The weekly US EIA data recorded another above expectations build in crude inventory as imports increased 0.5mmb/d (+5.5%) WoW, despite inventory levels already being the highest since 1990 and three weeks later than the start of the normal seasonal decline. Refinery utilisation increased 1.0% to 89.1%, which was above market expectations. However, actual throughput is only tracking around average, so high refinery usage does not look a strong justification for such high levels of crude inventory. Neither do current levels of demand, which remain very depressed. Implied all product demand fell 0.4mmb/d WoW (-1.9%) to 18.3mmb/d, although the 52-week cumulative YoY trend remained flat, down 2.8%. While implied gasoline demand increased 0.3mmb/d WoW (+3.5%) to 8.9mmb/d, it was still down 5.3% YoY, even though on-road fuel prices continue to weaken with gasoline hitting USD 3.669/US gallon, down USc 4.5/US gallon (-1.2%) WoW.
We continue to suspect that part of the explanation for the behaviour of crude inventory is that Saudi Arabia is boosting supply to the US to put pressure on crude prices. For the year to March, Saudi crude imports into the US are up 27% YoY. However, if that crude were not going to the US, it would be going into inventory elsewhere. Preliminary reports indicate that OPEC production for May has increased MoM again, in line with our expectations. If this process continues, and we believe there is a substantial chance that it will, then we think it is likely that Brent will breach the USD 100/bbl mark quite soon.