In yesterday’s EIA Weekly Petroleum Status Report, US crude oil production jumped 118kb/d (1.6%) WoW to 7.3mmb/d, the highest WoW increase YTD (Figure 1). The growth rate since the beginning of the year implies full year average crude production of 7.5mmb/d, or a 1.1mmb/d (+16.7%) YoY increase. That is notably higher than the 0.8mmb/d YoY growth in US crude production the EIA has forecast in its latest Short Term Energy Outlook and also higher than the 0.8mmb/d YoY growth in US liquids output the IEA has forecast in its April edition of the Oil Market Report.
US crude inventory reversed much of last week’s stock draw with a 0.9mmbbl (+0.2%) WoW inventory gain and remains comfortably above the top of the seasonal range, though lately it appears to be flattening (Figure 2). The WoW inventory gain came on a combination of higher domestic crude production, higher crude imports (up 0.1mmb/d WoW) and sharply reduced refinery crude throughput (down 0.6mmb/d WoW). Gasoline inventory was down 3.9mmbbl (-1.8%) WoW, over six times more than market expectations and the build in distillate inventory also came in lower than expected. Overall, total inventory was down 1.9mmbbl WoW.
Implied all-product demand rose 0.1mmb/d (+0.8%) WoW to 18.5mmb/d and close to 2012 demand levels but still some 0.6mmb/d below the seasonal average. Within the product categories there was significant volatility in demand. Implied demand for gasoline gained 0.4mmb/d (+4.4%) WoW rising to 8.8mmb/d, the highest YTD and back above the bottom of the seasonal range. Demand for jet kerosene was up 0.3mmb/d WoW though demand for propane/propylene and the ‘other oil products’ category was down 0.2mmb/d and 0.4mmb/d WoW, respectively. On a 52-week average basis, all product demand improved to 0.1% YoY, from flat YoY in the previous two weeks.
Oil prices appear to be looking to find a level around the USD 100/bbl mark having slid initially from the middle of February and then further still at the beginning of March, in line with our expectation. However, we are not convinced that Brent will stabilise until it is clear that the market has been brought to a more balanced supply/demand outlook, which will probably require positive OPEC action.
The US EIA data recorded a 0.9mmbbl gain in crude inventory (vs. +2.0mmbbl expected), a 0.1mmbbl build in distillate (vs. +0.5mmbbl expected) and a 3.9mmbbl draw in gasoline (vs. -0.6mmbbl expected).