US commercial crude stocks skyrocketed last week as refinery activity plunged and net imports surged. We expect stocks to a rise a bit further in the coming weeks as refinery throughput remains constrained.
Crude stocks to march higher as refinery activity remains in the doldrums
- US commercial crude stocks skyrocketed last week as refinery activity plunged and net imports surged. We expect stocks to a rise a bit further in the coming weeks as refinery throughput remains constrained.
- The EIA’s weekly US Petroleum Report, released earlier today, estimates that crude oil in commercial storage ballooned by a record 21.6m barrels last week. This was much larger than the 7.4m barrel increase reported by the American Petroleum Institute (API) yesterday. Stocks are now once again firmly above their five-year average. (See Chart 1.)
- As was the case last week, the main factor behind the increase in crude stocks was the sharp decline in crude inputs to refineries. Refinery throughput plummeted by 2.3m bpd to just 9.9m bpd (see Chart 2), the lowest level since records began in 1982, owing to the ongoing freezing weather-related disruption in the southern parts of the country. Temperatures have increased in the past week or so, but we still expect refinery activity to remain constrained for some time as maintenance takes place. Meanwhile, the 1.7m bpd increase in net imports and the small rise in production also boosted crude inventories.
- Elsewhere, product stocks tumbled (see Chart 3) owing to the aforementioned collapse in refinery throughput but also because of a sharp rebound in implied gasoline demand. (See Chart 4.) The partial easing of quarantine measures and the warmer weather has supported road travel activity. We expect that gasoline stocks will fall further in the next few weeks as demand continues to revive as the virus is brought under control and as refinery throughput remains soft.
- Oil prices rose today despite the record-breaking increase in crude stocks, perhaps because market attention is more focused on tomorrow’s OPEC+ meeting.
Chart 1: Commercial Crude Stocks (Mn. Barrels)
Chart 2: Crude Oil Inputs to Refineries (Mn. BpD)
Chart 3: Total Product Stocks (Mn. Barrels)
Chart 4: Implied Gasoline Demand (Mn. BpD)
Sources: EIA, Capital Economics
Samuel Burman, Assistant Commodities Economist, email@example.com