Continuing our weekly series, Open Insights, we'll take a look at the EIA's Weekly Petroleum Status Report ("WPSR") for the week of March 1, 2019.
The EIA reported a crude build of 7.1M barrels for the week. Imports increased by 1.1M barrels per day (bpd) from last week and hovered around 7.0M bpd, largely led by imports from the north (Canada) and south (Mexico). Exports also continued to stay elevated at 2.8M bpd. Given where WTI/Brent spreads are (near $10/barrel), we anticipate exports to remain healthy.
Refinery utilization increased slightly to 87.5% as turnaround season begins to taper off. This marks the second week of increases, and we should rise steadily from here into late March.
Compared to five-year averages, this week's report was neutral for crude and slightly bullish for products. Let's just go through the charts quickly. Here's crude:
Gasoline inventories decreased by 4.2M barrels and distillates 2.4M barrels for the week. Compared to the five-year average (2014-2018), gasoline inventories have declined for the past six weeks. We surmise this will continue as refinery margins for gasoline continue to be challenged, incentivizing refiners to reduce production.
Overall total crude and products decreased by slightly less than 500K barrels for the week.
And so there goes February. It was always going to be a tough month. We knew that coming into the year because it's the slow season. Refinery turnaround dampens demand, and crude inventories typically rise. While we knew imports would stay low, we weren't exactly sure exports would stay high. US production is almost 1.75M bpd higher this year than last (Feb '18 vs. Feb '19), so without a release valve, even lower imports wouldn't help if we couldn't find another way to drain the tub.
Fortunately, exports have averaged almost 3M bpd in February, almost 1.5M bpd higher than last year, absorbing most of the US production increase.
Recent tanker reservations bode well for the higher exports to continue in March and April, and as the Brent/WTI differential continues to stay wide, we'd anticipate that US barrels will be further pulled away. Ultimately, February was a bullish month. Crude inventories increased by 5M barrels, when the five-year average is closer to 15M barrels. We've effectively mirrored what happened with crude inventories last year (i.e., a nominal build), and we know what happened to oil prices in Q2 and Q3 as refineries and demand recovered).
So now we march into March. March will be about geopolitics and trade (i.e., demand). US/China, Brexit, etc. Those are large hurdles, but hurdles that everyone is incentivized to overcome given global trade is less of a race than a three-legged race these days. Everyone is tied together, so let's see if incentives matter like we think they do.
As always, we welcome your comments. If you would like to read more of our articles, please be sure to hit the "Follow" button above.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.