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ANALYSIS: US crude stocks see largest draw since January amid rising demand, export surge

US crude oil inventories moved sharply lower in the week ended April 30, US Energy Information Administration data showed May 5, amid stronger refinery demand and a surge in exports.

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Total commercial crude stocks fell 7.99 million barrels to 485.12 million barrels last week, EIA said, exceeding bullish market expectations of an up to 7.69 million-barrel draw seen by the American Petroleum Institute on May 4.

It was the largest one-week decline in crude inventories since the week ended Jan. 1, and left stocks 1.9% behind the five-year average for this time of year, the widest deficit since the week ended March 20, 2020.

June NYMEX WTI settled May 5 down 6 cents at $65.63/b, while July ICE Brent finished up 8 cents at $68.96/b.

The draw was centered on the US Gulf Coast, where inventories moved 10.41 million barrels lower to 269.58 million barrels, and on the Atlantic Coast, which saw a 1.08 million-barrel drawdown.

Midwest inventories climbed 1.88 million barrels to a nine-week high 134.47 million barrels, including a 250,000-barrel increase in stocks at the NYMEX WTI delivery point of Cushing, Oklahoma.

EXPORT VOLUMES SURGE

US crude exports surged to 4.12 million b/d last week, an uptick of 1.58 million b/d, or 62%, from the week prior and were the strongest since the week ended March 13, 2020.

The arbitrage incentive for moving WTI MEH into Northwest Europe versus North Sea Forties has averaged around $1/b to date in May, according to S&P Global Platts Analytics data, up from an April average of 26 cents/b.

But incentives for exports to Asia continue to weaken. WTI MEH has averaged a 15 cent/b arbitrage incentive versus Malaysian Tapis crude in Singapore to-date this month, down from 49 cents/b in April and 87 cents/b in March.

Data from cFlow, Platts trade-flow software, shows a nearly threefold uptick in European-bound volumes to 2.02 million b/d in the week ended April 30, while Asia-bound cargos declined for a fourth straight week to around 1.27 b/d.

GASOLINE BUILD EXTENDS AS DEMAND SLIDES

Stronger refinery demand also contributed to the crude draw. Total refinery net crude inputs climbed 1.5% to 15.24 million b/d, EIA said, the highest since the week ended March 20, 2020.

Nationwide refinery utilization hit 86.5% of total capacity, an increase of 1.1 percentage point from the week prior. The uptick put utilization at roughly par with the five-year average, closing a deficit that has persisted since February 2020.

Total US gasoline stocks climbed for a fifth-straight week, moving 740,000 barrels higher to 235.81 million barrels. The build left stocks 1.9% behind the five-year average, marking the narrowest deficit since mid-February.

NYMEX June RBOB settled May 5 up 1 point at $2.1513/gal, while June ULSD climbed 37 points to $2.0025/gal

US implied gasoline demand edged 10,000 b/d lower to 8.86 million b/d, sliding for a second week to a six-week low, while production edged around 10,000 b/d higher to 9.58 million b/d.

Gasoline imports remained steady at around 1.02 million b/d, while exports fell to a five-week low 560,000 b/d.

Apple Mobility data shows US driving activity climbed to a four-week high during the week ended April 30, but still appeared to be trapped in shoulder-season doldrums. End-user demand should pick up in coming weeks amid an easing of pandemic restrictions and anticipation of rising consumption has been reflected in stronger RBOB cracks, which pushed to the highest since August 2017 on May 4.

Distillate stocks, in contrast, declined 2.9 million barrels to a one-year low of 136.15 million barrels, even as implied demand was down nearly 5% at 4.13 million b/d.

But despite the weekly pullback in demand, the general trend of rising distillate consumption extended last week, with the four-week moving average climbing to an eight-week high of 4.11 million b/d.

In a sign that operators may be tweaking runs to take advantage of stronger gasoline cracks, total refinery production of distillates fell to a seven-week low of 4.5 million b/d.