Analysis: US crude stocks climb to 3-year high as refinery demand bottoms

New York — US crude inventories again moved higher last week, but the build was blunted by an unexpected uptick in refinery demand, sliding production levels and strong export flows, an S&P Global Platts analysis showed Wednesday.

US commercial crude inventories climbed 8.99 million barrels to 527.63 million barrels during the week ended April 24, US Energy Information Administration data showed. The build was around 1 million barrels smaller than analysts had forecast in S&P Global Platts' Monday survey.

The build was realized entirely at Cushing, Oklahoma, the delivery point of the NYMEX crude contract, and on the US Gulf Coast.

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Cushing stocks climbed 3.64 million barrels, an uptick of more than 6% on the week, to their highest level since May 2017 at 63.38 million barrels. Storage tanks there are now approximately 81% full, according to a Platts analysis. Notably total Midwest inventories were up just 3.33 million barrels, indicating that regional storage outside of Cushing contracted last week.

USGC crude stocks swelled 7.12 million barrels to 280.04 million barrels, putting storage levels there just 0.2% behind the all-time high seen in March 2017.

Continued production declines coupled with an increase in refinery demand helped blunt the crude build, which came in under 10 million barrels for the first time since mid-March.

Total US crude production slipped 100,000 b/d to 12.1 million b/d. US output is now down 1 million b/d from its all-time high in early March, and was last lower in July 2019.

At the same time refinery crude appetite strengthened last week. Nationwide utilization rose 2 percentage points to 69.9% of capacity last week, and net crude inputs saw their first uptick in four weeks, climbing 305,000 b/d higher to 12.76 million b/d. Refinery utilization was either flat or higher in all regions outside of the US west coast, where rates slipped 1 percentage point to 59.6% of capacity. Despite the uptick, refinery utilization was still very weak at around 23% behind the five-year average.

EXPORTS STEADY AS TRADERS EYE OFFSHORE STORAGE

US crude exports climbed 410,000 b/d at 3.3 million b/d last week as traders scrambled to place barrels as onshore storages fill.

Approximately 20 million barrels, or 650,000 b/d, of crude exports over the past month have been for the purpose of storage outside of mainland US, according to S&P Global Platts Analytics. The bulk of this total has been deployed to storage locations in the Caribbean, including around 6.5 million barrels shipped to St. Croix alone, while around 5 million barrels have been placed into floating storage offshore, Platts Analytics said. Around 3 million US barrels were also seen heading for storage at South Africa's Saldanha Bay.

GASOLINE STOCKS DIP AMID RESURGENT DRIVING DEMAND

Refined product demand moved sharply higher last week as state and local governments began relaxing stay-at-home orders. Total product supplied, a proxy for demand, surged 1.66 million b/d to 15.76 million b/d, the highest since late March. The uptick suggests that the worst may be behind energy markets in terms of demand destruction resulting from coronavirus lockdowns.

Driving activity has steadily rebounded from an Easter weekend nadir, when it fell to 37.4% of a January 13 baseline, Platts Analytics data shows. As of Saturday, nationwide driving activity was up to 72.6% of this baseline. Activity for New York City and Los Angeles were around 57.5%, while driving in Atlanta was up to 77%.

Nationwide gasoline stocks showed their first decline since mid-March, falling 3.7 million barrels to 259.57 million barrels. The draw down was realized mainly on the US Atlantic and west coasts, where stocks dipped 1.36 million and 1.99 million barrels, respectively.

Distillate stock builds extended last week, with nationwide inventories climbing 5.09 million barrels to 141.97 million barrels. The increase put stocks 4% above the five year average, erasing a deficit that has persisted since March 2018.