U.S. Crude Oil Stocks Declined 4.4 Million Barrels Last Week

The U.S. commercial crude oil stocks fell 4.4 million barrels to 455.3 million barrels in the week that ended July 31, Energy Information Administration (EIA) data showed Wednesday.

Analysts surveyed Monday by Platts had expected a 1.6 million-barrel decline.

The weekly draw was driven by strong refinery activity and a drop in crude oil imports. Crude oil runs increased 313,000 b/d to 17.1 million b/d, a record, according to EIA data that goes back to 1982.

On the U.S. Gulf Coast (USGC), crude oil runs increased 219,000 b/d to 8.8 million b/d, raising the region’s refinery utilization rate 1.4 percentage points to 96.1% of operable capacity. By comparison, the USGC utilization rate was 93.9% for the same reporting period one year ago.

One reason refineries have been operating at high levels this summer may be strong margins. USGC refining margins using West Texas Intermediate (WTI) averaged $10.73 per barrel (/b) for the 10 days that ended July 31, versus $6.86/b during the same reporting period one year ago.

Platts margin data reflects the difference between a crude’s netback and its spot price. Netbacks are based on crude oil yields, which are calculated by applying Platts product price assessments to yield formulas designed by Turner, Mason & Co.

The Midwest refinery utilization rate increased 1.6 percentage points to 100.3% of operable capacity, matching a previous record-high set June 2014, according to EIA data going back to 2010.

Refineries can exceed 100% of capacity for short periods of time because the operable capacity figure published by EIA takes into account downtime for repairs expected over the course of a year, said Rob Merriam, EIA’s manager of petroleum supply statistics.

The total refinery utilization rate rose 1 percentage point to 96.1% of operable capacity. Analysts expected the rate decreased 0.2 percentage points.

Strong refinery activity helped push lower stocks at Cushing, Oklahoma — delivery point for the New York Mercantile Exchange (NYMEX) crude oil futures contract — by 542,000 barrels to 57.2 million barrels.

Cushing stocks have been steady since June, fluctuating around 56-58 million barrels, off the hub’s historic peak of 62.2 million barrels seen in April.

Midwest crude oil stocks dropped 536,000 barrels to 138.7 million barrels. The biggest decline occurred on the U.S. Gulf Coast, where inventories drew 3.4 million barrels.

Not only did USGC refinery activity pick up, but the region’s crude oil imports also dropped 659,000 b/d to 2.7 million b/d, helping reduce stocks.

Total crude oil imports fell 365,000 b/d to 7.18 million b/d, in line with the year-to-date average of 7.258 million b/d.

By country of origin, the biggest decline came from Saudi Arabia imports which decreased 532,000 b/d to 620,000 b/d.

It is not unusual for Saudi imports to rise or fall by large amounts each week because the accounting for even a single tanker has a significant impact. On an absolute basis, the week-to-week change in Saudi imports has averaged 212,000 b/d so far this year.

Crude oil production was estimated to have risen 52,000 b/d to 9.465 million b/d. Continental U.S. production rose 54,000 b/d to 9.007 million b/d, snapping a four-week streak in which output was falling or flat.

Gasoline Stocks Build

Gasoline stocks increased 811,000 barrels last week to 216.7 million barrels. Analysts surveyed expected a 700,000-barrel decline.

Implied* demand rose 348,000 b/d to 9.7 million b/d, but was insufficient to absorb the extra supplies.

By region, the biggest increase was seen on the Gulf Coast, where stocks rose 1.6 million barrels to 75.4 million barrels, less than a 1% surplus to the five-year average for the same reporting period.

On the U.S. Atlantic Coast (USAC), home to the New York Harbor-delivered NYMEX reformulated blend stock for oxygenate blending (RBOB) futures contract, stocks fell 159,000 barrels, helping offset the build.

At 59.8 million barrels, USAC stocks sit 3.6% above the five-year average for the same reporting period.

Despite being well-supplied, USAC gasoline imports increased 155,000 b/d to 710,000 b/d, as strong cracking margins attracted barrels from Europe.

The front-month NYMEX RBOB cracking margin against Intercontinental Exchange (ICE) Brent stayed above $20/b last week, compared with $11-$12/b a year ago.

Distillate stocks built 709,000 barrels last week to 144.8 million barrels, compared with analysts’ expectation of a 1.1 million barrel increase.

Stocks of low and ultra-low sulfur diesel (ULSD) grew 634,000 barrels to 40.1 million barrels on the U.S. Gulf Coast. Compared with the five-year average for the same reporting period, USGC stocks represent a 8.1% surplus.

On the Atlantic Coast, stocks of low and ULSD decreased 1.87 million barrels to 42.83 million barrels, a 47.4% surplus to the five-year average for the same reporting period.