The cold weather that has gripped North America continues to leave its mark on the US EIA oil data for the week to 17 January. Implied all-products demand held up around the seasonal average, up 0.1mmb/d (+0.5%) WoW to 19.0mmb/d. There was a very sharp rise in demand for residual fuel oil, up 120% (+0.3mmb/d) WoW , albeit from a low base. Residual fuel oil can be used as bunker fuel, for electricity generation, in industrial process and space heating, and for other industrial purposes but has largely been displaced from these uses. However, the bitterly cold winter has led to record withdrawals from gas storage, taking stock levels below the bottom of the seasonal range and leading to a spike in gas prices. That, we believe, has prompted fuel switching back to residual fuel oil, which is showing up in this set of numbers. Demand for the rest of the product categories was largely flat WoW, except for demand for jet kerosene which dropped 0.2mmb/d (-12.7%) WoW. On a 52-week average basis, all-products demand rose to 2.0% YoY for the first time since May 2011.
Refineries utilisation dropped further as refineries struggled to cope with the freezing temperatures. Utilisation levels dropped 3.5% WoW against market expectations of a 0.4% drop, while refinery throughput was down 0.5mmb/d (-3.3%) WoW to 15.2mmb/d.
Crude imports recovered somewhat from last week’s exceptionally low levels. Crude imports rose 0.7mmb/d (+9.5%) WoW to 7.5mmb/d but remain below the bottom of the seasonal range. Domestic crude production dropped 107kb/d (-1.3%) WoW, and might have been hampered by the cold weather. Repairs to pipelines taking crude produced in the US Gulf of Mexico onshore might also have led to the cut in production.
With refinery throughput down and crude imports recovering, crude inventory rose 1.0mmbbl WoW, roughly in line with market expectations. That was the first rise in crude inventory since it peaked in mid-November. Gasoline inventory also built in line with expectations, up 2.1mmbbl WoW, rising above the top of its seasonal range. By contrast, distillate stock levels, which were thin and already below the bottom of the seasonal range, dropped 3.2mmbbl WoW (six times market expectations).
Total US oil inventory has now fallen to the bottom of the seasonal range, having been at the top for much of the year before. Preliminary data implies OECD oil stocks at the end of 2013 dropped below the bottom of the seasonal range (see IEA Data – OECD demand upgraded, of 22 January) and this data set continues to suggest inventories are tight. We expect low oil inventories to be supportive for oil prices, in line with our view of a firmer start to the year for Brent.
The US EIA data recorded a 1.0mmbbl build in crude inventory (vs. +0.8mmbbl expected), a 3.2mmbbl draw in distillate inventory (vs. -0.6mmbbl expected) and a 2.1mmbbl build in gasoline inventory (vs. +2.0mmbbl expected).