Yesterday’s EIA Weekly Petroleum Status Report had implied all-product demand down 0.6mmb/d (-3.1%) WoW, dropping from last week’s YTD high to 18.5mmb/d and back below the seasonal average. Weakness in implied demand for the ‘other oil products’ category was mainly responsible for that, with demand down 0.7mmb/d (-17.7%) WoW to 3.4mmb/d and within the more accustomed 3.0-3.5mmb/d range after last week’s spike in demand. Implied demand for gasoline eased 0.1mmb/d (-1.2%) WoW to 8.3mmb/d, one of the lowest readings YTD. Implied demand for distillate also weakened, down 0.1mmb/d (-2.4%) WoW to 3.6mmb/d and back below the bottom of the seasonal range. On a 52-week average basis, all product demand turned negative at -0.1% YoY after six consecutive positive readings.
US crude oil production eased 48kb/d (0.7%) WoW to 7.3mmb/d. Even so, the growth rate since the beginning of the year implies a full year average crude production around 7.5mmb/d, or a 1.0mmb/d (+15.3%) YoY increase, which is higher than the 0.9mmb/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 May edition of the Oil Market Report.
US crude inventory surprised with a 0.6mmbbbl (-0.2%) WoW draw where the market was expecting a 0.5mmbbl gain. However, gasoline inventory surprised with a 2.6mmbbl (+1.2%) WoW inventory gain and distillate inventory built more than expected. Overall, total inventory gained 2.7mmbbl WoW and remains above the top of the seasonal range.
In summary, this data set demonstrates the continued weakness in US demand, robust US crude production keeping out crude imports and comfortable levels of inventory. That is, we believe, supportive to our view that the global inventory levels are growing amidst an over-supplied oil market environment and where we see near term oil price risk to the downside.