Continuing our weekly series, Open Insights, we’ll take a look at the EIA’s Weekly Petroleum Status Report (“WPSR”) for the week of February 9, 2018.
EIA reported a crude build of 1.8M barrels as refineries began their decline into maintenance season. Since the Gulf Coast accounts for half of refinery inputs, tapering off in PADD 3 typically means a decline in crude demand overall, and this week that began to play out. Crude exports also decreased slightly and is hovering around 1.3M bpd whereas imports held relatively steady at 7.9M bpd.
As noted above, refinery utilization declined from last week’s unexpected increase, and registered 89.8% in today’s report. We anticipate refinery utilization to trough in late February at 85-86% (pushed back a few weeks) because of the unexpected increase last week. Every 1% decline represents about a 1.3M barrel per week reduction in demand, so with 2-3% left to go, expect anywhere between 2.5M to 4M barrels of demand per week to fall off. WTI and LLS/Brent spreads have also continued to compress, and is now at slightly less than $4/barrel, still wide enough that US exports will continue to stay elevated.
Gasoline inventories increased by 3.6M barrels for the week, which is unusual as the 5-year averages (take your pick 2010-2014 or 2013-2017) all show a flat build, no doubt caused by the higher refinery utilization. Distillates fell slightly by 0.5K barrels, also lower than average.
Overall total crude and products decreased by 2.7M barrels for the week, in-line with 5 year averages. Here’s our updated chart for total US crude and products.
As always, we’ll leave you with some food for thought.
Refineries are running at elevated levels today; working off a glut of crude oil. As they taper off in the next few weeks we believe crude inventories will begin to build and the product inventories (namely gasoline and distillates) will begin trending down. The build in those categories is largely caused by the high refinery outputs right into the heart of lower demand season. For Q1 overall we forecast crude inventories will build somewhere between 20-25M barrels overall, about half of the 40-48M barrel builds of the various 5-year averages (2011-2014, 2012-2016, and 2013-2017). So as crude numbers flip to bigger builds, stay the course. We haven’t really touched upon the seasonal slowdown yet, and will in the next few weeks. Thus far, however, inventories are still much lower than “normal”, which continues to bode well for Q2 and H2 2018.
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