Analysis of US EIA data: Crude oil stocks at highest ever for end August
New York - September 1, 2010
US crude oil stocks climbed 3.425 million barrels to 361.707 million barrels the reporting week ending August 27, the highest level for this data week, as driving season was coming to a close, an analysis of the data from the Energy Information Administration (EIA) 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.
Analysts polled by Platts had projected a build of 1.9 million barrels in crude stocks.
At 361.707 million barrels, US crude stocks were 37.209 million barrels above the five-year average and 18.319 million barrels above year-ago levels, the largest surpluses against the averages this year.
With domestic production jumping 91,000 barrels per day (b/d) to 5.602 million b/d, runs edging down 68,000 b/d to 14.822 million b/d, and imports dipping 202,000 b/d to 9.679 million b/d, inventories increased for the second consecutive week. Stocks tend to build during maintenance season as distillation capacity is reduced during that time.
The build in inventories was concentrated along the Gulf Coast where stocks rose 3.167 million barrels.
By contrast, crude stocks at Cushing, Oklahoma -- home of the New York Mercantile Exchange (NYMEX) oil futures contract delivery point -- declined 503,000 barrels to 35.753 million barrels, a four-month low. But given weakness in the front of the futures curve, it appears there is market expectation of pending increased supply and that crude oil may already be en route to Cushing via the Seaway Pipeline. The price spread between the October and November futures contracts settled Tuesday at minus $1.62 per barrel (/b). But it narrowed to minus $1.52/b after the EIA’s release of the data.
While the rise in crude stocks was expected, the 739,000-barrel decline in middle distillates was not. Analysts polled by Platts had expected middle distillate inventories to increase 1 million barrels. The decline in middle distillates was concentrated in diesel while heating oil inventories increased 715,000 barrels to 52.412 million barrels.
Despite the decline in middle distillates, inventories were 34.710 million barrels greater than the five-year average and 11.672 million barrels above year-ago levels. More than 75% of the surplus against the averages resides with ultra low sulfur diesel inventories.
The drop in stocks of middle distillates resulted from a 299,000 b/d jump in implied demand*. The jump in demand may have strictly reflected restocking at the tertiary level rather than absolute end consumption, given the sluggish state of the US economy.
While implied demand for middle distillates saw a pickup, demand for gasoline ahead of the Labor Day weekend was a steady 9.386 million b/d. But with refiners throttling back on gasoline production, which fell 141,000 b/d to 9.287 million b/d, stocks inevitably declined. But the decline of 212,000 barrels to 225.405 million barrels was a minor change, given the final week of driving season.
*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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