ANALYSIS: US crude inventory draw likely extends as refinery demand tests 13-month highs

New York — US crude oil inventory draws likely extended in the week ended April 9 amid an expected uptick in refinery demand, an S&P Global Platts analysis showed April 12.

Total commercial crude stocks likely drew 2.9 million barrels lower last week to around 495.4 million barrels, analysts surveyed by Platts said. The expected draw would leave inventories around 2.2% above the five-year average of US Energy Information Administration data, marking the weakest supply overhang since mid-February.

The expected draw comes amid a likely uptick in refinery demand. Analysts pegged nationwide refinery utilization at around 84.5% of total capacity, up half a percentage point from the week prior and the highest since mid-March 2020.

US refinery runs are expected to reach 15.18 million b/d for the week ended April 9, S&P Platts Analytics data showed, as refineries continue to come back online in the Midwest and US Gulf Coast. This would put refinery crude demand at the highest since the week ended March 20, 2020.

Refinery margins strengthen

Refinery margins continue to strengthen as refined product demand steadily climbs.

US Gulf Coast WTI MEH cracking margins averaged $13.71/b in the five days ended April 9, Platts Analytics data shows, up compared with an April-to-date average of $13.67/b and nearly $1/b stronger than what was seen during March.

In the Midwest, cracking margins for WTI at the NYMEX delivery point of Cushing, Oklahoma, averaged $15.09/b last week, more than $3/b higher than March levels.

Stronger margins are largely an artifact of a steady rise in gasoline cracks. The USGC unleaded 87 crack versus WTI MEH averaged $20.60/b last week, up more than $2/b from March, while unleaded 87 versus Cushing WTI averaged over $22/b, an increase of more than $6/b from last month.

Distillate cracks, in contrast, have seen much less dramatic gains in recent weeks. The USGC crack for ULSD versus WTI MEH averaged $13.31/b last week, up 12 cents/b from March, while ULSD versus WTI Cushing was down 4 cents/b from March at $19.23/b last week.

Gasoline stocks slide

Total gasoline stocks are expected to have declined 200,000 barrels to around 234.4 million barrels, analysts said. The seasonal draw is around 1 million barrels shy of what is typically seen during early April, according to EIA data, but would still narrow the deficit to the EIA five-year average to 2.5% from 2.9% the week prior.

Apple mobility data shows US driving activity dipped around 1.2% last week, showing the first decline since mid-February when severe winter weather paralyzed much of the country. Notably, mobility was still nearly 150% above year-ago levels.

US distillate inventories, in contrast, are expected to show a seasonal build of around 700,000 barrels, analysts said, leaving them around 146.2 million barrels. The build would leave stockpiles around 5% above the five-year average, opening the widest surplus since the week-ended Feb. 12.