John Kemp

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US refining system (week ending 29 May 2009)

June 3, 2009

Crude inventories built (+409,000 b/d), according to the EIA, defying market predictions of a decline (-200,000 b/d).  Imports jumped (+868,000 b/d) to the highest level for four weeks (9.646 million b/d). 
Higher crude arrivals were recorded into the PADD III Gulf Coast refining region (+558,000 b/d) and PADD I North-East (+195,000 b/d). But this merely reversed the previous weakness, taking import rates back to year-ago levels, after several weeks in which arrivals had been unusually low.  PADD V West Coast arrivals also rose (+293,000 b/d) but were partly offset by slower imports into PADD II Midwest (-126,000 b/d). 
Refinery operating rates continued to rise (+1.15 percentage points) to the highest level this year (86.26%) though rates remain far below last year’s level (89.72%). 
BUT the jump in refinery operating rates WAS NOT accompanied by an increase in the volume of crude processed.  In fact, crude throughput actually fell marginally (-8,000 b/d).  Instead, non-crude inputs jumped sharply (+203,000 b/d).  The percentage of crude oil in total refinery inputs fell to its lowest level for since mid-Jan and before that for any time in the last five years.  Crude oil inputs accounted for just 96.60% of all refinery inputs last week, down from 98.00% the previous week.  Refiners must have drawn down stocks of other, semi-processed, oils.  But the series is volatile and week-to-week variations tend to reverse rapidly.  Other things being equal, next week should see a sharp increase in reported crude oil processing rates. 
Reported gasoline inventories fell (-31,000 b/d).  The substantial gap between reported inventories (-31,000 b/d) and the change (+726,000 b/d) implied by domestic production + imports – product supplied points to continued strong exporting and/or recording errors (-757,000 b/d). 
Domestic production fell (-581,000 b/d) and imports slowed (-56,000 b/d) more than offsetting weaker consumption in the holiday-week (-518,000 b/d).  Gasoline stocks were broadly unchanged (203.202 million bbl) down 5.888 million bbl  (-2.8%) compared with last year (209.090 million bbl).  Stocks are relativley low and firmly in the bottom half of the five-year range. 
There was no relief on the distillate side.  Stocks continued to build (+237,000 b/d), amid little change in production or imports from the prior week and slackening consumption.  Ultra-low sulphur stocks in PADD I North-East, already +5.664 million bbl (+41%) higher than last at a record 19.976 million bbl continued to trend higher.  Stocks are also far above year-ago levels in PADD II (+4.379 million bbl, +19.5%) and in PADD III (+8.652 million bbl, +42.7%). 
In a development that should also worry refiners, stocks of semi-processed “unfinished oils” and miscellenaneous “other oils” continue to rise — in the case of “other oils” inventories rose +3.600 million (+2.3%) to another record (158.600 million bbl).  The overhang of such “other oils” is now +20.500 million bbl (+14.8%) higher than at the same time last year (138.100 million bbl). 
While crude oil inventories look high, the massive stock of refined products, other than gasoline and residual fuel oil, is even larger. 
For graphical analysis of this week’s EIA report on inventories, production, imports and exports of crude oil and refined products see the links below:

  • About John

    "John joined Reuters in 2008 as one of its first financial columnists, specialising in commodities and energy. While his main focus is on oil markets, he has written broadly on the emergence of commodities as an asset class, regulatory issues and macroeconomic themes. Before joining Reuters, John spent seven years as a senior analyst for Sempra Commodities (now part of JP Morgan) covering base metals and crude oil. Previously, he worked as an analyst on world trade, banking and financial regulation for consultancy Oxford Analytica."
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