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EIA data – Crude inventory down again


This week’s EIA data recorded another fall in crude inventory, down 3.7mmbbl (-1%) WoW. Crude inventory has been falling since mid-June, barring one week in mid-July, which suggests that it is being worked down from the significantly aboverange levels it has occupied since May. Gasoline and distillate inventory also registered drawdowns and are marginally above and below their historical minimums, respectively. Gasoline inventory levels continue to be comfortable on a days forward cover basis.

The data suggests that crude inventory is being managed down by lower imports. Crude imports were well below the bottom of the historical range, and over 1mmb/d lower than the seasonal average despite a 0.2mmb/d (+2.6%) WoW increase. That, together with a 0.1mmb/d WoW drop in domestic production and flat (but high) refinery throughput, resulted in the net inventory draw.

Implied all product demand remains weak: it fell 0.2mmb/d (-1.1%) WoW and is down 6.6% YoY. On a YTD average basis, implied demand worsened to -2.7% YoY, from last week’s -2.5%. Gasoline implied demand was essentially flat WoW at 8.8mmb/d and remains well below the historical range.
Gasoline prices rose for the fifth consecutive week, reflecting the recent rise in crude oil prices, we think. A 3.9% WoW rise took gasoline prices to USD 3.645/US gallon, likely putting further pressure on demand.

Despite the drawdowns, total inventory remains ample given weak US demand. OPEC publishes its monthly Oil Market Report today and the IEA reports tomorrow which we expect to shed more light on OPEC July production. Initial indications suggest that OPEC production might have fallen MoM but is still well in excess of demand, with the Saudis continuing to produce at the 10mmb/d level.

Colin Smith, Marc Jacouris
VTB Capital analyst

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