The increase in refinery throughput and decline in net imports meant that US crude stocks fell last week for the first time in around two months. We expect that stocks will fall further in the coming weeks as refinery activity continues to rise.
Stronger demand to weigh on crude stocks
- The increase in refinery throughput and decline in net imports meant that US crude stocks fell last week for the first time in around two months. We expect that stocks will fall further in the coming weeks as refinery activity continues to rise.
- The EIA’s weekly US Petroleum Report, released earlier today, estimates that crude oil in commercial storage fell by around 0.9m barrels last week to just over 500m barrels. (See Chart 1.) The decline was in stark contrast to the 3.9m barrel build reported by the American Petroleum Institute (API) yesterday as well as the small rise expected by analysts surveyed by Reuters.
- The drawdown in crude stocks was driven in large part by the 0.6m bpd increase in crude oil inputs to refineries. Refinery throughput is now just over 14.9m bpd, a year high, as refineries owners are presumably anticipating even stronger product demand in the coming weeks. Meanwhile, the 0.2m bpd drop in net imports, also weighed on stocks. (See Chart 2.)
- Elsewhere, implied product demand soared by 1.6m bpd with all major products categories rising w/w. (See Chart 3.) We expect product demand will continue to increase in the coming months as the ongoing lifting of lockdowns should enable travel activity to grow. And while demand for kerosene (jet fuel) currently lags other products, we doubt that this will continue for much longer. Indeed, the recent increase in daily passenger numbers suggest that jet fuel demand will rise further. (See Chart 4.)
- Oil prices rose after the publication of the EIA’s latest report due to the somewhat unexpected drawdown in crude stocks, but the markets main attention is probably on tomorrow’s OPEC+ meeting.
Chart 1: Commercial Crude Stocks (Mn. Barrels)
Chart 2: Weekly Change in Net Imports & Commercial Crude Stocks (Mn. Barrels)
Chart 3: US Product Demand
Chart 4: US Passenger Throughput &
Sources: EIA, TSA, Capital Economics
Samuel Burman, Assistant Commodities Economist, email@example.com