Analysis of US EIA data: Middle distillate stocks soar to 27-year high
New York - August 11, 2010
U.S. distillate stocks climbed 3.456 million barrels the week ending August 6, to 173.142 million barrels, a 27-year high, as refiners responded to decaying demand for gasoline, conceding the end of the summer driving season, an analysis of the data from the Energy information Administration showed Wednesday. This analysis and commentary is provided by Linda Rafield, Platts senior oil analyst and editor of the weekly Futures and Derivatives Review, a supplement to Platts Oilgram Price Report.
Stocks of middle distillates were 36.229 million barrels above the five-year average and 10.875 million barrels above year-ago levels. These are plush enough surpluses that can only be eroded by a pickup in rail and port traffic and an exceedingly cold winter in the Northeast.
Output of middle distillates dipped just 8,000 barrels per day (b/d) to 3.342 million b/d, while gasoline production dropped 124,000 b/d 9.291 million b/d. Given the retreat in gasoline demand at a time when historically it picks up, the drop-off in production made economic sense.
But implied demand* for middle distillates continued to slow and at 3.455 million b/d on a four-week moving average was up just 119,000 b/d year-over-year with 2009 providing an exceptionally low baseline.
U.S. refiners throttled back on run rates as demand no longer warranted gross inputs of over 16 million b/d, with cuts occurring across all regions.
Crude runs dropped 509,000 b/d to 15.066 million b/d while gross inputs fell 549,000 b/d to 15.492 million b/d, slowing the rate of output of light end products.
Oil demand held steady week over week, ticking up 143,000 b/d to 19.467 million b/d. But most of the acceleration in implied demand was in "other oils." Implied demand for other oils jumped 467,000 b/d to 4.144 million b/d despite the decline in gross inputs with refiners running more feedstock through their facilities.
Meanwhile, product stocks continued to swell, climbing another 3.122 million barrels to 770.056 million barrels. Product stocks were 54.793 million barrels above the five-year average and 556,000 barrels above year-ago levels, the first time inventories have sported a surplus against year-ago levels in ten weeks, reinforcing the recent deceleration in demand.
Gasoline demand dipped 241,000 b/d to 9.236 million b/d. But on a four-week moving average basis, gasoline demand was actually at a two-year high of 9.445 million b/d. The decline in gasoline demand from that of the previous report, contributed to a 409,000-barrel build in stocks. Gasoline inventories, at 223.383 million barrels for the latest week, were 19.346 million barrels greater than the five-year average and 11.452 million barrels more than year-ago levels. These are steep surpluses given that the summer driving season ends in four weeks.
*Implied demand is the amount of product that moves through the U.S. distribution system, not actual end consumption.
*Editor’s Note: Linda Rafield’s commentary is based on her knowledge of market trends, information from industry sources, and her own views as a long-time energy analyst. Please contact Kathleen Tanzy if you require any additional information or would like to interview Linda Rafield.
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