We review EIA's Weekly Petroleum Status Report for the week of October 25, 2019.
Crude inventories increased by 5.7M barrels as net imports swung sharply higher.
Large petroleum product draws continued as inventories declined by 7.9M barrels, offsetting the crude build.
We took a brief hiatus from our weekly series Open Insights to update our oil thesis, recently published here, but we're back to looking at the EIA's Weekly Petroleum Status Report ("WPSR"). This is for the week of October 25, 2019.
EIA reported a significant crude build of 5.7M barrels for the week as crude imports climbed higher than our forecast and exports came in lower. Net imports leapt by 1.2M bpd, or over 8.4M barrels in total, and the significant deviation from our figures suggests that it could reverse in the weeks to come. We believe it comes down to timing, as what we estimate from a tanker perspective isn't lining up with what we see from an inventory count aspect. Nevertheless, we'll know soon enough in the following weeks. On the good news front, refinery utilization has begun to rise as turnaround season (TARS) winds down as utilization increased by 2.5% for the week.
Lower refinery throughput, however, is again translating to higher gasoline and diesel draws. Gasoline inventories fell by 3M barrels and diesel by 1M barrels, both are surprisingly getting tight, which explains why refinery margins have remained elevated. NGPL stocks continue to draw, eating away at the excess build earlier this year, whereas propane was essential flat. Overall petroleum products declined by 7.9M barrels.
Total crude and products decreased by 2.2M barrels for the week, bearish compared to the five-year average draw of 6.6M barrels.
As always, we'll leave you with some food for thought.
We're six week out from Iran's attack on Saudi Arabia's facilities. Our initial working theory was that refining products would be the first affected as Aramco would need to pull back on its refining utilization to preserve light crude. By November, once light crude stores run low, then a light oil shortage would emerge. This is what global inventories have looked like in the past weeks (using weekly inventory figures).
34M barrel delta... that's um, material. We anticipate the Aramco outage to last a few more months before processing capacity is fully restored. What's interesting is that the low imports of late to the US weren't "attack related," but part of the Saudi's former strategy to starve the US and run down crude/product stores. We surmise by November/December we'll see this former strategy collide with the reality of the Iranian attack. This is about to get interesting, and by interesting, we mean tight.
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