Counter-seasonal US crude draw extends amid stronger exports, refinery utilization

New York — Counter-seasonal US crude oil inventory declines extended in the week ended Jan. 29 as exports pushed to four-week highs, US Energy Information Administration data showed Feb. 3.

Total commercial crude stocks fell 990,000 barrels to 475.57 million barrels last week, EIA data showed, leaving them less than 5% above the five-year average, the narrowest supply overhang since the week ended April 3.

The draw was concentrated at the NYMEX delivery point of Cushing, Oklahoma, where stocks declined 1.52 million barrels to 48.7 million barrels, the lowest since the week ended July 3. The Cushing draw exceeded that of the broader Midwest region, which saw a total decline of 1.46 million barrels as regional imports pushed to an 18-month high 3.26 million b/d.

Front-month NYMEX March WTI settled 93 cents higher Feb. 3 at $55.69/b.

The nationwide crude draw was blunted by a 1.68 million-barrel build in US West Coast stocks to a 13-week high of 49.15 million barrels.

US Gulf Coast crude stocks were down 1.04 million barrels at 255.58 million barrels, as exports climbed 130,000 b/d to a four-week high of 3.48 million b/d.

US exports to Asia climbed to a four-week high of 2.05 million b/d, up from 1.18 million b/d the week prior, according to data from cFlow, Platts trade-flow software.

The arbitrage incentive for moving WTI MEH to Singapore versus Tapis crude in January averaged at around 36 cents/b, according to S&P Global Platts Analytics data, presenting the strongest incentive for moving US crude to Southeast Asia since April. However, to-date in February, this arbitrage has fallen to minus 1 cent/b.

Refinery utilization, margins climb

Further pressuring regional crude stocks, USGC refinery utilization climbed 1.3 percentage points to 84.3% of capacity, the highest since late March and just 5% behind the five-year average.

Total US refinery utilization climbed to 82.3% of capacity, up 0.6 percentage point on the week, but net crude inputs slid 80,000 b/d to 14.64 million b/d and were nearly 10% behind the five-year average.

US refining margins continued to climb last week, however, the increase was due in part to higher Renewable Identification Numbers prices that increased the cost of meeting the Renewable Fuel Standard mandate. For the week ended Jan. 29, the price of an ethanol RIN rose almost 11 cents from the week earlier to $1.01, while biodiesel RINs rose over 9 cents to $1.15, according to Platts assessments.

While RINs are a cost, refined products prices are inflated by those RINs. Also, US refiners that generate RINs can benefit from the higher cost.

US Gulf Coast cracking margins for WTI MEH crude with RINs averaged $8.99/b for the week ended Jan. 29, compared with the $5.29/b without RINs, Platts Analytics data shows.

Gasoline inventories grow

Total US gasoline inventories climbed 4.47 million barrels to 252.15 million barrels, EIA data showed. The build narrowed the inventory deficit to the five-year average to 1.2% from 1.9% the week prior.

The build comes as implied demand for gasoline declined for a second week, falling around 1% to 7.77 million b/d. While demand fluctuations are a typical feature of mid-winter doldrums, it is important to note the baseline for gasoline demand in recent weeks remains more than 10% behind the five-year average.

Apple mobility data shows US driving activity turned lower last week, sliding around 2 percentage points to a three-week low. The pullback ended a four-week uptrend and put driving activity around 4 percentage points behind year-ago levels.

NYEMX front-month March RBOB futures climbed 3.26 cents to settle at $1.6486/gal on Feb. 3, and March ULSD was up 1.59 cents at $1.6905/gal.

Atlantic Coast gasoline stocks fell 1.62 million barrels to 66.66 million barrels. The counter-seasonal draw left regional inventories 3.2% behind the five-year average, the first time stocks have fallen below normal since mid-October.

In contrast, USGC gasoline stocks showed a counter-seasonal build of 4.07 million barrels to 87.7 million barrels, putting them 2.3% above average and closing a deficit to the five-year average that had persisted since late-November.