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ANALYSIS: US gasoline stocks climb as coronavirus-hit demand tests four-month lows

Highlights

Gasoline stocks up 1.9 million barrels

Gasoline demand lowest since early June

US commercial crude stocks fall 1 million barrels

New York — US gasoline inventories showed a surprise build in the week ended Oct. 16 as demand tested four-month lows, US Energy Information Administration data showed Oct. 21.

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Total US gasoline stocks climbed 1.9 million barrels last week to 227.02 million barrels in the week ended Oct. 16, according to the EIA, putting inventories 1.6% above the five-year average and eliminating a deficit that had persisted since late September.

Total refined product supplied, EIA's proxy for demand, slipped 1.36 million b/d to 18.11 million b/d, driven by lowered demand across all product categories aside from propane.

Total gasoline demand fell to 8.29 million b/d, down 290,000 b/d on the week and the lowest since the week-ended June 12. Distillate demand shrank 590,000 b/d to 3.59 million b/d, a five-week low. The declines put gasoline and distillate demand roughly 14% and 12% behind year-ago levels, respectively.

Gasoline stocks were broadly higher across the eastern half of the country. US Gulf Coast gasoline stocks climbed 1.63 million barrels to 81.67 million barrels, Midwest stocks were up 720,000 barrels to 48.28 million barrels, and US Atlantic Coast inventories expanded 540,000 barrels to 60.09 million barrels.

NYMEX November RBOB settled 4.76 cents lower at $1.1403/gal and November ULSD declined 3.36 cents to settle at $1.1399/gal.

MIDWEST INFECTIONS ON THE RISE

Notably, these regions -- especially the Midwest -- are all seeing increases in COVID-19 coronavirus infections. While so far state governments have been reluctant to full lockdowns seen this past spring, some leaders, such as New York Governors Andrew Cuomo, are calling for limits on non-essential travel.

The seven-day average of new coronavirus infections nationwide reached 59,000 on Oct. 20, according to data from The COVID Tracking Project, the highest level since Aug. 4.

Apple Mobility data shows US driving activity continued to decline last week, with the index averaging at 128.5 in the seven days ended Oct. 16, down from 128.8 the week-prior and the weakest since mid-June.

Adding to this, the USGC saw additional pressure on driving demand due to the impact of Hurricane Delta, which made landfall in Louisiana Oct. 9.

US distillate inventories declined for a fifth straight week, falling 3.83 million barrels to 160.72 million barrels.

HURRICANE DELTA HITS US CRUDE STOCKS

Commercial crude inventories fell for a second straight week last week, dropping 1 million barrels to 488.11 million barrels as production slipped and exports rebounded.

Total crude production fell 600,000 b/d to 9.9 million b/d, the lowest since the week ended Aug. 28. The slowdown is due in large part to lingering Gulf of Mexico production shut-ins in the wake of Delta. As of Oct. 16, around 147,000 b/d representing 8% of US Gulf of Mexico crude production remained offline, down from a peak of 1.697 million b/d or 92% of crude output on Oct. 10.

Meanwhile, US crude exports surged 900,000 b/d to 3.04 million b/d. The uptick is likely due in part to exporters catching up from delays caused by Delta, which temporarily closed both LOOP and the Houston Ship Channel and affected shipping operations region-wide during the week prior.

NYMEX December WTI settled $1.67 lower at $40.03/b and ICE December Brent declined $1.43 to settle at $41.73/b.

The draw was offset in part by weaker refinery crude demand. Total US net crude inputs were down 550,000 b/d to 13.03 million b/d, a six-week low, as utilization rates dropped 2.2 percentage points to 72.9% of capacity.

Refinery margins retreated last week. US Gulf Coast cracking margins for WTI MEH averaged at $5.70/b in the five-days ended Oct. 16, down from an October to-date average of $6.28/b, according to S&P Global Platts Analytics data.

In the Midwest, where refinery utilization has consistently been stronger than in the rest of the country, WCS Hardisty coking margins averaged at $7.59/b in the five days ended Oct. 16, well-below the $9.07/b averaged to-date this month.