USAC product inventories plunge as Colonial Pipeline outage restricts supply

New York — US Atlantic Coast refined product inventories moved sharply lower in the week ended May 14, US Energy Information Administration data showed May 19, on the back of supply disruptions due to the closure of the Colonial Pipeline for most of the week.

USAC gasoline stocks fell 4.58 million barrels to 60.02 million barrels, leaving them at the lowest since the week ended Oct. 9, 2020, and nearly 11% behind the five-year average for this time of year.

USAC combined low and ultra-low sulfur diesel stocks declined 3.01 million barrels to 34.67 million barrels, the lowest since April 2020.

Colonial had halted all pipeline operations on May 7 because of a ransomware attack. While the pipeline was restarted on May 13, the slow speed of product transfer meant that supply disruptions extended for the entirety of the EIA reporting period.

June NYMEX RBOB settled down 5.89 cents at $2.1020/gal and June ULSD declined 4.93 cents to $2.0071/gal.

Colonial stretches more than 5,500 miles from the Houston refining hub to New York Harbor, supplying about 45% of all the gasoline and diesel fuel consumed on the East Coast.

Notably, the USAC gasoline draws comes despite imports climbing nearly 16% on the week to 1.08 million b/d, a four-week high.

The sharp USAC product draws comes as panic-buying exacerbated shortages caused by the pipeline outages, causing close to 50% or more of gas stations in North Carolina, South Carolina, Georgia, Virginia, Florida and Washington to run out of fuel.

While retail gasoline demand is not reflected in the EIA methodology, ripple effects from this consumption surge up to wholesalers likely contributed to pushing the EIA's product supplied for gasoline up 5% to 9.22 million b/d, the highest since the week ended March 13, 2020.

But while the pipeline closure contributed to USAC draws, the stranded barrels added to US Gulf Coast stockpiles, mitigating the impact on nationwide inventories. USGC gasoline stocks jumped 5.73 million barrels to 91.42 million barrels, while regional diesel stocks were up 1.43 million barrels at 46.14 million barrels.

Total US gasoline stocks declined 1.96 million barrels to 234.23 million barrels, leaving them 2.2% behind the five-year average, while nationwide distillate stocks saw a 2.32 million-barrel decline to 132.1 million barrels, around 5.4% behind average.

Even with the pipeline closure, strong margins helped support an unexpected uptick in refinery runs last week. Total net crude inputs were up 100,000 b/d at 15.12 million b/d as utilization edged 0.2 percentage point higher to 86.3% of total capacity. Yet crude runs still lost ground to the historic levels, falling 5% behind average last week compared to 4.5% the week prior.

USGC WTI MEH cracking margins averaged around $14.33/b last week, S&P Global Platts Analytics data showed, up compared with a May to-date average of $14/b.

Notably, USAC refinery utilization surged to 87.2% of capacity, an increase of 7.9 percentage points from the week prior and the highest since June 2019. Meanwhile, runs cuts by some refiners due to the Colonial pipeline outage likely contributed to a second weekly decline in USGC utilization, which fell 0.3 percentage point to 88% of capacity.

Crude stocks climb amid stronger import

Despite the stronger refinery demand, total US crude stocks climbed 1.32 million barrels to 486.01 million barrels as imports surged 920,000 b/d to a three-week high 6.41 million b/d. Crude inventories climbed in all regions outside of the US West Coast, where stocks fell 2.45 million barrels to 45.79 million barrels - the lowest since the week ended Dec. 18, 2020.

June NYMEX WTI was down $2.13 at $63.36/b and ICE July Brent fell $2.05 to $66.66/gal.

The build was concentrated on the USAC, which saw a 1.26 million-barrel increase, and in the Midwest, where inventories climbed 1.18 million barrels. However, this Midwest build belies a 140,000 barrel draw at the NYMEX delivery point of Cushing, Oklahoma.

Offsetting the jump in imports was a 1.51 million b/d uptick in export flows to 3.31 million b/d. This uptick is likely due to weekly volatility in loading schedules given exports were at more than two-year lows the week prior. Looking at the four-week moving average, outbound crude flows averaged 2.94 million b/d, within the range seen since late March.