US crude inventories likely draw as weekly exports rebound

US crude inventories likely declined the week ended June 16 as refinery runs were steady while exports rebounded, according to a survey of analysts by S&P Global Commodity Insights June 20.

Analysts on average said US crude stocks to fell 2 million barrels. That would put inventories at 465.1 million barrels, roughly on par with the five-year average, based on the most recent US Energy Information Administration data.

Net inputs into refineries were expected to remain steady to slightly higher. S&P Global analysts expect outages to have remained unchanged despite some refinery glitches.

"Refinery outages are projected to remain at around 540,000 b/d for the week ending June 23, and barring any major unplanned outages, the level of downtime in the region is expected to remain at lower levels in the coming weeks," the analysts said in a report.

Unit outages, combined with tight refined products inventories, have boosted refined products crack spreads, which should encourage operating refiners to boost runs. For instance, the NYMEX front-month RBOB crack spread settled at $39.09/b on June 20, down $1.71 on the day, but up from around $32/b in early June.

US refiners have increased runs by 1.6 million b/d since early March to 16.6 million b/d the week ended June 9, EIA data shows, helping to draw down US crude inventories.

However, crude stocks have fallen just 11.4 million barrels since early March, as production has edged higher while crude has drawn from strategic inventories. US Strategic Petroleum Reserve stocks have fallen nearly 20 million barrels since March 24 to 351.7 million barrels as part of a congressionally mandated sale of 26 million barrels, with deliveries to be completed by the end of June.

A recent slowdown in weekly crude exports has also limited commercial crude stock draws. However, S&P Global Commodities at Sea shows crude exports jumping to 4.6 million b/d the week ended June 16 from 2.1 million b/d the prior week.

While CAS data does not line up exactly with the weekly EIA export data, the longer-term trends are similar. For the four weeks ending June 9, for instance, both CAS and the EIA show exports averaging 3.8 million b/d.

S&P Global data shows the spot arbitrage for WTI MEH into Northwest Europe as marginal, while the WTI MEH arbitrage into Asia remains open. In a rare move, North Sea crude is heading to Asia in part because of the influx of US barrels in Europe.

Refined products tight

In refined products, analysts polled by S&P Global on average expect US gasoline inventories to have tightened by 1 million barrels the week ended June 16 and distillate stocks to remain unchanged.

Phillips 66's downed 141,000 b/d FCC unit at its Bayway, New Jersey, refinery is expected to reduce gasoline production by roughly 100,000 b/d, according to S&P Global analysts.

Low gasoline inventories and relatively high prices on the US Atlantic Coast have opened the arbitrage for overseas barrels. CAS data shows the US importing 1.2 million b/d of gasoline and blendstocks the week ended June 16, down from 1.5 million b/d the prior week, but up from just 600,000 b/d in mid-May.

The additional imports have helped to boost USAC inventories, which have climbed 5.7 million barrels since mid-April to 57.1 million barrels the week ended June 9, EIA data shows. Over the same period, the deficit to the five-year average has tightened to 12% from 17%.

Still, crack spreads for the New York-delivered RBOB contract remain high to encourage more blending and continued imports, with arbitrages open from the Middle East and Asia.

Kpler vessel tracking software shows a rise in US gasoline imports from India, Saudi Arabia and the UAE in June, for instance. Traders in Asia have noted that US demand for high-octane gasoline blendstocks, such as reformate, has increased. High-octane blendstocks are in demand to balance out low-octane naphtha in summer gasoline blends.

US Gulf Coast exports of gasoline have eased, although that does not necessarily mean more barrels will be sent north on the Colonial Pipeline as that artery is already fully subscribed.

USAC distillate stocks are also tight, as refiners have been maximizing gasoline yields. USAC stocks at 26.6 million barrels the week ended June 9 were 35% below the five-year average, EIA data shows.