The pace of builds in US crude stocks continued to slow last week as refinery activity surged. However, we expect stocks to ease back in the coming weeks as refinery capacity utilisation steadily bounces back.
US commercial crude stocks to fall soon
- The pace of builds in US crude stocks continued to slow last week as refinery activity surged. However, we expect stocks to ease back in the coming weeks as refinery capacity utilisation steadily bounces back.
- The EIA’s weekly US Petroleum Report, released earlier today, estimates that crude oil in commercial storage rose by 1.9m barrels last week. This was slightly lower than the 3m build reported by the American Petroleum Institute (API) yesterday, but was in stark contrast to the 0.3m barrel draw expected by Reuters analysts. Commercial stocks are now around 30m barrels above their five-year average. (See Chart 1.)
- Despite the tick-up in domestic production and the slight increase in net imports (see Chart 2), inflows into commercial stocks decelerated again last week as crude inputs to refineries surged by almost 1m bpd. Refinery throughput is now almost at 14.4m, which is just shy of the 14.8m bpd recorded before the cold weather-related disruption last month. (See Chart 3.) We expect crude stocks to fall soon. Refinery activity should recover to February levels as repairs are completed in the coming weeks. At the same time, we think that US production will remain constrained for some time yet. (See our Energy Update.)
- Meanwhile, gasoline and distillate stocks rose last week (see Chart 4) owing primarily to the increase in refinery activity. Looking ahead, the ongoing easing of lockdowns and renewed strength in manufacturing activity should boost product demand in the coming weeks, which will weigh on stocks.
- Despite the ongoing build in crude stocks and rise in net imports, oil prices continued to rebound after the publication of the EIA’s latest report, perhaps because it looks likely that stocks will start to fall in the coming weeks.
Chart 1: Commercial Crude Stocks
Chart 2: Weekly Change in Net Imports & Commercial Crude Stocks (Mn. Barrels)
Chart 3: Crude Oil Inputs to Refineries (Mn. BpD)
Chart 4: Gasoline & Distillate Stocks (Mn. Barrels)
Sources: EIA, Capital Economics
Samuel Burman, Assistant Commodities Economist, firstname.lastname@example.org