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EIA data – Unexpected, counter-seasonal crude inventory draw

According to yesterday’s Weekly Petroleum Status Report for the week ended 15 March, there was an unexpected and counter-seasonal drop in US crude inventory, down 1.3mmbbl (-0.3%) WoW to 382.7mmbbl. Markets had expected a 2mmbbl build in crude inventory. The inventory draw was also the first in 9 weeks for crude and there were also inventory draws for gasoline and distillate.

The two main contributing factors to the crude inventory draw were a 0.2mmb/d WoW drop in crude imports and, more importantly, a 0.5mmb/d WoW increase in refinery crude throughput. Refinery throughput reached 14.5mmb/d, above the top of the seasonal range. Domestic crude production was flat at 7.2mmb/d. The growth rate since the beginning of the year implies full year average crude production of 7.4mmb/d, or YoY growth of 0.9mmb/d (+14.3%), slightly higher than the 0.84mmb/d YoY growth in US liquids supply forecast by the IEA and EIA.

Implied all product demand continues to track last year’s lows, plunging 0.8mmb/d (-4.5%) WoW to 17.8mmb/d. Implied demand dropped in all product categories except for distillates, which rose 0.2mmb/d (+11.3%) WoW to 3.6mmb/d. Implied demand for gasoline dropped 0.3mmb/d (-3.5%) WoW to 8.3mmb/d, the lowest since the beginning of the year. The 52-week YoY average for all product demand is a fraction below 0%, albeit against a lower baseline.

Brent has traded with notable volatility, lately impacted by Eurozone jitters and Cyprus’s failed bailout plan; it even closed at USD 107/bbl two days ago. In contrast, WTI has risen in March as inventory levels in Cushing, Oklahoma, the physical crude’s pricing point, have fallen. As a result, the crude differential narrowed to USD 15/bbl, its lowest YTD, indeed the lowest since July 2012.

With US President Obama in the Middle East visiting Israel, there is scope for renewed focus on the region, particularly on the issue of Iran’s nuclear programme.

Colin Smith, Marc Jacouris
VTB Capital analyst

EIA, USA, gasoline, dollar

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