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Analysis: Record-high exports take US crude stocks lower, snapping 10 weeks of builds

Highlights

Commercial crude stocks fall 7.32 million barrels

Exports soar to all-time high 3.2 million b/d

Refinery utilization stumbles, but remains historically strong

New York — US crude supply contracted last week, snapping 10 consectutive weeks of gains as crude exports soared to all-time highs.

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Commercial crude stocks fell 7.32 million barrels to 443.16 million barrels during the week-ended November 30, US Energy Information Administration data showed Thursday, bringing inventories to 5.98% above the five-year average. The decline far exceeded analyst expectations of a 2.39 million-barrel draw in an S&P Global Platts analysis on Monday.

A key driver of the inventory draw was a sharp uptick in crude exports, which increased 761,000 b/d to 3.2 million b/d last week.

Europe-bound exports increased 2.42 million barrels to 4.5 million barrels last week, S&P Global Platts Analytics cFlow data showed. The uptick came amid a wide ICE Brent/WTI spread of around minus $8.48/b. While the Brent/WTI spread has come in from recent highs of below $10/b in October, it far wider than year-ago levels of around minus $5.74/b.

ICE February Brent settled down $1.50 at $60.06/b and NYMEX January WTI was down $1.40 at $51.49/b at market close.

Crude flows to Asia were largely flat week-on-week, edging 448,000 barrels higher to 8.87 million barrels, but exports to South Korea more than doubled to 4.55 million barrels last week, according to cFlow data.

The economics of moving US crude into Asia have broadly weakened in recent weeks. WTI delivered into North Asia was assessed at roughly par with North Sea Forties in North Asia during November, compared with a $1.56/b discount during October, according to Platts data. WTI's discount to ESPO in North Asia also narrowed in November to around minus 79 cents/b from minus $2.06/b during October. REFINERY UTILIZATION SLIPS

A slowdown in refinery runs offered a bearish counterpoint to the record exports. Refinery utilization dipped 0.1 percentage point to 95.5% of capacity last week, counter to analysts expectations of a 1.2 percentage point increase. Total net crude inputs also edged 66,000 b/d lower to 17.49 million b/d.

Still, run rates remained healthily above the five-year average of 92.62% of capacity. Midwest utilization rates, which fell 1.4 percentage points to 94.3% of capacity last week, continued to struggle coming back from historic lows earlier this fall, and remained 0.9 percentage points below the five-year average of 95.2% of capacity.

Lower Midwest run rates contributed to a 1.73 million-barrel build in stocks at Cushing, Oklahoma - the delivery point of the NYMEX crude contract.

In contrast, USGC refinery utilization reached 97.5% of capacity last week, above the five-year average of 94.26% of capacity. Strong run rates coupled with record high crude exports contributed to a 9.1 million-barrel inventory draw last week in the USGC.

GAS STOCKS GROW AS DEMAND WANES

Total gasoline inventories grew 1.7 million barrels last week to 226.25 million barrels as end user demand plumbed year-to-date lows.

Implied demand for gasoline fell 311,000 b/d to 8.88 million b/d, the lowest since January 2018 and more than 2% below the five-year average.

Despite the build, gasoline inventories continued to normalize, and were just 3.87% above the five-year average last week - the narrowest surplus to the average since late July. Atlantic Coast stocks, which added 322,000 barrels last week, were just 8.94% above the five-year average. Yet this supply overhang, while narrowing, continued to weigh on RBOB crack spreads.

Strong distillate cracks have supported refining margins in recent weeks, inducing refiners to continue to produce gasoline. US Gulf Coast distillate cracks compared with WTI at Houston narrowed slightly last week to $17/b from $19.38/b during the prior week, Platts calculations showed, but remained well-above year-ago levels of $10.69/b. In contrast, RBOB cracks against Brent on the Atlantic coast averaged at minus 42 cents/b, compared with $10.13/b last year.

But gasoline production dropped 458,000 b/d to 9.9 million b/d last week, falling below 10 million b/d for only the third time since mid-June, while distillate output edged up 100,00 b/d to a year-to-date high at 5.57 million b/d.

Stepped-up production pushed US distillate stocks up 3.81 million barrels to 125.61 million barrels. The increase far exceeded analyst expectations of a 1.25 million-barrel build, and moved inventories to just 2.96% below the five-year average of EIA-reported data.

A 250,000 b/d increase in distillate imports to 436,000 b/d last week also contributed to the inventory growth. Total gasoline imports, on the other hand, fell to 189,000 b/d, the lowest since November 1995.

-- Chris van Moessner, christopher.vanmoessner@spglobal.com

-- Edited by Jeff Mower, newsdesk@spglobal.com