For the fourth week in a row, the US EIA data recorded an above-consensus crude inventory build, thus ensuring crude inventory levels remained above the prior five-year range. Although product inventory draws were substantial and above expectations, that largely reflected falling imports, especially of gasoline which dropped 0.3mmbd WoW. However, despite tightening product inventory, low demand levels means that days forward cover in products are at or well above normal levels. Consequently, we suspect that the reduction in imports reflects prudent inventory management.
All product implied demand remains anaemic at 18.9mmb/d, having fallen 0.1mmb/d WoW. On a 52-week average, all product demand is 3.1% down relative to the previous year. This is largely because implied gasoline demand continues to be weak (its 52-week average is down 3.5% YoY), while implied distillate demand is worsening (its 52-week average is now down 0.5% YoY, versus -0.1% the week before).
Lower US product imports are likely to imply increasing inventory in other regions, we expect, and will contribute to the sharp growth in global inventories in areas where inventories are currently tight, given the apparent oversupply in the market. We believe this process is already showing signs of pressurising the Brent price and we expect it to continue.