US refined product stocks surge as demand hits 5-week low
US refined product inventories moved sharply higher last week amid a slowdown in demand, US Energy Information Administration data showed.
Total US gasoline inventories built for a tenth straight week, EIA data showed, moving 6.68 million barrels higher to 258.29 million barrels during the week ended January 10. The build put stock levels more than 5.5% above the five-year average for this time of year, opening the widest supply surplus since January 2019.
Nationwide distillate stocks expanded 8.17 million barrels last week to 147.22 million barrels, narrowing the deficit to the five year average to 2.7% from 7.2% the week prior, according to EIA data.
The product build was due in part to a sharp downturn in buying interest. Total US products supplied fell 310,000 b/d to a five-week low 19.04 million b/d last week, putting demand levels nearly 5% below the five-year average.
Gasoline demand was roughly at par with historic averages after rising 430,000 b/d last week at 8.56 million b/d, but total distillate supplied fell to 3.19 million b/d, down 190,000 b/d on the week and more than 20% under the five-year average.
Distillate buyers likely delayed purchases amid forecasts calling for temperatures in the mid-60s across much of the Northeast last weekend, cratering nationwide distillate demand. Observed temperatures at Boston’s Logan Airport were more than 30 degrees above normal Saturday, according to US National Oceanic and Atmospheric Administration data. Warm weather has persisted across the region this week, possibly adding headwinds to any near-term rebound in distillate demand.
Combined low- and ultra-low sulfur diesel stocks jumped 3.65 million barrels on the US Atlantic Coast last week to 42.42 million barrels, a 20-week high. But regional inventories were still tight at nearly 8% under the five year average. US Gulf Coast combined diesel stocks were at a two-year high 41.5 million barrels after building 2.29 million barrels from the week prior.
Weakened pipeline economics and a lack of export options have contributed to the build out of USGC diesel stocks.
Platts assessed USGC prompt pipeline diesel last week at an average discount of 8.6 cents/gal compared with NYMEX ULSD futures, in sharply from mid-December levels when discounts approached 10 cents/gal. The arbitrage incentive for moving ULSD to
Europe, which has been mostly negative since May, has moved sharply lower in 2020, averaging at minus $1.74/b in January according to S&P Global Platts Analytics data.
Product stocks also saw a boost from an uptick in refiner crude demand. Total net crude inputs were 2.4% above the five-year average after climbing 80,000 b/d to 16.97 million b/d last week, even as total refinery utilization rates slipped 0.8 percentage point to 92.2% of capacity.
CRUDE SUPPLY TIGHTENS DESPITE RECORD OUTPUT
Total US crude inventories slipped 2.55 million barrels to 428.51 million barrels last week. While the draw ran counter to analysts’ expectations of a modest build, it left US supply at roughly par with the five-year average.
The crude draw was mainly centered on the USGC, where stocks fell 2.97 million barrels to a 15-week-low 218.43 million barrels. While USGC net crude inputs were slightly higher last week at 9.28 million b/d, a 420,000 b/d rebound in exports to 3.48 million b/d likely drove the supply contraction.
US crude production ticked up 100,000 b/d last week to a fresh all-time high of 13 million b/d, EIA data showed. The strong output contributed to a 340,000-barrel build at Cushing, Oklahoma, the delivery point of the NYMEX crude contract.
After climbing steadily throughout 2019, US crude output has been rangebound at around 12.85 million b/d for the past nine weeks. The EIA estimated US oil production to average at 13.3 million b/d in 2020 and 13.71 million b/d in 2021 in its Short Term Energy Outlook released Tuesday.