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ANALYSIS: US gasoline stocks draw extends as demand hits 14-month high

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ANALYSIS: US gasoline stocks draw extends as demand hits 14-month high

Highlights

Gasoline stocks draw 1.75 million barrels

Implied demand strongest since March 2020

Crude stocks fall 1.66 million barrels

US gasoline inventory draws extended in the week ended May 21, US Energy Information Administration data showed May 26, as demand pushed to a 14-month high.

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Total US gasoline inventories declined 1.75 million barrels to 232.48 million barrels last week, leaving storages 3.2%% behind the five-year average for this time of year, the widest deficit since the week ended March 26.

The draw comes as EIA reports implied gasoline demand climbed nearly 3% to 9.48 million b/d, putting it more than 4% above the five-year average.

The uptick in implied demand correlates with increased driving activity. Apple mobility data shows US driving activity during the week ended May 21 was up around 3% at 146.5% of baseline, marking the highest level since the index was launched in January 2020.

NYMEX June RBOB on May 26 settled 3.28 cents higher at $2.1501/gal, and June ULSD climbed 98 points to $2.0452/gal.

US Atlantic Coast gasoline stocks climbed 340,000 barrels to 60.36 million barrels but still fell 11.2% behind the five-year average, opening the widest deficit since the week ended Jan. 18, 2013, when stocks were 11.3% below average.

US Gulf Coast gasoline stocks, in contrast, fell 2.26 million barrels to 89.16 million barrels last week, their largest one-week draw since early March, as the normalization of flows along the Colonial Pipeline provided an outlet for barrels stranded by its closure the week prior. Regional inventories remain ample, however, at around 7.4% above the five-year average.

Notably, US gasoline imports remain very strong, with the four-week moving average of inbound volumes edging up to 1.02 million b/d. While import volumes were likely influenced by the shutdown of the Colonial Pipeline earlier in May, which widened arbitrages for moving volumes into the USAC, the four-week average has been above 1 million b/d since mid-April, three weeks ahead of the Colonial shutdown. These are levels last seen during August 2019, during what could be considered a relatively normal year for US product demand.

These strong imports are then likely a reflection of rapidly normalizing gasoline demand, driven by the success of US vaccination efforts, coupled with a refinery system that continues to operate at below pre-pandemic levels.

Total refinery net crude inputs averaged 15.24 million b/d last week, up 0.8% from the week prior, as total utilization climbed 0.7 percentage point to 87% of capacity, the highest since March 2020. But despite these increases, both metrics lost ground to their respective five-year averages, with net crude inputs around 5.3% below normal and utilization around 1% behind.

US distillate inventories saw a seventh consecutive weekly draw, falling 3.01 million barrels to 129.08 million barrels, the lowest since the week ended April 10, 2020, and nearly 8% behind the five-year average.

Like gasoline, the distillate draws were predicated on rising demand, which climbed 400,000 b/d to an 11-week high of 4.46 million b/d, and restricted supply. Total refinery distillate production was up 2% on the week at 4.67 million b/d but was still around 7% below the five-year average.

Crude draws resume

Nationwide crude oil inventories drew 1.66 million barrels lower last week to 484.35 million barrels, leaving them around 1.9% behind the five-year average.

NYMEX July WTI on May 26 settled 14 cents higher at $68.21/b, and July ICE Brent finished the session up 22 cents at $68.87/b.

USGC stocks saw a 1.9 million-barrel draw down to 270.45 million barrels, as crude exports climbed around 4% to a three-week high of 3.43 million b/d.

Significant draws were also seen in the Midwest, where stocks fell 1.69 million barrels to 132.8 million barrels, including a 1.01 million-barrel draw in inventories at the NYMEX delivery point of Cushing, Oklahoma. Cushing stocks have now drawn for three consecutive weeks, leaving them around 17.5% behind the five-year average.