The US EIA data for the week to 31 January recorded domestic crude production flat WoW at 8,044kb/d. One month into 2014, during which the EIA expects average crude production to grow by 1mmb/d YoY, domestic production has actually declined, down MoM and around 0.1mmb/d short of the EIA’s Short-Term Energy Outlook projections. Matching the 1mmb/d YoY growth rate would now require a weekly production growth of 23kb/d, higher than the weekly growth rate in 2013, with a 2014 exit rate of 9.1mmb/d. Though it is still very early into the year, that target is beginning to look more challenging, and there is yet no sign of the oil rig count increasing.
Implied all-products demand dropped sharply, down 0.9mmb/d (-4.7%) WoW to 19.1mmb/d, but it remains above the seasonal average. Demand for distillates dropped 0.6mmb/d (-12.9%) WoW to 3.9mmb/d, down from last week’s multi-year high but still above its seasonal average. Strong distillate demand is reflected in the 52-week average demand metric, which is now up over 5% YoY. Gasoline demand eased by 0.1mmb/d (-1.5%) WoW to 8.5mmb/d and back below the seasonal average. Demand for propane/propylene also dropped, down 0.3mmb/d (-20.9%) WoW. Despite falling demand, on a 52-week average basis, all-products demand rose to 2.1% YoY, from 2.0% in the previous week.
Refinery utilisation dropped 2.1%, against market expectations of a 0.3% drop, on a combination of operational issues on account of the severe winter and refineries going into planned maintenance. Refinery throughput fell 0.4mmb/d (-2.4%) WoW to 15.0mmb/d, the lowest since mid-October 2013.
Crude inventory rose by 0.4mmbbl WoW to 358.1mmbbl, less than market expectations of a 2.3mmbbl increase, to remain comfortably above the seasonal average. However, distillate inventory remains low, more so after another 2.1mmbbl WoW stock draw which kept inventory levels well below the bottom of the seasonal range. In terms of days forward cover, distillate inventory was reduced to just 28.5 days, compared to the seasonal average of 39.6.
Growth in US production has got off to a slow start in 2014, given market expectations of strong non-OPEC production growth putting pressure on the market, and may be a contributing factor to the fairly firm start to the year for Brent.
The US EIA data recorded a 0.4mmbbl build in crude inventory (vs. +2.3mmbbl expected), a 2.4mmbbl draw in distillate inventory (vs. -2.1mmbbl expected) and a 0.5mmbbl build in gasoline inventory (vs. +0.9mmbbl expected).