US crude inventories likely lower as refiners boost runs

US crude inventories likely continued to fall last week as refiners exited maintenance, boosting runs, an analysis by S&P Global Commodity Insights showed April 3.

Refiners likely boosted runs to roughly 16 million b/d, up 187,000 b/d on the week, and up 1 million b/d from the week ended March 3, based on the most recent US Energy Information Administration data.

US refiners had slashed runs starting in December, in part due to a deep Texas freeze, but also for scheduled maintenance. As a result, the US crude inventories climbed roughly 67 million barrels between early December and mid-March.

But US crude stocks fell 7.5 million barrels in the week ended March 24 largely because of higher crude runs.

Assuming little change in crude imports and exports, crude inventories will likely fall another 10.4 million barrels, an S&P Global analysis shows. That would put inventories at 463.7 million barrels, just 2% above the five-year average, down from a 9% surplus in mid-February.

US crude production likely climbed back to 12.3 million b/d last week, up 100,000 b/d from the week ended March 24. The EIA has said it is likely under reporting crude production in its weekly estimates and is working on a fix.

S&P Global estimates the EIA could be under reporting by between 100,000 b/d and 300,000 b/d largely because of the field condensate that is often collected in gas pipelines and introduced into the crude stream as light hydrocarbons.

US rig counts have been range bound, notably in the Permian Basin, where the bulk of US output growth is expected to originate. The Permian's rig count has fluctuated in the 350s and 360s since mid-November, S&P Global data shows.

While overall capex is higher in 2023, much of that is due to inflationary pressures, according to analysts. Still, Permian output is expected to exceed 6 million b/d by 2024, according to S&P Global.

It remains to be seen if higher crude prices sparked by voluntary production cuts announced by OPEC and its allies stick, and encourage more upstream spending. NYMEX front-month crude was lingering around $80/b midday April 3, near the top of a $72.50/b to $82.50/b range crude was primarily stuck in between mid-November and mid-March.

US refined products supplies were also expected to have tightened the week ended March 31 even as refiners increased runs. According to an S&P Global analysis, US gasoline stocks likely tightened by 1.3 million barrels, while distillate stocks tightened by 140,000 barrels.

Gasoline and distillate inventories are tight on the US Atlantic Coast, which is supportive for the New York Harbor-delivered NYMEX RBOB and ULSD cracks. USAC distillate stocks at 30.1 million barrels in the week ended March 24 were 21% below the five-year average, while USAC gasoline stocks at 56 million barrels were 9% below the five-year average.

And assuming 700,000 b/d of refining capacity is down in France due to strikes, roughly 300,000 b/d of diesel is being taken off the market. So, every 10 days of striking takes around 3 million barrels off the market, said S&P Global analyst Rick Joswick in a March 30 webinar.

"Northwest Europe will get tighter on distillates going forward," he said.