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ANALYSIS: US crude inventories climb as production normalizes after hurricanes

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ANALYSIS: US crude inventories climb as production normalizes after hurricanes

Highlights

US crude stocks up 500,000 barrels to 492.93 million barrels

Production hits nine-week high at 11 million b/d

Gasoline draw deflates historic inventory surplus

New York — US crude inventories edged higher in the week ended Oct. 2 as rising production met a slowdown in exports, US Energy Information Administration data showed Oct. 7.

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Commercial crude stocks climbed 500,000 barrels last week to 492.93 million barrels, EIA data showed, leaving them around 12% above the five-year average for this time of year.

US West Coast crude stocks climbed 2.19 million barrels during the week, representing the bulk of the nationwide build, while Atlantic Coast stocks moved 690,000 barrels higher. In contrast, an uptick in refinery demand in the Midwest and US Gulf Coast supported regional draws, pushing inventories down 590,000 barrels and 2.06 million barrels, respectively.

Notably, crude inventories at the NYMEX delivery point of Cushing, Oklahoma, climbed 470,000 barrels to 56.54 million barrels, the highest since mid-May.

NYMEX November WTI settled 72 cents lower at $39.95/b Oct. 7 and ICE December Brent was down 66 cents at $41.99/b.

The build comes as crude exports slipped 850,000 b/d lower to 2.66 million b/d, while imports jumped 610,000 b/d to a six-week high 5.73 million b/d.

Rising US crude production also contributed to the build. Total crude output climbed to 11 million b/d, up 300,000 from the week prior and the highest since the week ended July 31. The uptick puts production back to levels seen throughout the summer, indicating output has largely normalized after a string of hurricanes in August and September blunted US Gulf of Mexico production.

But this level of crude output is likely to come under pressure as Gulf of Mexico operators again shut in production ahead of Hurricane Delta, which is forecast to make landfall in Louisiana Oct. 9. As of mid-day Oct. 7,

As of mid-day Oct 7, 1.488 million b/d of oil production, representing 80.42% of the Gulf's total output, was offline, according to US Bureau of Safety and Environmental Enforcement data.

Rising refinery demand blunts build

Refinery crude demand edged up 180,000 b/d to a five-week high of13.85 million b/d amid a 1.3 percentage point uptick in the nationwide utilization rate, which rose to 77.1% of capacity. While refinery runs were still well-behind the five-year average, the uptick narrowed the deficit to around 12%, its weakest since the week-ended March 27.

Refinery margins have strengthened in recent weeks led by an uptick in gasoline cracks. US Gulf Coast WTI MEH cracking margins averaged at $5.81/b in the five days ended Oct. 2, Platts Analytics data shows, up from a September average of $5.08/b.

US gasoline stocks fell 1.44 million barrels to 226.75 million barrels -- putting them at the lowest since November 2019 and 0.4% behind the five-year average. Gasoline stocks are now down more than 36 million barrels from their all-time high 263.23 million barrels during the week-ended April 17, and have erased a supply overhang that stood as high as 12.5% above the five-year average in mid-April.

An uptick in demand coupled with stepped-up exports contributed to the gasoline draws. Product supplied for gasoline edged up 4% on the week to 8.9 million b/d, though demand remained historically week with the four-week moving average still nearly 7% behind year-ago levels. Meanwhile weekly gasoline exports jumped 240,00 b/d to 900,000 b/d, the highest since December 2019.

Tightening gasoline inventories have supported RBOB futures, pushing crack spreads to two month-highs last week. The front-month ICE RBOB crack versus Brent crude averaged at $7.40/b last week, compared with a September average of around $6.50/b.

Distillate stocks were also lower last week, with nationwide inventories drawing 960,000 barrels lower to 171.8 million barrels.

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