Analysis: US crude stocks expected lower amid strengthened exports, refinery demand

New York — US crude oil inventories likely declined in the week ended July 24 amid an expected uptick in refinery demand and stronger exports, an S&P Global Platts Analysis showed July 27.

Commercial crude stocks are expected to have fallen 1.2 million barrels to around 535.4 million barrels during the week ended July 24, analysts surveyed by Platts said. Despite the draw, the surplus to the five year average of US Energy Information Administration data would increase to around 19.2%, up from 19% the week prior.

Refinery utilization is expected to climb around 0.5 percentage point to around 78.4% of total capacity, narrowing the deficit to the five-year average to 15.7%.

Refinery margins generally weakened last week.

The WTI MEH US Gulf Coast cracking margin averaged $5.16/b in the five-days ended July 23, S&P Global Platts Analytics data showed, below the July-to-date average of $5.27/b. On the US Atlantic Coast, Bakken cracking margins averaged $5.50/b over the same period, compared to a July average of $5.77/b.

But despite this overall weakening of margins, cracks for several key USGC refined products climbed last week.

The Platts USGC ULSD crack against WTI climbed to $9.73/b, the strongest since mid-April; the Platts jet fuel crack against WTI averaged at $5.22/b, the highest since late-March; and the Platts unleaded 87 gasoline crack inched off seven-week lows to average at $8.27/b.

Margins notwithstanding, USAC refinery utilization is likely to see a large jump amid the restart of units at Phillips 66's 258,500 b/d Bayway refinery in Linden, New Jersey. Several unspecified units at the facility were taken offline earlier this month following a power outage July 9, but the company begun restarting operations July 15, sources told Platts. The outage helped drive USAC refinery utilization to a record-low 36.6% of capacity during the week ended July 17.

Total gasoline inventories likely dipped 2 million barrels to around 244.7 million barrels, analysts said, while distillate inventories were pegged flat at around 177.9 million barrels.

Exports pick up as floating storage retreats

US crude exports surged to 3.89 million b/d last week, according to data from cFlow, Platts trade-flow software, further pressuring crude inventories. The cFlow figure marks a nearly 1 million b/d jump from an EIA-reported 2.99 million b/d during the week ended July 17.

Notably, cFlow and EIA utilize differing methodologies in determining weekly export figures, and the former has consistently pegged exports above EIA since the week ended June 26. If corroborated by EIA, exports would be the strongest since the week ended March 13.

Weekly US crude exports have risen above 3 million b/d just twice since late May as the market worked through a glut of crude in floating storage built up during the spring. But as the COVID-19 pandemic recedes in some regions, global crude demand has begun to clear the backlog of crude on the water, possibly offering some support to exports going forward.

The amount of oil on idle tankers fell 20 million barrels last week to 344 million barrels, according to Platts Analytics data, on pace for the first monthly decline February.

US crude exports to Asia climbed 950,000 barrels last week, cFlow shows, driven mainly by China-bound volumes reaching 2.7 million barrels, compared to zero the week prior. But exports to Europe were down for a third week, falling 1.2 million barrels to 7.8 million barrels.