Early signs of winter refinery maintenance and increased imports likely pushed U.S. crude oil inventories higher last week, according to an S&P Global Platts preview of this week's pending U.S. Energy Information Administration (EIA) oil stocks data.
Survey of Analysts Results:
S&P Global Platts Analysis:
Analysts S&P Global Platts surveyed Monday are looking for crude stocks to build 1.75 million barrels in the week ended January 6. Crude inventories rose 160,000 barrels on average for the same reporting period from 2012-16.
With a major U.S. Gulf Coast facility starting planned repairs last week, the start of the seasonal slowdown in refinery activity could be underway.
Marathon Petroleum began planned repairs last week on multiple units at its 539,000 barrels per day (b/d) in Garyville, Louisiana, that were scheduled to last until March 1.
Analysts expect U.S. refinery utilization to show a 0.3 percentage points drop for the latest reporting week to 91.7% of capacity, which if confirmed, would exceed the year-ago level of 91.2%.
Another factor behind last week's expected crude build was imports, which probably rebounded after having plummeted nearly 1 million b/d to 7.183 million b/d in the week ended December 30.
Crude oil imports tend to fall at the end of the calendar year as part of an effort by market participants to minimize state ad valorem taxes on stocks. With that issue in the rear-view mirror, imports likely recovered.
Foggy conditions along the U.S. Gulf Coast (USGC) that had restricted tanker arrivals have dissipated, which should have led imports higher last week, according to Michael Wittner, global head of oil research at Societe Generale.
With the market paying close attention to stepped-up U.S. drilling activity, oil futures could also come under pressure from weekly U.S. inventory data that shows a significant increase in production.
The broader concern involves the possibility that increased U.S. crude oil production offsets the impact of the Organization of the Petroleum Exporting Countries' (OPEC) agreed cuts that went into effect January 1.
U.S. crude oil production already appears to have bottomed. It averaged 8.77 million b/d the week ended December 30, up from 8.428 million b/d the week ended July 1, according to estimates by the U.S. Energy Information Administration.
While the five-year average shows U.S. gasoline stocks rising nearly 5.8 million barrels for the same reporting period, analysts are looking for a build of 1.25 million barrels last week.
The start of refinery turnaround season, along with strong exports, could help minimize the size of the expected build.
One of the units at the Garyville, Louisiana, and refinery taken offline last week was a 100,000 b/d hydrocracker. Sources said that work had begun two weeks earlier than originally anticipated.
With other refiners expected to begin repairs in the coming weeks, traders shrugged off EIA data from Thursday that showed U.S. gasoline stocks rose 8.3 million barrels to 235.45 million barrels.
Front-month New York Mercantile Exchange (NYMEX) reformulated blend stock for oxygenate blending (RBOB) futures stayed above $1.60 per gallon last week, which was toward the top end of the price range in 2016.
Another supportive factor recently has been U.S. exports, particularly to Latin America. U.S. gasoline exports have averaged 1 million b/d the last four weeks, nearly twice as much as the same period a year ago.
Analysts expect U.S. distillates stocks fell 130,000 barrels last week, versus an average build of 3.76 million barrels for the same time of year from 2012-16, as relatively cold weather could be driving up heating oil demand.
Demand from Latin America and the Caribbean has also been strong for U.S. distillates exports, which, in turn, is diverting barrels away from the USGC-to-Europe route.
The amount of distillates loaded on the Gulf Coast set to discharge into Europe in January totals 700,000 metric tons so far, according to an estimate based on data from cFlow, Platts trade-flow software.
Visit source siteplatts.com/