US crude stocks hit 14-week low amid rising exports, refinery demand: EIA

New York — US crude oil inventories moved sharply lower during the week ended July 24 as exports and refinery demand climbed to multi-month highs, US Energy Information Administration data showed July 29.

Commercial crude stocks fell 10.61 million barrels to 525.97 million barrels last week, EIA data showed. While the draw pushed stockpiles to 14-week lows, they remained more than 17% above the five-year average for this time of year.

The inventory draw was concentrated on the US Gulf Coast, where stocks fell 10.46 million barrels to 295.51 million barrels, and on the US West Coast, where stocks fell 1.7 million barrels to 52.75 million barrels, the lowest since mid-March.

Meanwhile, stockpiles at the NYMEX delivery point of Cushing, Oklahoma, climbed 1.31 million barrels to an eight-week-high 51.42 million barrels. The build helped push total Midwest stocks up 2.23 million barrels to 139.74 million barrels.

Inventories at the Strategic Petroleum Reserve were unchanged for a second week at 656.15 million barrels.

An uptick in crude exports contributed to the USGC draw. Outbound crude volumes averaged at 3.21 million b/d last week, up from 2.99 million b/d the week prior, and the strongest since mid-May.

Crude exports have steadily increased in July as arbitrage incentives have improved for moving US crude into Southeast Asia and Northwest Europe. The arbitrage incentive for WTI MEH in Singapore versus Malaysian Tapis crude climbed above $1/b last week, bringing the July-to-date average up to 15 cents/b, according to S&P Global Platts Analytics data, reopening an arbitrage that had been closed since April.

The arbitrage incentive for WTI MEH in Rotterdam versus North Sea Forties has averaged at 14 cents/b to date in July. This arbitrage was last open on a monthly basis in December 2019, Platts Analytics data shows.

As exports inched higher, imports plunged to 5.14 million b/d last week, EAI data showed, down 800,000 b/d from the week prior and the weakest since the week ended April 17.

Refinery demand recovery resumes as margins strengthen

Total net crude inputs climbed 390,000 b/d to 14.6 million b/d last week, snapping a two-week downturn. The uptick put inputs at the strongest since late March, though they were still more than 14% behind the five-year average for this time of year. Nationwide refinery utilization jumped 1.6 percentage points to 79.5% of capacity.

Notably, Midwest utilization hit 86.9% of capacity last week, less than 9% behind year-ago levels. Midwest cracking margins for Bakken ex-Clearbrook averaged $5.33/b for the week ended July 24, up from $3.54/b over Q2. Coking margins also rose, with benchmark Western Canada Select margins averaging $3.30/b, up from $2.66/b over Q2.

But on the West Coast, utilization slipped for a second week, falling 1.1 percentage points to 68.1% of capacity. USWC refinery margins have climbed in recent weeks, however, with California largely returning to lockdown status, regional refiners could see renewed pressure if product demand dips. USWC cracking margins for Alaska North Slope averaged $9.21/b for the week ended July 24, compared with the $8.42/b over Q2.

Major refined product inventories saw modest increases last week even as total product demand ticked higher last week.

Total gasoline stocks climbed 650,000 barrels to 247.39 million barrels, pushing inventories to 7.9% above the five-year average and halting a three-week narrowing trend. Meanwhile, nationwide distillate stocks were up 500,000 barrels at 178.39 million barrels, a fresh 38-year high.

Total product supplied, a proxy for demand, surged 1.44 million b/d to 19.1 million b/d. Product demand was the strongest since the week ended March 20, but was still more than 10% behind year-ago levels. Gasoline demand saw a 3% bump on the week, averaging at 8.81 million b/d, while distillate demand was up nearly 13% at 3.64 million b/d.