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Analysis: US crude inventories likely higher last week on continued refinery maintenance

Highlights

Analysts on average look for 4.7-million barrel build

US crude exports to Europe fall

Harvest demand should bolster distillate demand

New York — US crude inventories likely climbed last week as refinery maintenance reduced demand while exports slipped, an S&P Global Platts analysis showed Monday.

Analysts polled by Platts were looking on average for US crude stocks to have risen by 4.7 million barrels, continuing a trend seen since early September as refiners have gone into fall maintenance.

US crude stocks have climbed 19 million barrels to since the week ending September 6 to 434.85 million barrels, according to the US Energy Information Administration.

A crude stock build will not necessarily be bearish for crude prices, as inventories typically build this time of year and begin to draw at the end of November once more refinery capacity has returned to service.

US refiners were operating at just 83.1% of capacity the week ending October 11, according to the EIA.

But refinery likely increased runs for the week ending October 18 as they began to exit maintenance.

A combined 2.52 million b/d of distillation capacity was down for maintenance the week ending October 11 in the US Midwest and US Gulf Coast, according to S&P Global Platts Analytics. By the week ending October 18 that figure had slipped to 2.2 million b/d, and by end-November just 153,000 b/d is expected to be down.

US crude production is expected to remain steady to higher, at roughly 12.6 million b/d, while crude imports are expected to have fallen last week. The EIA showed imports at 6.3 million b/d the week ending October 11, down from 7.6 million b/d the same week in 2018 as on heavy refinery maintenance and higher US output.

US crude exports likely fell last week, would could help to bolster crude inventories.

S&P Global Platts cFlow trade flow software shows USGC exports averaging 2.6 million b/d last week, down from the 3.3-million b/d reported by the EIA for the week ending October 11.

The decline was led by a fall in export to Europe, likely in response to a recent rise in freight rates.

PRODUCT STOCKS SEEN FALLING

With refinery runs remaining low, refined product inventories were expected to have drawn last week.

Analysts polled by Platts were on average looking for gasoline stocks to have fallen by 2 million barrels and distillate stocks to have fallen by 3 million barrels.

Distillate consumption in the Midwest likely climbed as farming activity picked up.

According to the US Department of Agriculture, just 22% of corn acreage has been harvested in 18 selected states as of October 13, down from 38% the same time last year, because of weather delays.

While harvesting in southern states, such as Texas and Tennessee, has been on par or even higher than last year, the Midwest has been especially hard hit by wintry weather. Just 23% of corn acreage has been harvested in Illinois as of October 13, down from 70% the same time in 2018, the USDA data shows.

US distillate stocks have tightened since mid-August. Inventories at 123.5 million barrels the week ending October 11 were 11% below the five-year average, according to the EIA.

Diesel stocks on the US Atlantic Coast at 33.63 million barrels were 26% below the five-year average, which is supportive for the New York-delivered NYMEX ULSD futures contract.

US gasoline inventories are well-supplied by comparison. Stocks at 226.2 million barrels the week ending October 11 were roughly 2% above the five-year average.

-- Jeff Mower, jeff.mower@spglobal.com

-- Edited by James Bambino, newsdesk@spglobal.com