US Crude Soars as Exports Wane
Steep declines in US crude exports coupled with sustained record-high production added to US crude supply last week, US Energy Information Administration data showed Wednesday.
Total US commercial crude stocks moved sharply higher by 7.98 million barrels to 403.96 million barrels during the week ended 28 September, EIA said, far exceeding analyst expectations of a 2.76 million barrel build.
US production held at all-time highs of 11.1 million b/d and a 163,000 b/d uptick in imports contributed to moving inventories to a five-week high last week, according to EIA. The large gains come on the heels of an unexpected build during the week ended 21 September. The back-to-back builds have worked to normalize crude supply, and inventories are now just 5.99% below five-year averages, down from 8.17% in mid-September.
EXPORTS TO ASIA SLOW AMID LESS FAVORABLE ECONOMICS
Crude outflows dipped to a four-week low 1.72 million b/d last week, a 917,000 b/d decline from the week prior, EIA data showed, largely in line with S&P Global Platts Analytics cFlow estimates.
While weekly EIA data does not track exports by destination, the most recent cFlow estimates show US exports to Asia-Pacific likely fell 2.58 million barrels to 6.45 million barrels.
Outflows to China were steady at 1.61 million barrels, and exports to Taiwan were sharply higher at 2.12 million barrels, up from 536,000 barrels during the week prior, according to cFlow. But these gains were matched by sharp declines in exports to other Asian nations. South Korea imports fell to 519,000 barrels from 3.175 million the week prior and Singapore, which had imported 2.65 million barrels two weeks ago, took no US crude last week.
The decline in US Asia-bound exports was reflective of increasingly unfavorable economics of moving US crude to the Far East compared to Middle Eastern grades. WTI delivered into Singapore averaged a $1.11/b premium compared with Saudi Arab Light, flipping from a 38.34 cent discount in August, Platts calculations showed.
A wider ICE Brent/WTI spread last week supported an increase in exports to the United Kingdom and Northwest Europe, but overall European-bound volumes were around 5.2% lower week-on-week at 3.44 million barrels.
Last week, the ICE Brent/WTI spread averaged $9.55/b, compared with $8.77/b the week prior. The wider spread has improved WTI’s competitiveness in Europe. WTI delivered into Rotterdam averaged a narrow 14.25 cents/b premium compared with North Sea Forties, according to Platts calculations, down from 34.4 cents in August. The competitiveness of US crude in Europe became especially pronounced last week, with WTI priced in Rotterdam at an average discount of 94.16 cents compar
ed with Forties. REFINERY RUNS STEADY
Refinery utilization steady was steady last week as turnaround activity eased. Utilization rates held at 90.4% of total capacity last week, counter to analyst expectations of a 1 percentage point decline, EIA data showed.
USGC and Atlantic Coast runs were higher by 0.7 and 1.5 percentage points, respectively, but Midwest refinery utilization was down by 4.3 percentage points.
Total net crude inputs edged higher 77,000 barrels to 16.59 million b/d last week against a total operable capacity of 1.86 million b/d, EIA data showed. This suggests roughly 2 million b/d of distillation capacity was offline last week, down from 2.09 million b/d during the week prior. Analysis from S&P Global Platts Analytics on Monday expected around 2.86 million b/d of distillation capacity offline last week due to seasonal and other planned maintenance.
Still, refinery utilization last week was the highest in five years for the last week of September. Runs were 2.3 percentage points above year-ago levels and 1.12 percentage points above a five-year average.
EIA data showed lower-than-expected draws in product stocks last week. Distillate stocks were down 1.75 million barrels last week, EIA said, just shy of analyst expectations of a 1.83 million-barrel draw, but gasoline stocks shed only 459,000 barrels last week, well below analyst expectations of a 672,000-barrel draw.
Exports of distillate fuels increased to 14-week highs at 1.56 million b/d last week, up 416,000 b/d from the week prior. The impact of this steep uptick in export activity on inventories was mitigated in part by a comparable 414,000 b/d decline in implied demand for distillates. Implied distillate demand remains healthy, but last week’s decline to 3.88 million b/d moved it below year-to date average of 4.04 million b/d.
Likewise, while gasoline demand edged up by 115,000 b/d to 9.1 million b/d, implied demand is still well-below year-to-date averages of 9.37 million b/d. And at 235.2 million barrels, gasoline stocks are ample, sitting over 7% above the five-year average of EIA data.