ANALYSIS: US sees large distillate inventory draw amid steady demand, weaker imports

New York — US distillate fuel oil inventory draws extended during the week-ended April 23, as demand rose to seven-week highs and imports fell to the lowest since early November, US Energy Information Administration data showed April 28.

Total distillate inventories fell 3.34 million barrels last week to 139.05 million barrels. The draw pushed stocks to just below the five-year average, eliminating a surplus that had persisted since early March.

The draw comes as implied demand for distillate surged to 4.33 million b/d, a more than 12% increase from the week prior and the highest since the week-ended March 5. Adding further pressure to inventories was a 30,000 b/d slide in imports to 140,000 b/d, putting inbound volumes at the lowest since the week- ended Nov. 6.

Meanwhile refinery production of distillate fuel increased just 70,000 b/d to 4.63 million b/d.

NYMEX May ULSD settled 3.29 cents higher at $1.9386/gal and May RBOB climbed 5.18 cents to $2.0722/gal.

US Atlantic Coast combined low and ultra-low sulfur diesel stocks drew 2.07 million barrels lower to a one-year low 40.27 million barrels, falling behind the five-year average for the first time since the week ended April 10, 2020.

US Gulf Coast diesel inventories were down 930,000 barrels at 45.38 million barrels but remained ample at nearly 14% above the five-year average.

While the onset of warmer weather has spurred increased agricultural and construction activity, adding support to diesel demand, gasoline demand remains in shoulder-season doldrums.

Total US gasoline inventories climbed 90,000 barrels to 235.07 million barrels putting them 2.6% behind the five-year average for this time of year.

US driving activity remained rangebound last week, Apple mobility data showed, edging 0.4% higher but still below levels seen in early April.

EIA showed implied demand for gasoline fell 230,000 b/d to 8.88 million b/d, a 2.4% decline from the week prior. The pull back in weekly demand sent the four-week moving average slightly lower last week, snapping an eight-week up streak.

US crude stocks up marginally

Total US commercial crude stocks climbed 90,000 barrels to 493.11 million barrels, putting inventories 0.3% behind the five-year average and erasing a surplus that has persisted since the week ended March 27, 2020.

NYMEX June WTI settled 92 cents higher at $63.86/b and ICE June Brent climbed 85 cents to settle at $67.27/b.

The milquetoast build belies large swings in regional inventories. USGC stocks drew down 5.07 million barrels to 279.99 million barrels, an eight-week low, while Midwest inventories swelled 2.67 million barrels to a seven-week high 132.39 million barrels - including a 720,000-barrel build at the NYMEX delivery point of Cushing, Oklahoma.

The nationwide build comes as total imports surged 1.21 million b/d to 6.62 million b/d, up 22% from the week prior and the highest since the week-ended June 5, 2020.

Meanwhile, refinery crude demand edged higher, but failed to reach recent highs seen in late March.

Total refinery net crude inputs averaged 15.02 million b/d, up 1.7% from the week prior, as utilization climbed to 85.4% of capacity, the highest since the week ended March 20, 2020 and just 1.2% behind the five-year average.

Refining margins tighter

US refining margins trended slightly lower in the week ended April 23, likely presenting headwinds to higher refinery runs. USGC cracking margins for WTI MEH averaged $12.54/b for the week ended April 23, down from the $13.06/b the previous week, according to S&P Global Platts Analytics data.

The weaker whole-barrel margins were due largely to a decline in gasoline cracks. In contrast, distillate cracks continue to gain amid steadily tightening supply.

The USGC ULSD crack versus WTI MEH averaged $13.58/b in the five-days ended April 22, up 27 cents compared with the April to-date average of $13.31/b, and USGC jet cracks versus WTI MEH rallied to $7.05/b last week, compared with $6.98/b to-date this month.

But the USGC unleaded 87 crack versus WTI MEH averaged $19.11/b last week, compared with $19.95/b to-date in April.