US crude oil inventory builds likely extend amid slow exports, tepid refinery demand

Counter-seasonal US crude oil inventory builds likely extended in the week to July 8, analysts surveyed by S&P Global Platts said July 11, as exports held near the bottom of their recent range.

Nationwide commercial crude stocks likely climbed 1.4 million barrels in the week to jul8 to around 425.2 million barrels, analysts said. The expected increase would put inventories at the highest since late December and leave them 8.6% behind the five-year average of US Energy Information Administration data, in from 10.4% the week prior.

US crude exports averaged around 3 million b/d over the period, according to data from Platts cFlow ship and commodity tracking software from S&P Global Commodity Insights. While this marks a roughly 400,000 b/d increase from an EIA-reported 2.6 million b/d the week prior, it is down around 9% from the four-week moving average.

US crude exports to Asia remained low for a second week, cFlow data shows, averaging 900,00 b/d in the week to July 8 after having only reached 610,000 b/d the week prior. This is down sharply from mid-June, when Asia-bound exports averaged 1.85 million b/d.

Total refinery utilization is expected to rise around 0.3 percentage point to 94.8% of capacity, analysts said, rising more than 4% above the five-year average for this time of year. However, total refinery net crude inputs are forecast by Platts Analytics to average around 16.6 million b/d, up 170,000 b/d from the week prior and just 0.6% above normal for this time of year.

Refinery margins continued to decline over the period, weighed down by both utilization rates testing two-year highs and a broad slide in crude prices. US Gulf Coast WTI MEH cracking margins averaged $29.17/b in the week to July 8, Platts Analytics data shows, down sharply from a June average of $39.24/b.

Front-month NYMEX WTI futures finished the week ended July 8 down more than 14% from their June 8th peak. Over the same period the four-week moving average of refinery utilization has climbed around 1.5 percentage point to levels last seen in September 2019.

Nationwide gasoline stocks likely edged 200,000 barrels lower to 218.9 million barrels, analysts said. Gasoline inventories remain tight at around 8.2% behind the five-year average, however this deficit is in considerably from early June, when stocks were more than 10% below normal.

But at the regional level gasoline stocks remain very tight. US Atlantic Coast inventories have consistently held more than 20% below average since late April. Consequently, the incentive to export gasoline from Northwest Europe to the Atlantic Coast was strong in May and June, averaging $13.11/b and $12.47/b, respectively, according to data from S&P Global. Trade flow was strong as well, with May seeing 380,000 barrels of gasoline exported to the Atlantic Coast and June 262,000 barrels.

But the arbitrage incentive took a steep dive at the end of June and was just $1.69/b on June 30 before hitting minus 60 cents/b on July 5, and fell further to minus 68 cents/b on July 7.

Over the past several months, large shipments of gasoline, premium gasoline, alkylate and reformate from refiners in India have been making their way to the Atlantic Coast.

India typically exports significant volumes of gasoline and alkylate to the Atlantic Coast during the spring and summer, according to US Customs data, but the reformate and premium gasoline cargoes are a new development since the Russia-Ukraine war began.