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US crude inventories move sharply lower amid strong exports, rising refinery utilization

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US crude inventories move sharply lower amid strong exports, rising refinery utilization

Highlights

Commercial crude stocks fall 8.01 million barrels

Refinery utilization strongest since August

Product demand hits 18-week low

New York — US crude oil inventories saw their largest decline since August in the week ended Jan. 1 on the back of strong exports and rising refinery demand, US Energy Information Administration data showed Jan. 6.

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Commercial crude stocks moved 8.01 million barrels lower to 485.46 million barrels last week, narrowing the nationwide surplus to the five-year average to 9.3% from 10.3% the week prior.

Crude stocks declined in all regions outside of the NYMEX delivery point of Cushing, Oklahoma, where inventories climbed 790,000 barrels to 59.2 million barrels. On the US Gulf Coast, crude stocks declined 6.23 million barrels to an eight-week low 258.63 million barrels.

The crude draw comes as US exports edged up to a nine-month-high 3.63 million b/d while imports remained near six-week lows after climbing 40,000 b/d to 5.37 million b/d. Notably, USGC imports edged down 40,000 b/d to 960,000 b/d, the lowest since the week ended Sept. 11.

The EIA report showed crude movements that are consistent with end-of-year tax maneuvering. Annual tax assessments of crude oil inventories are typically carried out on Dec. 31, according to the EIA, creating incentives for companies to reduce their holdings in the final weeks of the year through fast-tracking exports, increasing refinery runs, or else moving barrels into regions with a higher tax advantage, such as Cushing.

Refinery utilization climbed 1.3 percentage points to 80.7% of total capacity and total net crude inputs were up 90,000 b/d at 14.38 million b/d, a four-week high. Utilization was the strongest since mid-August but was still around 14% behind the five-year average for this time of year.

Midwest refiners were running at 86.4% of capacity last week, up 5.5 percentage points from the week prior, and regional net crude inputs jumped 230,000 b/d to 3.61 million b/d, the highest since the week ended Sept. 4.

Midwest refinery margins remain considerably stronger than those on the coasts. In the five days ended Jan. 4, Bakken crude cracking margins in the region have averaged at $7.88/b, while West Canada Select coking margins surged to $14.90/b, S&P Global Platts data shows, up from a respective December average of $7.27/b and $12.70/b.

In contrast, USGC WTI MEH cracking margins averaged around $7.43/b over the past week, while US Atlantic Coast Bakken cracking margins were around $5.59/b.

Refined product stocks climb as demand wanes

Total gasoline stockpiles climbed 4.52 million barrels to 241.08 million barrels, the highest since the week ended Aug. 14. It was the largest one-week build since the week ended April 10, but was less than what is typically seen in the last week of the year. Stocks were left around 0.1% above the five-year average, the weakest supply overhang since early October.

Distillate inventories were up 6.39 million barrels at 158.42 million barrels.

Total product supplied, EIA's proxy for demand, hit an 18-week low of 17.05 million b/d last week after falling 2.26 million b/d, the biggest one-week drop since late August. While end of year holidays typically weigh on refined product consumption, last week's decline pushed demand to more than 11% behind the five-year average, out from 3% the week prior and opening the largest deficit since late September.