There was a positive tone in the EIA data for the week ending 10 August, with implied all products demand rising 1.1mmb/d WoW to 20.0mmb/d, above the seasonal prior five-year average for only the second time in the year. An encouraging 0.5mmb/d rise in implied gasoline demand raised it to 9.3mmb/d, the highest YTD and above the historical average for the first time in 2012. However, It remains uncertain whether this represents a real, sustainable level of demand given that 0.8mmb/d of the weekly increase in implied demand was for the volatile ‘other oil products’. Indeed, gasoline demand itself might come under pressure after another rise in on-road fuel prices (up 2.1% WoW to USD3.721/US gallon). Gasoline and diesel now cost more than they did a year ago.
Crude imports remained subdued, with an increase of only 0.1mmb/d WoW. On the other hand, there was a sharp rise in gasoline imports (+0.3mmb/d, +72.4% WoW) with most of the product landing in the US East Coast (PADD 1) where gasoline levels stand well below the historical range. Meanwhile, nationwide gasoline stock levels are in better shape but at the lower end of the historical range.
Crude inventory surprised with a 3.7mmbbl WoW draw but remains ample in quantity. The larger than expected drawdown was due to an increase in refinery throughput, up 0.1mmb/d WoW from already very high levels, after a drop in domestic production net off against the increase in crude imports.
Crude prices have perked up even further over the past week, coinciding with yet more threats and rhetorical speeches from Israel and Iran, sanctions and fines on corporates accused of breaching US sanctions and, most recently, arrests in Europe of individuals accused of supplying Iran with contraband. In spite of such developments, the market continues to look oversupplied and until that changes price risks remain to the downside, in our view.