US crude stocks hit seven-month low amid stronger refinery demand, exports

Seasonal US crude oil inventory draws extended in the week ended Aug. 16, Energy Information Administration data showed Aug. 21, amid stronger exports and refinery demand.

US commercial crude stocks declined 4.65 million barrels in the week ended Aug. 16 to 426.03 million barrels, EIA data showed. The draw put stocks 4.2% behind the five-year average for this time of year and at the lowest outright level since the week ended Jan. 26.

Inventories moved lower across all regions outside the US West Coast, where stocks climbed 2.42 million barrels, but draws were concentrated on the US Gulf Coast, which saw a 4.19 million-barrel decline over the period.

Stockpiles at the NYMEX delivery hub of Cushing, Oklahoma, declined for a second straight week, falling 560,000 barrels to 28.2 million barrels. Cushing stocks now stand at the lowest level since November 2023.

The draw comes as US refinery crude demand climbed to five-week high 16.69 million b/d, moving 2.7% above the five-year average for this time of year, while overall refinery utilization was up 0.8 percentage points on the week at 92.3% of capacity.

Refinery crude demand has held at or above average consistently since mid-February, EIA data showed. However, most US refiners stated in recent second-quarter results call their total third-quarter refinery run rates will be lower than actual second-quarter refinery throughput as they seek to balance output with slowing demand, thus providing some support for weakening refining margins, according to an Aug. 13 S&P Global Commodity Insights analysis.

The US Gulf Coast WTI MEH cracking margin has averaged $11.65/b to date in August, Commodity Insights data showed Aug. 21, down compared with a July average of $12.35/b.

Adding to inventory pressure was an uptick in exports, which climbed 8% from the week prior to 4.05 million b/d.

Transatlantic export economics remain broadly favorable. The arbitrage incentive for moving WTI MEH into Rotterdam versus North Sea Forties has averaged $1.99/b to date this month, Commodity Insights data showed, compared with 41 cents/b in July.

But the economics for heavy crude in Asia have deteriorated in recent weeks amid tepid China demand growth. The incentive for moving US Mars crude into China versus Dubai crude stands at minus 15 cents/b so far in August, compared with 9 cents/b in July.

Nationwide gasoline stocks declined 1.61 million barrels to 220.6 million barrels, EIA data showed. This seasonal draw held stocks steady for a second week at 2.4% behind the five-year average.

Midwest gasoline stocks saw the largest weekly build since mid-January, climbing 1.27 million barrels to a four-week-high 47.43 million barrels.

The build is due in part to the Aug. 12 restart of Exxon Mobil's Joliet refinery in Channahon, Illinois. Midwest refinery utilization rates climbed to 96.6% for the week ended Aug. 16, up 10.4 percentage points from 86.2% the prior week, EIA data showed.

Nationwide distillate inventories fell 3.31 million barrels to 122.81 million barrels, putting them 10% behind the five-year average.