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EIA data – Demand disappoints


US EIA data for the week to 7 June saw all-product demand drop 0.9mmb/d (-4.6%) WoW to 17.9mmb/d, one of the lowest readings YTD despite incremental demand as a result of the driving season. Distillate demand was the only oil product category that saw a WoW increase, up 0.3mmb/d (8.7%) to 4.1mmb/d and above the top of its seasonal range. Implied demand for gasoline dropped 0.2mmb/d (-2.0%) WoW to 8.6mmb/d, clearly boosted by the driving season but below the bottom of the seasonal range. The cumulative average demand on a 52-week basis for all-products is now flat YoY, from 0.2% YoY in the previous week.

There was an unexpected, counter-seasonal rise in crude inventory, up 2.5mmbbl where the market was expecting a 1.5mmbbl stock draw, though API data had already pointed towards a build. A 0.6mmb/d WoW increase in crude imports was the key factor behind that inventory build. Distillate inventory surprised with a 1.2mmbbl draw, while the market had expected a 1.5mmbbl inventory build. However, gasoline inventory built more than expected, up 2.7mmbbl instead of just 0.5mmbbl as had been expected. In fact, gasoline inventory levels are quite comfortable and above the top of the seasonal range, in stark contrast to year-ago levels which mark the bottom of the seasonal range. Total US oil inventory trended higher WoW, comfortably reversing last week’s stock draw, and remain clear above the top of the five-year range.

Domestic US crude production lost some momentum, down 76kb/d WoW to 7.2mmb/d. The growth rate since the beginning of the year implies full year average crude production at around 7.3mmb/d, or a 0.8mmb/d (+13%) YoY increase. That is in line with the EIA’s estimates per the latest Short Term Energy Outlook.

The IEA published its June edition of the Oil Market Report (OMR) yesterday. It has revised its ‘call on OPEC crude’ in 2013 down 0.1mmb/d to 29.5mmb/d following downward adjustments to baseline non-OECD demand. However, OPEC crude production has risen again MoM and is now 0.6mmb/d above January levels, which were already above the call on OPEC crude. Against that background we continue to see price risks lying to the downside.

Colin Smith, Marc Jacouris
VTB Capital analyst


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