S&P Global Platts Preview of U.S. EIA Data

Likely to Show Crude Stocks Rose 425,000 Barrels

Geoffrey Craig, S&P Global Platts Oil Futures Editor

New York - September 07, 2016

A likely drop in U.S. refinery utilization is expected to have pushed crude inventories higher last week, although the size of that build could be offset by a loss of oil production in the U.S. Gulf of Mexico, according to an S&P Global Platts preview of the U.S. Energy Information Administration (EIA) oil inventories data.

Survey of Analysts Results:

  • Crude oil stocks expected to show a build of 425,000 barrels
  • Refinery utilization expected to decrease 0.4 percentage points
  • Gasoline stocks expected to show a drawdown of 625,000 barrels
  • Distillate stocks expected to rise 1.1 million barrels

S&P Global Platts Analysis (the below may be quoted in part or full, with attribution to S&P Global Platts Oil Futures Editor Geoffrey Craig or an S&P Global Platts analysis):

Operators shut 192,000 barrels per day (b/d) of oil production last week as the storm that became Hurricane Hermine moved through the Gulf of Mexico. That amounted to 12% of the Gulf's daily production.

Despite the outages, however, crude stocks remain ample -- and have risen five of the last six reporting periods -- under the weight of strong imports.

Over the last four weeks, imports have averaged 8.5 million b/d, versus 7.7 million b/d the same period a year ago.

Strong coking margins for imported grades could be drawing imports to the U.S. Gulf Coast. Margins for Mexican Maya averaged $12.69/b last week, which was roughly double that of West Texas Sour. The Mars coking margin averaged $10.59/b.

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

Strong imports have probably helped keep spot differentials for Gulf Coast crudes from rallying. Gulf Coast sour benchmark Mars was assessed at West Texas Intermediate (WTI) minus $3.05 per barrel (/b) Friday, essentially unchanged on the week. Replacement grades like Western Canadian Select (WCS) have strengthened only slightly. WCS ex-Cushing was assessed at WTI minus $9.05/b Friday, up from minus $9.55/b the week prior.

The arrival of the autumn turnaround season will add even more downward pressure on both U.S. crude oil inventories, as well as differentials. Already, there are early signs of facilities shutting units for maintenance.

PBF started planned work on the fluid catalytic cracking (FCC) at its 160,000 b/d Paulsboro, New Jersey, refinery, one of five PBF-owned facilities expected to undergo repairs during the third quarter. Suncor began repairs expected to last eight weeks at its 137,000 b/d Montreal refinery.

Also in Canada, Irving Oil was heard to have planned a turnaround at its 300,000 b/d Saint John, New Brunswick, refinery starting in September.

Citgo began planned work last month on the FCC expander at the East Plant of its Corpus Christ, Texas, refinery.

Other Gulf Coast refiners expected to see repairs this quarter are Valero's 335,000 b/d Port Arthur, Texas, facility and Motiva's 603,500 b/d refinery, also in Port Arthur, Texas.

Analysts surveyed Tuesday by S&P Global Platts are looking for U.S. refinery utilization to decline 0.4 percentage point to 92.4% of capacity, while crude stocks are seen building 425,000 barrels.

That expectation runs counter to seasonal norms, as crude stocks have fallen by 2 million barrels on average for the same reporting week in 2011-15.


A question moving forward is whether refiners will scale back imports as demand falls in conjunction with the autumn maintenance season.

A related issue is the extent of repairs that refiners undergo. In autumn 2015, refinery utilization bottomed at 86% of capacity, a figure that will become a benchmark for measuring this year's turnaround.

A drop in refinery activity means less product supplied, and a relatively deep maintenance season should help gasoline and distillate stocks erase the surplus stocks that have accumulated.

Gasoline inventories equaled 232 million barrels the week that ended August 26, which was 22 million barrels above the five-year average for the same time of year.

Analysts are looking for a draw last week of 625,000 barrels, which if confirmed, will make a minor dent in the surplus. Gasoline stocks rose 458,000 barrels on average this time of year from 2011-15.

Distillate stocks are expected to rise 1.1 million barrels, compared with an average build of 1.9 million barrels the same period in 2011-15.

For the reporting period ending August 26, distillate stocks were 154.8 million barrels, which was 17.7 million barrels above the five-year average.

Exports of distillates from the U.S. Gulf Coast to Europe, which provide an additional outlet for supply, have totaled 920,000 metric tons (mt) so far in September, according to data from cFlow, S&P Global Platts trade-flow software.

That compares with 1.21 million mt over the same period in August, the data shows.

For more information on crude oil, visit the S&P Global Platts website.

Global, Americas, Asia: Kathleen Tanzy, + 1 917 331 4607, kathleen.tanzy@spglobal.com.

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