Similar to last week’s data set, yesterday’s EIA weekly data saw significantly stronger than expected inventory builds in gasoline and distillate. Gasoline inventory rose 5.0mmbbl (+2.4%) WoW to 217.1mmbbl, remaining close to the top of the seasonal range. In just three weeks, gasoline inventory has surged 8%, or 16.7mmbbl, taking it from below average to the very top of the seasonal range. Distillate inventory was also up WoW, rising 3.0mmbbl (+2.6%) to 118.1mmbbl. It remains below the bottom of the seasonal range though slowly but surely the market tightness is easing. In crude inventory, there was a small but counter-seasonal build where the market was expecting an inventory draw, keeping crude inventory levels comfortably above the top of the seasonal range.
Refinery throughput and utilisation were relatively unchanged and running above the top of the seasonal range. The key reason for the shift from last week’s crude inventory draw to this week’s inventory build was the pick-up in crude imports: they gained 0.3mmb/d (3.3%) WoW. A 35kb/d rise in domestic crude production also contributed to the inventory build.
Implied all product demand was up 0.5mmb/d (+2.7%) WoW, lifting it from the bottom of the seasonal range towards (but still below) the average at 18.8mmb/d. However, the rise in implied demand was down to sharply higher demand for residual fuel oil and propane/propylene, rather than main product categories (gasoline and distillate). Implied demand for gasoline and distillate remained close to the anaemic levels of last week.
In our view, this was a bearish set of data. Meanwhile, OPEC’s rollover of its 30mmb/d production target, in line with expectations, could also have been seen as negative on oil prices given OPEC’s self-reported production above the call on OPEC and its target. Despite the market reaction, which might be connected with the imminent rollover of the current futures contract, we maintain our view that oil markets are over-supplied. And while that remains the case, we see a downside risk to oil prices.
We extend our congratulations to His Excellency Abdalla Salem El-Badri on the one year extension of his tenure as Secretary General of OPEC, effective from 1 January 2013, given OPEC’s failure to agree on a replacement.