NEW YORK , Jan. 07 2019 — US refined product stocks likely continued to build last week as refinery runs ticked higher, according to a S&P Global Platts survey of analysts Monday.
- Gasoline, distillate stocks likely rose 4.2 mil barrels, 4.3 mil barrels, respectively
- Refinery runs expected to be 97.4% of capacity
- Crude oil stocks likely fell 1.4 million barrels to 440 million barrels
Total gasoline stocks were expected to increase 4.2 million barrels to 244.2 million barrels last week, while distillate inventories likely rose 4.3 million barrels to 133.7 million barrels in the week that ended January 4, according to analysts surveyed Monday.
The predictions of strong builds in product stocks come amid an expected 0.2 percentage point increase in nationwide refinery utilization to 97.4% of total capacity, analysts said.
Rising refinery utilization likely also trimmed crude stocks last week, with analysts surveyed by Platts expecting US commercial crude supply to decline 1.4 million barrels to around 440 million barrels.
Crude oil supply estimates varied widely, with S&P Global Platts Analytics calling for a draw of as much as 5.95 million barrels last week.
The expected build in gasoline stocks would push inventories to their highest level since March and mark the fourth consecutive week that gasoline stocks have set a fresh five-year high, according to US Energy Information Administration (EIA) data. While gasoline stocks remain ample, last week's expected build would pare the surplus to the five-year average back to 3.3% from an EIA-reported 4.6% during the week prior.
Distillate stocks also likely tightened last week compared with historical levels. Despite coming on the heels of a 9.5 million-barrel increase in the week prior, last week's expected build of 4.3 million barrels would increase the nationwide deficit to the five-year average by 1.5 percentage points to more than 9.7%.
While the lingering impact of year-end destocking in part likely contributed to breakneck refinery runs last week, refining margins for distillate fuels offered refiners strong profit incentives to run more crude last week.
US Gulf Coast (USGC) ultra-low sulfur diesel (ULSD) crack spreads compared with prompt-month Brent averaged around $14.50/b last week, up from around $13.22/b during the week prior, Platts calculations showed. While USGC ULSD cracks were slightly weaker than year-ago levels, they remained 12.7% above the five-year average last week.
In contrast, ample gasoline stocks have weighed heavily on refining margins. Last week USGC gasoline cracks averaged around minus 41 cents/b compared with prompt-month Brent.
EXPORT ARBITRAGES IMPROVE AMID CRUDE PRICE REBOUND
A sharp uptick in export activity last week likely added to the nationwide crude draw. Crude exports grew to 2.53 million b/d, according to S&P Global Platts' cFlow trade flow software, an increase of more than 13% from an EIA-reported 2.24 million b/d during the week prior.
Asia-bound exports jumped 7.59 million barrels to 13.56 million barrels last week, cFlow data showed, led by a sharp uptick in flows to China, which increased nearly four-fold week on week to 2.12 million barrels.
In contrast, exports to Europe cratered to 2.1 million barrels, a 54% decline from the week prior.
As oil prices rebounded last week, increases in Brent crude futures outpaced those in WTI, reversing a recent trend of diminishing arbitrage economics for the US grade. Last week, prompt-month Brent prices increased more than 6%, compared with a 5% jump in front-month WTI futures, widening the front-month differential between the two grades to an average of $8.62/b from $7.71/b during the week prior.
Arbitrage economics for exports to Asia have improved in January, with WTI delivered into North Asia assessed at an average discount of $1.35/b compared with Murban this month, up from an average discount of 12 cents/b in December. WTI also sustained an average discount of 57 cents/b to North Sea Forties in North Asia this month, compared with a 12 cents/b premium in December.
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