This week’s EIA data surprised with a 2.7mmbbl build in crude inventory, counter to market expectations of an inventory draw and contrary to the trend in recent weeks which had seen bloated crude stock levels being worked down.
A 0.7mmb/d (+7.8%) WoW rise in crude imports was the main reason for the inventory rise. Together with a 0.1mmb/d WoW rise in domestic production, these more than offset a sharp 0.3mmb/d WoW increase in refinery throughput.
Gasoline inventory also picked up against expectations of a stock draw, gaining 4.1mmbbl WoW to cut the gap to the historical average by nearly 40%, WoW. Gasoline inventory looks significantly more comfortable than it has in recent weeks and even more so in terms of days forward cover.
Implied all product demand rose 0.5mmb/d (+2.6%) WoW but remains below average. The main contribution came from the volatile 'Other Oils' product category (+0.7mmb/d, +17.7% WoW) rather than gasoline, which was flat WoW at a 8.7mmb/d – well below the historical range. Not helping matters, gasoline prices have spiked in recent weeks and are now just shy of USD 3.50/ US gallon.
In our view, this was a bearish set of numbers, certainly from a crude inventory perspective but also in that the demand picture shows few signs of a sustained recovery. With Chinese demand cooling, the market continues to look oversupplied and until that changes price risk remains to the downside, in our view.