US crude inventories likely dip 3 million barrels to near three-month low

US crude inventories are expected to near three-month lows in the week-ended Jan. 19, analysts surveyed by S&P Global Commodity Insights said Jan. 22, due to refinery impacts from extreme weather paired with higher-than-expected crude exports.

US commercial crude stocks likely dipped 3 million barrels to 427 million barrels, analysts said, which would mark the lowest level seen since Oct. 27 when crude stocks were at 421.9 million barrels, according to US Energy Information Administration data.

Crude exports were reported at 5.03 million b/d during the same period, coming in higher than expected, S&P Global Commodity Insights analysts said Jan. 18. Production is expected to decline by 900,00 b/d to 12.4 million b/d due to extreme cold weather and operational challenges shutting in output, particularly in North Dakota and Texas.

"US supplies were affected by last week's dramatic cold snaps," Tim Evans, independent analyst at Evans on Energy said Jan. 22. "Some [are] estimating that 10 million barrels of crude oil production was lost between North Dakota and the Permian Basin."

Evans added that the extreme weather had also impacted refinery operations, suggesting that the "net balance in crude oil may not be so dramatic," he said.

Product stocks to see impact from extreme cold

Refined products may see more direct support amid the cold front, Evans said.

Total gasoline inventories likely climbed 1 million barrels to around 249.1 million barrels, which would put stocks at nearly a two-year high. Stocks were last seen higher Jan. 28, 2022 at 248.4 million barrels. Nationwide distillate stocks are expected to have inched 81,000 barrels lower to 134 million barrels, despite seasonality suggesting a larger draw, according to S&P Global analysts.

"This week got a lot colder and heating degree days are forecast to increase which should provide a strong boost to distillate demand," S&P Global analysts said. "Although strong retail sales should be positive for demand as it forces retailers to restock inventories, weaker-than-expected trucking activity towards the end of December has revised expectations as to how soon and how high retail inventories will be rebuilt."

Strong US refinery utilization likely dipped 1.33% to 91.3% of capacity, analysts said, due to limited planned and unplanned outages across the US. S&P Global analysts observed multiple reports of refinery shut downs or running at reduced rates due to operational issues caused by cold weather and heavy rain.

As a result, refinery net crude inputs are forecast to decline 682,000 b/d to average at 15.97 million b/d for the week ending Jan. 19, according to S&P Global analysts.

"There is a potential for a lower figure if there are more refineries that experience equipment malfunctioning or operational upsets or any other unplanned outages that are not related with this cold weather," they added.

Gasoline demand is expected to average 7.90 million b/d for the same period, according to S&P Global analysts. Distillate demand is forecast to average at 4 million b/d for the same period.

Refinery utilization and net crude demand, supported by healthy margins, have held at or above average since late November. The US Gulf Coast WTI MEH cracking margin averaged $15.37/b in the five-days ended Jan. 19, S&P Global data shows, up from a December average of $10.84/b.