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ANALYSIS: US crude oil inventory builds likely extend as refinery runs hold below normal

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ANALYSIS: US crude oil inventory builds likely extend as refinery runs hold below normal

Highlights

Commercial crude stocks likely climb 400,000 barrels

Gasoline stocks expected down 1.4 million barrels

US driving activity up year on year

New York — US crude oil inventory builds likely extended in the week ended March 12 as the Gulf Coast refinery complex continued to operate at reduced capacity in the wake of the February deep freeze, an S&P Global Platts analysis showed March 15.

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Total commercial crude stocks likely climbed 400,000 barrels to around 498.8 million barrels last week, analysts surveyed by Platts said. The counter-seasonal build would leave stocks 6.5% above the five-year average of US Energy Information Administration data, opening the widest surplus since early January.

The expected increase comes as nationwide refinery runs continue to hold well below normal following the mid-February deep freeze that took as much as 4.4 million b/d of refinery capacity fully offline Feb. 18.

Nationwide refinery utilization is expected to average around 74% of total capacity, analysts said. While this is a 5 percentage point uptick from the week prior, it would leave utilization around 9 percentage points below pre-freeze levels and still more than 14% behind the five-year average.

While the bulk of the impacted refineries have seen at least partial restarts, at least eight facilities were still operating at less than full capacity last week, and at least two facilities comprising a combined 700,000 b/d of capacity had no estimated full restart date.

US crude production, which saw a sharp decline in February in the weeks following the winter weather, had recovered to pre-storm levels of around 10.9 million b/d in the week ended March 5, EIA data shows.

In total, the storm is likely to cost roughly 70 million barrels in lost refinery runs, according to S&P Global Platts Analytics, considerably overshadowing aggregate crude production losses of 20 million-25 million barrels.

US crude exports averaged 2.68 million b/d in the week ended March 12, according to data from cFlow, Platts trade-flow software, roughly flat from an EIA-reported 2.63 million b/d the week prior.

Products stocks shrink

Refined products stock draws likely extended amid still-weak refinery runs, though strong margins likely incentivized production from operational facilities.

Total US gasoline inventories likely declined 1.4 million barrels to around 230.2 million barrels, analysts said, while distillate stocks were expected 900,000 barrels lower at around 136.6 million barrels. The draw would leave inventories respectively 5.7% and 3.4% behind their five-year averages.

US Gulf Coast cracking margins for WTI MEH averaged $13.54/b in the five-days ended March 12, S&P Global Platts Analytics data showed, up from a February average of $9.98/b. The strong margins come on the back of a steep rise in gasoline cracks.

The USGC unleaded 87 crack versus WTI MEH averaged $19.26/b last week, up 65% from a February average of $11.65/b. On the US Atlantic Coast, New York Harbor RBOB cracks versus Brent climbed above $20/b and were the strongest since August 2018.

Gasoline cracks were further supported by upward trending demand. Apple Mobility data showed US driving activity in the week ended March 12 was up around 3% from the week prior and nearly 8% above year-ago levels.

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