US crude and gasoline draws expected ahead of Gulf storms

Houston — Commercial crude inventories in the US likely fell by more than 4 million barrels for the week that ended Aug. 21 as demand and exports slowly picked back up, although two storms in the Gulf of Mexico threatened to disrupt refining activity, an S&P Global Platts analysis showed.

US commercial crude stocks are expected to fall by 4.3 million barrels to 508.2 million barrels, according to a survey of analysts, which is still close to 14% above the five-year average. This would represent the fifth consecutive dip in crude draws, making it the longest stretch of declines in a year.

Slowly reopening economic activity coupled with stronger US crude exports are contributing to the inventories dips. Data from cFlow, S&P Global Platts trade flow software, shows outbound oil volumes averaged nearly 3.6 million b/d for the week that ended Aug. 21.

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Crude exports to Asia, especially China, have rebounded of late now that China is taking in more US crude to help comply with the first phase of its US trade deal, although the goals will be nearly impossible to accomplish because of the demand collapse triggered by the coronavirus pandemic. Chinese state-owned oil firms have booked at least 20 million barrels of US crude for loading in August and September, according to reports.

As with crude, large gasoline stockpiles also are continuing to unwind, although still at about 7% above the five-year average.

Gasoline stocks are expected to fall by 2.7 million barrels down to about 241.1 million barrels, according to the surveyed analysts. And, following a larger-than-expected gasoline inventories draw for the week that ended Aug. 14, there's growing optimism that gasoline stockpiles will continue to decline in the weeks ahead, said Edward Moya, senior market analyst with OANDA.

"Reopening momentum in the US seems to be heading the right direction, albeit at a must slower pace that initially expected," Moya said. "Gradual reopenings in the US should continue in September and that should strongly help gasoline prices."

Distillate inventories were projected to fall about more than 700,000 barrels to 177.1 million barrels in storage, which is nearly 25% above the five-year average.

Looming Laura

Tropical Storm Marco was weakened from a hurricane and is expected to be further downgraded to a depression as it makes a Louisiana landfall late on Aug. 24. But the real focus now is on Tropical Storm Laura, which is expected to strengthen into a hurricane as it moves past Cuba and potentially takes aim at the Texas-Louisiana state line, according to the National Hurricane Center.

Separate from the storms, refiners already were cutting runs because of weak demand owing to the coronavirus. PADD III refinery runs averaged 7.8 million b/d the week ended Aug. 14, according to the US Energy Information Administration, 1.4 million b/d below the five-year average.

Surveyed analysts expect US refinery utilization to have fallen slightly from 80.9% down to about 80.7% for the week that ended Aug. 21.

More than 50% of US refining capacity is on the coast, with PADD III refining capacity, including condensate splitters, totaling over 10 million b/d, according to S&P Global Platts Analytics. Of that, 9.6 million b/d is in Texas, Louisiana and Mississippi.

And with more than 80% of the US Gulf's offshore oil production temporarily taken offline ahead of the storms, more refineries are expected to slow down or even shutter until Laura has passed and is no longer a threat.

The Gulf of Mexico was producing about 1.8 million b/d of oil and more than 1.5 million b/d is shut in from the storms, according to the US Bureau of Safety and Environmental Enforcement.