EIA weekly inventory numbers show that US commercial crude oil inventories increased by 5.52m barrels over the last week, which was above market expectations. This build was driven by a rebound in crude oil imports, which increased by 1.3m b/d WoW, while exports also fell by 298k b/d WoW. EIA numbers also showed a 300k b/d increase in crude production. The refined product numbers were more constructive. Gasoline inventories fell by 3.15m barrels over the week, while distillate stocks fell by 3.22m barrels. Looking at the refinery utilisation rates in the Midwest, it does not appear as though the data has taken into account the outage of BP’s Whiting refinery, given that utilisation rates in the region actually increased by 4.1pp over the week to 95.1%. The outage is likely to be reflected in next week’s numbers, which suggests we could see some further tightening in product stocks.
The fall in US gasoline stocks has provided further upside momentum to gasoline cracks with the prompt RBOB crack breaking above US$20/bbl, a level not seen since September last year. The tightening in middle distillates also continues to push the prompt heating oil crack higher. And it is trading at more than US$44/bbl, up from around US$35/bbl at the start of the year. The tightness in middle distillates is not isolated to the US. The European gasoil crack is trading at around US$31/bbl. The European middle distillate market will be feeling a bit more tightness due to the ongoing disruptions in the Red Sea.
The strength in refinery margins should provide some support to crude oil, by driving stronger crude demand as refineries look to increase run rates and take advantage of stronger margins.