Open Insights: EIA's Weekly Petroleum Report (04/26/19)

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Includes: BGR, BNO, CRAK, DBO, DDG, DIG, DRIP, DTO, DUG, ERX, ERY, FENY, FIF, FXN, GUSH, IEO, IYE, NDP, OIH, OIL, OLEM, OLO, PXE, PXJ, RYE, SCO, SZO, UCO, UGA, USL, USO, VDE, XLE, XOP
by: Open Square Capital
Summary

We review EIA's Weekly Petroleum Status Report for the week of April 26, 2019.

Crude inventories increased by 9.9M barrels, as refinery throughput continues to lag seasonally.

Gasoline stocks increased slightly while distillate stocks drew. Overall total products increased by 2.8M barrels.

(For reference, we recently updated our oil analysis in our latest quarterly letter which can be found here).

Continuing our weekly series, Open Insights, we'll take a look at the EIA's Weekly Petroleum Status Report ("WPSR") for the week of April 26, 2019.

EIA reported a crude build of 9.9M barrels for the week. Imports increased by 0.27M barrels per day (bpd) from last week and hovered around 7.4M bpd. Exports increased by 0.07M bpd and registered 2.6M bpd. Given where WTI/Brent spreads are (still hovering near $9/barrel), we anticipate exports to remain healthy.

Refinery utilization decreased slightly by 0.9% as turnaround and unplanned outages continued to affect the refining complex.

Compared to five-year averages, this week's report was bearish for crude and neutral for petroleum products. Let's just go through the charts quickly.

Gasoline inventories increased slightly by 917K barrels, and distillates declined by 1.3M barrels for the week. Compared to the five-year average (2014-2018), gasoline inventories have declined for the past 16 weeks (sans 1 week in March).

Overall total crude and products increased by over 12.7M bpd for the week.

As always, we'll leave you with some food for thought.

Nasty build for April overall and not what we'd expected or hoped for. Having said that, here's some perspective.

Maybe not that bad as we're somewhat close to the five-year trend line on crude (after April's "overbuild" reversed March's above-average declines).

Note that we're comparing the build to a five-year trend line in a more "normal" year vs. the "big build" years.

Much of April's underperformance (relative to our expectations/forecast) is attributable to refinery throughput. There sure are a lot of unplanned outages.

3-4% below trend on refinery utilization (for net crude inputs) when refinery throughput is at 18,762 bpd means we have ~560K bpd to ~750K bpd of demand out, or 16.8M to 22M barrels for April (and note April crude inventories pretty much increased by that much).

Looking at the products side, we have Big 3 products (diesel, gas, jet fuel) inventories slightly below five-year trends, so it's looking decent.

Exports are also staying relatively high despite/even after tapering off from the all-time high achieved a month ago.

As refinery turnaround ends and unplanned outages fade, US crude demand should increase by 1.1M bpd as we shift from April to May. Globally, refinery outages declined by almost 3.5M bpd falling from 8M bpd to 4.5M bpd (according to Energy Aspects), which should provide an added tailwind for US exports. As the US has shifted to exporting much of its production, the cadence of the exports will become more affected by global refinery demand/turnarounds, so we're expecting this to become a bigger issue impacting US inventories in the future (as exports are the release valve to increasing US production). We'll know more definitively as we dive further into May whether our reasoning on the above is accurate.

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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.