Weaker refinery demand pushes US crude stocks higher, but strong exports blunt

Commercial crude stocks climb 1.37 million b/d

Extraordinary refinery crude demand eases

Gasoline stocks see counter-seasonal build on weak demand

Lower refinery demand pushed US crude oil inventories higher in the week ended Oct. 20, US Energy Information Administration showed Oct. 25, but the seasonal build was blunted by above-trend exports.

US commercial crude inventories climbed 1.37 million barrels to 421.12 million barrels in the week to Oct. 20, widening the deficit to the five-year average to 5.1% from 4.7% the week prior.

The build ran counter to recent market expectations. American Petroleum Institute data released late Oct. 24 showed US crude inventories fell by 2.67 million barrels in the week to Oct. 20.

Inventories at the NYMEX delivery hub of Cushing, Oklahoma, climbed 210,000 barrels to 21.23 million barrels. It was only the third weekly build reported at Cushing in the past 16 weeks and the largest since the week ended June 23.

Still, Cushing stocks remain near nine-year lows and are 43.8% behind the five-year average for this time of year.

Backwardation in the NYMEX WTI forward curve has eased in recent weeks, somewhat improving storage economics, though forward contracts continue to trade at significant discounts to prompt. The sixth-month contract held an average discount of around $5.24/b compared with front-month in the week to Oct. 20, in from around $8/b in late September.

Seasonal decline in refinery demand

Refinery net crude inputs averaged 15.19 million b/d, EIA data showed, falling 1% on the week to parity with the five-year average. Refinery utilization fell half a percentage point to 85.6% of capacity and remained around 1% above normal for this time of year.

Weekly crude exports averaged 4.83 million b/d, down around 500,000 b/d on the week but still around 6.5% above the four-week moving average.

US crude exports to Asia averaged 2.8 million b/d, Platts cFlow ship and commodity tracking software from S&P Global Commodity Insights data showed, up from 2.2 million b/d the week prior and the highest in at least five weeks.

Asia-bound shipments could fall in coming weeks amid deteriorating arbitrage economics. The incentive for moving WTI MEH into Singapore has averaged just 6 cents/b versus Malaysian Tapis in the week to Oct. 20, S&P Global data showed, down from $2.52/b in September.

Nationwide gasoline stocks saw a counter-seasonal build of 160,000 barrels, pushing them 1.4% above the five-year average to 223.46 million barrels. The build comes as total product supplied for gasoline, the EIA’s proxy for demand, dipped 1% to 8.86 million b/d, falling 3% behind average for this time of year.

The gasoline build was concentrated on the US Gulf Coast, where stocks surged 1.85 million barrels. In contrast, the US Atlantic and West Coasts each saw roughly 1-million barrel draws.

Consequently USAC gasoline stocks remain relatively tight at 5.2% behind the five-year average, while total US inventories have built the largest surplus to historic levels since December 2020.