This week’s EIA data saw a larger than expected crude inventory draw, though this was more than offset by sharp builds in gasoline and distillate inventory which were significantly greater than market expectations. Gasoline and distillate inventory gained 7.9mmbbl (3.8%) and 3.0mmbbl (2.7%) WoW respectively, with gasoline inventory levels having risen sharply in a matter of two weeks toward the top of the seasonal range. Crude inventory was down 2.4mmbbl (-0.6%) WoW but remains plentiful and above the top of the seasonal range. The result was a net 8.5mmbbl inventory build where the market was looking for only a net 1.9mmbbl increase.
Refinery throughput was up 0.3mmb/d (+1.7%) WoW and, at 15.4mmb/d, it was just a shade below the top of the seasonal range. With refiners running hard but gasoline and distillate imports largely flat WoW, we suspect part of the story in the product inventory build might be hidden in the export numbers.
Meanwhile, after three weeks of implied all product demand around, or above, the 19mmb/d mark, demand dropped 0.6mmb/d (-3.3%) WoW to 18.3mmb/d. That was largely due to a 0.6mmb/d (-15.3%) WoW fall in implied demand for the ‘other oil products’ category. Implied demand for distillate also fared poorly with a 0.3mmb/d (- 7.6%) WoW fall which took it to the bottom of the seasonal range. Implied demand for gasoline was largely unchanged at 8.4mmb/d, and remains well below the bottom of the seasonal range.
It appears to us that the market took this data set as bearish for oil prices. We too see downside risks to the Brent price as it remains our view that oil markets are being oversupplied, and that this is increasingly being reflected in inventory data.