US crude supply expands amid unseasonal downturn in refinery demand

New York — US crude oil inventories moved higher in the week ended Nov. 6 amid an unseasonable pullback in refinery demand, US Energy Information Administration data showed Nov. 12.

Commercial crude stocks climbed 4.28 million barrels to 488.71 million barrels last week, EIA said. The build put inventories 6.7% above the five-year average, leaving the nationwide supply overhang roughly on par with week-ago levels and near seven-month lows.

The build was realized mainly on the US Gulf Coast, where stocks surged 5.1 million barrels to 258.5 million barrels, and in the Rockies, which saw stocks increase 1.69 million to 24.62 million barrels, marking a more-than-7% jump on the week.

Front-month NYMEX WTI settled down 33 cents at $41.12/b on Nov. 12, and ICE January Brent was 27 cents lower at $43.53/b.

Crude inventories edged lower in all other regions, falling 1.61 million barrels on the US West Coast and 560,000 barrels in the Midwest. Notably, nearly all the Midwest crude draw was seen at the NYMEX delivery point of Cushing, Oklahoma, where stocks declines 520,000 barrels to 60.41 million barrels.

Refinery net crude inputs averaged at 13.45 million b/d, down 110,000 b/d from the week prior amid a 0.8 percentage point pullback in utilization rates to 74.5% of total capacity. The counter-seasonal decline in inputs left refinery demand nearly 17% behind the five-year average.

Total offline crude distillation capacity fell to 5.02 million b/d in the week ended Nov. 6, down 280,000 b/d from the week prior and the lowest since mid-August, according to S&P Global Platts Analytics.

US refinery margins moved up last week as key crude spreads widened, increasing both margins and cracks so far in the fourth quarter.

US Gulf Coast cracking margins for WTI MEH gained $1/b week on week, averaging $6.54/b for the week ending Nov. 6, according to Platts Analytics. So far in the fourth quarter, USGC WTI MEH cracking margins are averaging $5.60/b, outpacing $5.09/b in the third quarter.

Inputs were 160,000 b/d lower on the USGC at 71.1 million b/d last week as regional utilization rates dipped 1.9 percentage points to 73.6% of capacity.

But margins across the board in the fourth quarter this year continue to lag those of Q4 2019, Platts Analytics data shows, as coronavirus lockdowns limit personal mobility and demand for transportation fuels and cut refined product prices.

Crude exports averaged at 2.77 million b/d, up 500,000 b/d from week-ago, but this increase was largely offset by a 470,000 b/d uptick in imports to 5.5 million b/d.

Product stocks draw amid demand surge

Total product supplied, EIA's proxy for demand, climbed 1.82 million b/d to 20.18 million b/d, marking an eight-month high and the first time crossing above 20 million b/d since the beginning of the COVID-19 pandemic lockdowns in March.

Gasoline demand climbed 430,000 b/d to 8.76 million b/d, while distillate supplied was up 290,000 b/d at 40.5 million b/d.

Still, total refined product demand was more than 6% behind year-ago levels.

Total gasoline inventories declined 2.31 million barrels to 225.37 million barrels. The draw left stocks just off one-year lows and narrowed the supply overhang to 3.3% above the five-year average from over 4% the week prior, snapping three consecutive weeks of a widening surplus.

USGC gasoline stocks declined 1.06 million barrels to 78.95 million barrels, the lowest since November 2019 and just 0.5% above the five-year average, all but eliminating a surplus that had stood as wide as 16% in early August.

Distillate inventories fell 5.36 million barrels to 149.29 million barrels, a six-month low. While distillate stocks remain ample at nearly 15% above the five-year average, they have declined nearly 30 million barrels since mid-August and are approaching what could be considered a normal range. After last week's draw, stockpiles were left just 680,000 barrels, or 0.5% above the most recent five-year high.