The US EIA data for the week to 28 June saw a sharp, and counter-seasonal, drop in total oil inventory, down 14.7mmbbl WoW. At 1,129mmbbl, total oil inventory remains high, above the top of the seasonal range. The large stock draw was mainly due to a drop in crude inventory, down 10.4mmbbl (-2.6%) WoW to 383.8mmbbl and now only a fraction above the top of the seasonal range. That came about as crude imports were sharply lower, down 0.9mmb/d WoW at 7.4mmb/d, while refinery crude throughput rose to the highest level since 2007, up 0.4mmb/d to 16.1mmb/d. Domestic crude production was flat WoW at 7.3mmb/d.
There were unexpected and counter-seasonal stock draws in gasoline and distillate inventory. Gasoline inventory levels remain high and above the top of the seasonal range though distillate inventory appears low, at the very bottom of the seasonal range. The respective states of gasoline and distillate inventory are being reflected in on-road pricing of gasoline and distillate, we believe, both of which have been falling but with gasoline prices more sharply. Gasoline prices dropped 2.3% WoW and are now below the USD 3.50/US gallon mark, ahead of the 4 July national holiday.
Implied all-product demand jumped 1.4mmb/d (+4.0%) WoW to 20.4mmb/d, the highest level of demand since December 2010 and at the top of the seasonal range. The jump in demand might be a result of the impending national holiday, though that pattern is not evident in previous years. Implied demand for gasoline was up 0.4mmb/d (+4.5%) WoW to 9.3mmb/d, the first time gasoline demand has risen above the 9mmb/d level in nearly two years. However, that is still only around the seasonal average, underscoring the lacklustre demand YTD. Implied demand for distillate was also strong, up 0.6mmb/d (+14.3%) WoW and above the top of the seasonal range at 4.5mmb/d. The cumulative average demand on a 52-week basis for all-products remains flat YoY.
Oil prices are being propped up by increasing unrest in the MENA region, we believe. Indeed, WTI has risen above USD 100/bbl in intra-day trading for the first time since May 2012. While the global over-supply to oil markets persists, we continue to see downside risk to oil prices.