April.

The USGC draw was in large part predicated on an increase in refinery crude demand. Total net crude inputs averaged 15.60 million b/d in the week ended May 28, up 2.4% from the week prior and the highest since the week ended March 20, 2020. Refinery utilization averaged 88.7% of capacity, an increase of 1.7 percentage points from the week prior and at near parity with the five-year average.

US crude stocks saw pressure from a 200,000 b/d slide in production to 10.8 million b/d in the week to May 28. Production was last lower in late February after severe winter weather and freezing temperatures shut in wells as far south as Texas.

Midwest refiners pushed utilization to 91.5% of capacity, the highest since February 2020. Meanwhile, USGC refinery utilization was up 1.4 percentage points at 89.7% of capacity, leaving it just shy of the 13-month high 90.2% seen in late April.

Notably USAC refinery utilization retreated to 87.9% of capacity in the week to May 28, a 2.1 percentage-point decline.

The stepped up refinery runs come as operators are now beginning to see support from jet fuel demand growth. The Platts Global Jet index reached $1.75272/gal for the week ended May 28, the highest since mid-January 2020, led primarily by increased demand in the Western Hemisphere.

US refiners on recent first quarter earnings calls noted that while both gasoline and diesel demand have rebounded to near or better than pre-pandemic levels, jet fuel demand had lagged by about 76% of normal levels in early May.

But the onset of warmer weather, easing social lockdowns and widespread vaccinations efforts have fueled a dramatic recovery in jet demand. In the week to May 28, the EIA reported demand reached 1.44 million b/d, the highest since the week ended Jan. 1 and just 0.7% behind the five-year average.

USAC gasoline stocks remain tight despite build

Total US gasoline inventories climbed 1.5 million barrels to 233.98 million barrels in the week ended May 28, while nationwide distillate inventories moved 3.72 million barrels higher to 132.8 million barrels, snapping seven consecutive weekly draws.

NYMEX July RBOB settled up 77 points at $2.2018/gal and July ULSD fell 54 points to $2.1017/gal June 3.

The gasoline build was driven largely by a 2.03 million-barrel increase in USAC inventories to 62.39 million barrels. East Coast stocks remained nearly 9% behind the five-year average and were at the lowest level in the week leading up to the US Memorial Day holiday, which traditionally marks the start of the summer driving season, since May 2015.

While still tight, the rising gasoline stocks have resulted in a slight easing of regional gasoline cracks. The ICE NYH RBOB crack versus Brent averaged $20.95/b in the week to May 28, down from $21.13/b the week prior.

Midwest gasoline inventories saw a 140,000 barrel increase to 46.13 million barrels, holding stocks there around 11.3% behind the five-year average, while on the West Coast, a 20,000-barrel build left stocks around 1.7% below normal.

Only USGC inventories remain above average, but these too have demonstrated a downward trend in recent weeks. Stocks there fell 330,000 barrels to 88.82 million barrels and the surplus to the five-year average narrowed to 6% in the week to May 28 from nearly 10% in mid-May.

Overall US gasoline demand remains strong, setting the state for further pressure on inventories in coming weeks. Weekly implied gasoline demand fell 330,000 b/d to 9.15 million b/d, but the four-week moving average of gasoline demand pushed to 9.16 million b/d, the highest since March 2020.

Notably, Apple Mobility data shows US driving activity averaged 152% of baseline levels in the week to May 28, marking a second straight week that the index has hit a fresh all-time high in records dating back to January 2020.
Source: Platts

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