Analysis of U.S. EIA data: Cushing Crude stocks hit new high on storage play
New York - May 19, 2010
Crude stocks at Cushing, Oklahoma – home of the New York Mercantile Exchange (NYMEX) crude oil futures contracts delivery point – hit a new high of 37.945 million barrels the week ending May 14, according to data released Wednesday by the U.S. Energy Information Administration (EIA).
Total U.S. crude stocks edged higher by 162,000 barrels to 363.686 million barrels, according to the EIA. Analysts polled by Platts had projected a build of 950,000 barrels in total U.S. crude levels, but with inputs to refineries climbing another 156,000 barrels per day (b/d) to 15.192 million b/d, the increase was tempered.
Crude oil imports climbed 142,000 b/d to 9.829 million b/d. Oil imports have been fairly high recently due to the steep contango* in the front of the futures curve, providing the incentive to store barrels.
Cushing stocks were 10.331 million barrels above the five-year average and 9.119 million barrels above year-ago levels, while U.S. crude inventories were 20.802 million barrels above the five-year average, but 5.838 million barrels below year-ago levels. Despite the continued climb in Cushing stocks, the front of the futures curve narrowed, trading in to minus $2.90 per barrel (/b) after settling the previous session at minus $3.29/b. This can be considered more a function of the upcoming contract expiration than the shift in supply/demand fundamentals. The June contract rolls off the board Thursday.
Total U.S. oil stocks at 1.087 billion barrels were 73.018 million barrels above the five-year average and 2.024 million barrels above year-ago levels.
This climb in oil levels has resulted despite a 950,000 b/d rebound in implied demand** to 19.205 million barrels on a four-week moving average as refiners have upped run rates, responding to a more favorable economic environment.
On a four-week moving average, crude inputs to refineries were 15.083 million b/d, or 678,000 b/d above year-ago levels.
Despite the rise in refinery runs, gasoline stocks edged down 296,000 barrels to 221.834 million barrels, or 15.047 million barrels above the five-year average and 17.88 million barrels above year-ago levels. The decline in gasoline inventories can be viewed as negligible given there are only two weeks to the start of driving season, but the modest draw occurred as imports tapered off rather than any movement in the distribution system.
Demand for gasoline inched down 48,000 b/d to 9.092 million b/d, which is not surprising given high readings since the second week of April when product normally starts to move along the distribution system in anticipation of a seasonal uptick in demand.
Demand for distillate jumped 196,000 b/d to 4.086 million b/d as abnormally low temperature readings along the Atlantic Coast caused a pull on heating oil stocks. Heating oil stocks dropped 763,000 barrels to 45.275 million barrels, an occurrence which is not unusual this late in the season.
Distillate production dropped 81,000 b/d to 4.213 million b/d, a fairly high level for this time of year, as refiners switched yields in favor gasoline, a seasonal occurrence. Output of gasoline climbed 269,000 b/d to 9.231 million b/d.
*Contango is the industry vernacular for the condition whereby prices for nearby delivery are lower than prices for future-month delivery.
**Implied demand is the amount of product that moves through the U.S. distribution system, not actual end consumption.
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