Source: Platts Analytics | Jenna Delaney, Senior Oil Analyst | May 24, 2017
Commercial crude oil inventories decreased by 4.4 million barrels the week ending May 19, marking seven straight weeks of declines. Gasoline and distillate stocks also fell, by 785,000 barrels and 484,000 barrels, respectively. The draw in crude oil was larger than the API’s estimate from yesterday evening, but the gasoline and distillate draws were smaller. The SPR also drew by 398,000 barrels, which brings the total decline during 2017 to 7.4 million barrels over twelve consecutive weeks.
Imports fell by 296,000 b/d; however, a large portion of the decline was driven by lower imports from Canada. To date in May, waterborne imports are 61,000 b/d lower month on month, but are 113,000 b/d higher year on year. Since the beginning of 2017, monthly imports have consistently come in higher year over year, which is not the story many market participants were expecting. Despite our expectation that domestic production will continue to grow throughout the year, we continue to forecast that imports will hover around 8.0 million b/d during the back half of 2017.
On the demand side, refinery runs increased by 159,000 b/d, reaching 17.3 million b/d. Over the past seven weeks, refinery runs have averaged nearly 1 million b/d above the same weeks during 2016. Although strong run rates have caused concern in the market that refined product inventories will swell, gasoline inventories have returned to their 5-year average ‘days forward cover’ (DFC) level, and distillate inventories have been near their normal DFC level for nearly a month. But, demand will need to remain strong to support required inventories, which are currently are elevated on an outright basis.
Total petroleum inventories have been tracking with 2016 levels for nearly two months, and crude oil inventories have compressed since the start of the year to now sit only 6.5 million barrels above last year’s levels. Although the consistent nature of draws on crude oil stocks have been a tailwind for prices over the past couple months, prices remained fairly static immediately after the EIA’s numbers were released. The market is anxiously awaiting the outcome of the OPEC meeting tomorrow, which will have a significant fundamental impact on the supply/demand balance in the months to come.