US gasoline stocks show counter-seasonal draw as demand rises despite winter weather

US gasoline inventories posted a counter-seasonal draw in the week ended Feb. 4, US Energy Information Administration data showed Feb. 8, as demand pushed to six-week highs despite a pair of winter storms during the period.

Nationwide gasoline stockpiles declined 1.64 million barrels to 248.39 million barrels, EIA said, pushing storages nearly 3% behind the five-year average for this time of year.

The draw comes despite the eastern US states weathering two large winter storms during the reporting period. The first storm early in the week brought heavy snowfall to New England, and the second later in the week brought snow, ice and freezing temperatures to a broad swath of the country from Texas to Maine.

The storms contributed to 3.7% decline in overall retail gasoline demand nationally, according to data from GasBuddy. Particularly hard-hit was demand in PADD III, which includes the USGC, which fell by 9% week on week, while Midwest demand in PADD II fell 7.2%.

But total product supplied for gasoline, which measures the disappearance of product from primary sources including refineries, blending plants and bulk terminals, jumped 900,000 b/d to 9.13 million b/d; the highest since the week ended Dec. 24. Implied demand for gasoline was over 5% above normal during the period, up sharply from the week prior when it was nearly 5% below average.

Distillate stocks also saw a counter-seasonal 930,000-barrel draw over the period, falling to 121.81 million barrels.

Refinery crude demand grows

Refinery net crude inputs averaged 15.58 million b/d, up 330,000 b/d from the week prior and the highest since the week ended Dec. 31, as utilization climbed 1.5 percentage points to 88.2% of capacity. It was the largest one-week jump in refinery crude demand since the week ended Nov. 5 and comes as refinery margins pushed to multi-year highs.

USGC cracking margins for WTI MEH averaged $18.11/b for the week ended Feb. 4, the highest weekly level since the $23.73/b posted when Hurricane Harvey hit the coast in August 2017, according to S&P Global Platts Analytics margin data.

Notably, the jump in refinery demand comes despite winter weather impacting operations. Phillips 66 took down the 145,000 b/d gasoline-making fluid catalytic cracking at its Bayway refinery in Linden, New Jersey, as cold weather shut the gas compressor at its associated cogeneration facility early Jan. 31.

Strong refinery demand contributed to a 4.76 million-barrel draw in crude inventories, leaving stocks at a three-year low of 410.39 million barrels and more than 10% behind the five-year average.

A 2.8 million-barrel draw at the NYMEX delivery point of Cushing, Oklahoma, led the nationwide decline. The draw pushed Cushing stocks to an 11-week low of 27.73 million barrels.

Strong backwardation in WTI forward curves has weighed on storage economics, adding pressure to Cushing stocks in recent weeks. The backwardation between the front-month and sixth-month NYMEX WTI contract averaged $6.77/b last week. The same spread averaged below $2/b as recently as early December.

Divergent import and export dynamics further contributed to lower inventories. Total crude exports averaged 3.1 million b/d, up 720,000 b/d on the week and the highest since early December. Crude imports averaged 6.39 million b/d, down around 700,000 b/d from the week prior.