US crude commercial stocks rose a touch last week, but we expect them to fall in the coming weeks as product demand picks up in tandem with the progressive easing of lockdowns.
Gasoline demand to continue to rise
- US crude commercial stocks rose a touch last week, but we expect them to fall in the coming weeks as product demand picks up in tandem with the progressive easing of lockdowns.
- The EIA’s weekly US Petroleum Report, released earlier today, estimates that crude oil in commercial storage rose by 0.6m barrels last week, which is close to its five-year average. (See Chart 1.) However, total US crude stocks fell by 0.1m barrels as strategic inventories declined by 0.7m. (The Department of Energy announced last month that 10.1m barrels of crude oil will be delivered to the market during April/May due to a Congressionally-directed sale.)
- Even though production and net imports rose last week, part of the reason for the rise in commercial crude stocks was because refinery throughput fell by almost 300,000 bpd. (See Chart 2.) That said, refinery activity remains close to pre-virus levels and we still expect refinery run rates to increase later this year as the lifting of quarantine measures boosts travel activity and demand for oil products.
- Meanwhile, distillate stocks continued to fall, and gasoline stocks edged higher. (See Chart 3.) In the case of gasoline, the decline in refinery throughput was just about offset by a 0.16m bpd rise in implied demand, which is now above 9m bpd for the first time since August last year. (See Chart 4.) We think that gasoline demand will rise further in the coming months as lockdowns ease, but also because of the usual seasonal increase in driving activity as the weather improves.
- Oil prices were broadly unchanged in response to the EIA’s weekly report, possibly because most market attention is focused on rising COVID-19 cases in Asia and the possibility of NOPEC (anti-trust) regulation.
Chart 1: Commercial Crude Stocks (Mn. Barrels)
Chart 2: Crude Oil Inputs to Refineries & Commercial Crude Stocks
Chart 3: Gasoline & Distillate Stocks (Mn. Barrels)
Chart 4: Implied Gasoline Demand (Mn. BpD)
Sources: EIA, Capital Economics
Samuel Burman, Assistant Commodities Economist, firstname.lastname@example.org