Welcome to the where's the oil edition of Oil Markets Daily!
US crude imports are about to set a new monthly low this month. We are seeing October US crude imports coming in at ~6 mb/d.
Next week will show elevated imports of ~7 mb/d followed by sub ~6 mb/d for the following three weeks.
The reasoning behind such low imports is largely thanks to elevated demand pull from Asia and the rest of the world. This combined with elevated freight rates makes it more attractive to ship crude to high demand regions.
Keep in mind that following the Abqaiq attack, we said global refined products will be impacted first since the Saudis have reduced refinery throughput and are instead importing products. Well, this has translated to very elevated refining margins globally which are prompting overseas refineries to ramp up throughput hard into year-end.
Given that this situation almost is the exact opposite of what happened going into Q4 2018 (lower refining margins prompting run cuts), the set up on the physical side is very bullish.
Now for a reference point, US crude imports were 7.544 mb/d in October last year. This would be a drop of ~1.544 mb/d. Now offset this with higher US oil production of ~0.9 mb/d and you can see the delta swinging to the deficit side.
So the combination of low crude imports and elevated crude exports this month will see US crude storage counter-seasonally decline.
Readers should expect a build next week followed by big draws.
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Disclosure: I am/we are long UWT. 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.