This week’s EIA data recorded another larger than expected crude inventory build, despite already high levels of inventory which have now reached 379.5mmboe, the highest since 1990. Product inventory fell more than expected but gasoline inventory remains ample, and tightening distillate is not a concern at this time of the year.
Product demand remains weak, despite WoW gains in implied demand for gasoline and distillate of 0.2mmb/d and 0.4mmb/d respectively, resulting in a small 0.1mmb/d rise in all product demand. All product demand remains negative on a YoY basis, though is showing signs of stabilising around the -3% mark on a 52-week average YoY basis. For gasoline, demand remained at -3.6% on a 52-week average YoY basis, and for distillate, this measure held at -0.6% YoY, in line with recent weeks.
Product imports declined sharply WoW to 1.6mmb/d, in stark contrast to the five-year average of 3.0mmb/d; distillate imports were virtually non-existent. Crude imports rose, despite swollen inventory levels, which we regard as negative for oil prices.
The IEA is due to release its monthly Oil Market Report on Friday and we expect it to show that crude inventory levels are rising outside the US, confirming that markets are now oversupplied.