Continuing our weekly series, Open Insights, we’ll take a look at the EIA’s Weekly Petroleum Status Report (“WPSR”) for the week of August 2, 2019.
EIA reported a crude build of 2.4 million barrels for the week, breaking a 7-week string of draws that saw crude inventories fall from 486 million barrels to 437 million barrels, a decline of close to 49 million barrels. We believe the declines will resume in August as refineries continue running at higher levels. Along those lines, refinery throughput increased by 3.4%, a significant climb from the prior week, and represents almost 4.4 million barrels of increased crude demand. The additional crude demand was offset by higher net imports as exports declined, thereby leading to the overall build.
Compared to 5-year averages, this week’s report was bearish for both crude and petroleum products. Let’s just go through the charts quickly.
Gasoline inventories increased by 4.4 million barrels, whereas distillates climbed by 1.5 million barrels, both higher than the 5-year averages. Total products increased by 8 million barrels, well above the 1 million barrel 5-year average. Using a 4-week 5-year average, products increased by ~10.5 million barrels vs. 6.3 million barrels.
Overall total crude and products increased by 10.4 million barrels for the week.
As always, we’ll leave you with some food for thought.
Large build in the US the past week, but let’s take a look at the overall global picture in the past two weeks.
We’re still seeing the same thing as in June/July, whereby crude draws in the West are being offset by large product builds in the West and the East. In the US, a large piece of the 6.4 million barrel build in the past two weeks is attributable to NGPLs and propane, which account for 5.8 million barrels (i.e., 85%) of the build. On the crude side, we believe we’ll continue to see draws. On the products side? That’s a more difficult question, as demand is a large factor. Moreover, with a significant number of Chinese refiners starting production this year, product availability in the East is significantly higher. Although the figures above do not encompass China, higher Chinese exports of products will inevitably push back/displace products globally if demand doesn’t rise. For now though, we continue to see refinery margins at healthy levels, which means refiners are seeing consumer demand for their petroleum goods. If this continues, product demand should keep inventory balances in check. We’re keeping an eye on this side of the equation, as it’ll be a large factor in deterring what total liquids look like by year-end.
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