ANALYSIS: US crude oil inventory draws likely extend as refinery runs push higher

US crude oil inventory draws likely extended during the week ended June 18 amid an expected increase in refinery demand to levels last seen in December 2109, analysts surveyed by S&P Global Platts said June 21.

Total commercial crude stocks are expected to have declined around 6.3 million barrels in the week, a draw that would put stocks 5.5% behind the five-year average of US Energy Information Administration data at 460.4 million barrels.

The counter-seasonal draw would see stockpiles decline for a fifth straight week, leaving them down nearly 26 million barrels from mid-May and the lowest since the week ended March 20, 2020.

The draw comes as refinery utilization is expected by analysts to average 93.1% of total capacity, up 0.5 percentage point from the week prior and the strongest since late December 2019.

Total refinery net crude inputs are expected to edge up to 16.45 million b/d in the week, according to S&P Global Platts Analytics, up from an EIA-reported 16.34 million b/d during the week prior.

RINs response

Refining margins were sharply lower last week amid a steep decline in Renewable Identification Number prices.

US Gulf Coast WTI MEH cracking margins averaged $10.63/b in the five days ended June 18, Platts Analytics data shows, in from $13.01/b the week prior.

RIN prices have come under significant pressure on the heels of media reports June 11 that the White House may ease some of federal renewable fuel standard mandates.

US product cracks have a RINs component baked-in, and New York Harbor RBOB and heating oil cracks versus Brent were down around $2.50/b in the week ended June 18 as RINs prices slid nearly 30% from all-time highs seen the week prior.

So-called "obligated parties," including refiners and imports, use RINs to show the Environmental Protection Agency they have fulfilled their mandated government use of renewable fuels.

Rising gasoline stocks

Strong refinery runs likely contributed to an increase in refined product stocks. Total gasoline inventories likely increased 1.3 million barrels to around 244.3 million barrels, analysts said, while nationwide distillate stocks are expected to have climbed 1 million barrels to 137.2 million barrels.

The expected gasoline build would mark a fourth straight week of rising supply, pushing stocks the their highest since mid-February and around 1% above the five-year average.

Notably, the recent gasoline builds have come despite a steady increase in driving demand. Apple Mobility data shows US driving activity pushed to around 164% of the index's January 2020 baseline in the week ended June 18, up six percentage points from the week prior and a fresh record high for the dataset.

In an encouraging sign for distillate demand, Apple data shows US transit ridership averaged 95% of baseline last week, the highest since the first week of March 2020.