Commercial crude stocks continued their counter-seasonal decline last week, even as net imports rebounded and refinery throughput eased back slightly. We expect inventories to decline further over the course of this year as demand revives.
Commercial crude stocks to remain on a downward trend
- Commercial crude stocks continued their counter-seasonal decline last week, even as net imports rebounded and refinery throughput eased back slightly. We expect inventories to decline further over the course of this year as demand revives.
- The EIA’s weekly US Petroleum Report, released earlier today, estimates that crude oil in commercial storage dipped by 1m barrels, significantly less than last week’s 9.9m plunge. This decline was also much less than the 4.3m barrel draw reported by the American Petroleum Institute (API) yesterday. Nevertheless, commercial stocks continue to edge closer to their five-year average. (See Chart 1.)
- The main factor behind the shallower draw in crude oil inventories was the rebound in net imports. (See Chart 2.) Net imports increased by 1.3m bpd primarily because of a surge in imports from Canada to a record high of 4.2m bpd. (See Chart 3.) One reason for this is perhaps because there are few alternative places for Canada’s oil to go. After all, domestic oil storage capacity in Canada is filling up rapidly due to the recent lifting of production curtailments in Alberta.
- Meanwhile, US total implied product demand fell last week (see Chart 4), with drops in demand for all products, despite the partial easing of virus-containment measures in California, the US’s largest state. That said, the rollout of COVID-19 vaccines is progressing smoothly, and we expect demand to gradually revive in the coming months as the easing of lockdowns should enable transport activity to bounce back.
- Oil prices were little changed in response to the EIA’s latest report, perhaps because market attention is focused on today’s OPEC+ Joint Ministerial Monitoring Committee (JMMC) meeting.
Chart 1: US Commercial Crude Stocks (Mn. Barrels)
Chart 2: Weekly Change in Net Imports & Commercial Crude Stocks (Mn. Barrels)
Chart 3: US Crude Oil Imports from Canada (Th. BpD)
Chart 4: US Implied Product Demand (Mn. BpD)
Sources: EIA, Capital Economics
Samuel Burman, Assistant Commodities Economist, firstname.lastname@example.org