This week’s EIA data had implied all product demand sharply up, rising 1.1mmb/d (+3.3%) WoW to 20.0mmb/d and within a fraction of the seasonal average. On a 52-week YoY average basis, implied all product demand improved to -2.1%, from -2.3% in the prior week. The rise in all product demand was mainly due to a 0.7mmb/d (+20.4%) jump in implied distillate demand, though its 52-week YoY average actually worsened to -4.5%, from -4.2% in the week before. There was also a 0.4mmb/d (+14.0%) WoW increase in the ‘other oil products’ category. Lastly, implied demand for gasoline rose by 0.1mmb/d (1.5%) WoW to 8.6mmb/d.
There was a counter-seasonal rise in refinery utilisation, up 1.1% to 91.5%, where the market was expecting no change, while refinery throughput increased 0.2mmb/d (+1.5%) WoW. Both measures moved further above the top of their respective seasonal range. Domestic production was marginally higher, up 11kb/d WoW, though crude imports were 0.1mmb/d lower.
As a result, there was a draw in crude inventory, but it was only by 1.0mmbbl (-0.3%) WoW to 371.6mmbbl, significantly smaller than the seasonal average of a 6.2mmbbl inventory draw. The gap to the seasonal average (and the top of the seasonal range) widened further still. Total stocks were flat WoW.
It appears to us that the market, possibly faced with positive sentiment over hopes that President Obama and the Republicans are edging closer to a deal, read this as a bullish data set. In our view, however, crude inventory is very high, in spite of very high refinery utilisation and low levels of crude imports. We maintain our view that oil markets are over-supplied and while that remains the case we see downside risk to oil prices.