This week’s US EIA data, released a day later than usual due to the Martin Luther King Jr Day holiday on Monday, surprised the market with significantly lower refiner utilisation (down 4.3% to 83.6%, versus -0.6% expected), which in turn was the key factor behind the crude inventory build. Utilisation was lower as a number of refinery units went into maintenance, particularly on the US Gulf Coast, resulting in lower refinery throughput, down 0.9mmb/d (-5.9%) WoW to 14.2mmb/d, which dropped from the top of the seasonal range to just below the seasonal average. Meanwhile, domestic crude oil production fell 52kb/d WoW, the first double-digit fall in production since late August 2012 when Gulf Coast production was shut in in the wake of Hurricane Isaac. These, as well as a 0.3mmb/d WoW fall in crude imports, largely explain the swing in crude inventory movements from last week’s 1.0mmb/d draw to this week’s 2.8mmb/d inventory build. Crude inventory reached 363.1mmbbl and is still comfortably above the top of the seasonal range.
Implied all product demand improved from the week before, up 0.6mmb/d (+3.8%) WoW to 18.6mmb/d, with WoW gains across the board other than distillate. Still, demand remains weak and is below the bottom of the seasonal range. Also, for the first time in ten weeks, the 52-week YoY average all product demand worsened and is now at -1.5% from last week’s -1.4%. Crude and gasoline inventory levels look comfortable in terms of Days Forward Cover (DFC). Both are above the top of the seasonal range, at 24.2 and 28.0 days, respectively. Distillate inventory, which in the second half of 2012 frequently reached record lows in terms of both absolute levels and DFC, has been rising steadily since mid-November of last year and is now clear above the seasonal average in terms of DFC. We believe that markets are oversupplied and the high inventory levels, weak demand and very low import levels inthis set of data do nothing to convince us otherwise.