Platts Analysis of U.S. EIA Data

Cushing stocks increased 1.91 million barrels last week

Platts Oil Futures Editor Geoffrey Craig

New York - March 25, 2015

Crude oil stocks jumped 1.91 million barrels at Cushing, Oklahoma, to 56.314 million barrels during the week ended March 20, U.S. Energy Information Administration (EIA) data showed Wednesday.

Stocks at Cushing, delivery point for the New York Mercantile Exchange (NYMEX) crude oil futures contract, equaled 79.5% of working storage capacity, EIA data showed.

Tank farms there pushed into record-high territory the week ended March 13, though remain shy of the all-time utilization record of 91% set in March 2011. Working capacity storage at Cushing has increased over time.

Cushing has seen net inflows each week since December 5. Traders are taking advantage of later-dated futures contracts being more expensive than near-term delivery, making Cushing storage a profitable enterprise.

As Cushing nears full capacity, the front-month discount to later-dated contracts should increase, as remaining storage becomes scarcer. Shippers will try and bid down the front-month price to account for rising storage costs.

For the week ended March 20, the front-month/sixth-month spread averaged minus $7.33 per barrel (/b), 55 cents/b wider than a week earlier. The front-month/12th- month average spread widened 88 cents the week ended March 20 to minus $11.20/b.

Total commercial crude oil stocks increased 8.170 million barrels to 466.678 million barrels the week ended March 20, EIA data showed.
Analysts surveyed Monday by Platts expected a 4.6 million-barrel build.

Crude oil production was almost flat, up 3,000 barrels per day (b/d) to 9.422 million b/d. A year ago, daily output was 8.19 million barrels.


Refineries were slightly more active the week ended March 20, as crude oil runs rose 94,000 b/d to 15.53 million b/d.

The refinery utilization rate increased 0.9 percentage point to 89% of operable capacity, compared with analysts' expectation of a more modest 0.1 percentage-point rise.

The utilization rate has been under 90% since January 16, with one week's exception, as refineries entered maintenance season. The return of U.S. refineries represents additional crude oil demand, which should support prices heading into the summer driving season.

On the U.S. Gulf Coast (USGC), the country's largest refinery in Port Arthur, Texas, restarted a gasoline-making fluid catalytic cracker the week ended March 20, helping push the region's refinery utilization rate 3.9 percentage points higher to 91% of operable capacity.

The economics of USGC refineries turning crude oil into refined products appear favorable. The USGC cracking margin for benchmark Light Louisiana Sweet crude oil the week ended March 20 averaged $13.17/b the week ended March 20.

Platts margin data reflects the difference between a crude oil'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.

By region, the biggest build occurred on the U.S. Midwest (USMW), driven in part by Cushing's increase, where stocks accumulated 4.7 million barrels to 142.746 million barrels.

Demand from USMW refineries weakened, as crude oil runs decreased 192,000 b/d to 3.37 million b/d.

Total crude oil imports were down 104,000 b/d to 7.392 million b/d, contributing to the weekly build. Imports from Saudi Arabia fell 359,000 b/d to 748,000 b/d. For the last four weeks, imports have averaged 7.262 million b/d.


The total U.S. gasoline inventory fell 2.014 million barrels to 233.386 million barrels, matching analysts' forecasts of a 2 million-barrel decline.
Gasoline stocks remained 5.5% above the EIA five-year average for the same reporting period and 7.4% above a year ago.

Implied demand* was down 641,000 b/d to 8.619 million b/d. The moving four-week average was 8.756 million b/d, on par with a year ago.

With regional refineries ramping up production, USGC gasoline stocks increased 1.55 million barrels to 80.163 million barrels, a 10.1% surplus to the 2010-14 average.

Distillate stocks were almost unchanged, down 34,000 barrels to 125.849 million barrels. That level equals a 12% surplus to a year ago and a 4.9% deficit to the five-year average.

Analysts surveyed expected a 1.7 million-barrel decrease.

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