Memorial weekend kicked off the US driving season in a low key fashion, according to this week’s EIA data. Implied gasoline demand dropped 0.3mmb/d (-3.2%) WoW and is back well below the bottom of the prior five year range, despite further easing of on-road gasoline and diesel prices. The 52- week cumulative average decline worsened slightly to -3.9% YoY. Implied distillate demand also fared poorly, down 0.5mmb/d (-12.5%) WoW, with the 52-week cumulative average at -0.6% YoY. Implied all product demand worsened slightly to -2.9% YoY on a 52-week cumulative average basis.
After 10 successive weeks of builds, crude inventory finally eased off, down 0.1mmbbl WoW. The fall in inventory was mainly due to a 0.3mmb/d rise in refinery throughput, boosted by the startup of the Motiva Port Arthur refinery expansion. Crude imports were also 0.1mmb/d lower WoW. With the ramp-up in throughput and weak domestic demand, there was a resultant sharp increase in both gasoline and distillate product inventory, with supply comfortable on a Days Forward Cover basis. Total crude and products rose 6.8mmbbl WoW.
Given the sell-off in the oil markets, any drop in crude inventory is likely to be taken positively. However, this data is far from convincing, especially given the build in product inventory. We believe that stronger pointers to whether or not Brent will actually consolidate around USD 100/bbl will come from what Saudi says about its production as well as from developments around Iran due this month.