EIA analysis: a big surge in gasoline stocks

The US market posted an enormous jump in gasoline stocks last week, as reported by the Energy Information Administration’s latest survey. Part of the reason was reduced demand, but refiners also appear to be reacting to strong margins by increasing their rates.

Analysis of US EIA data: U.S. Gasoline Stocks Rise as Refineries Resume Operations, Demand Declines

New York - December 5, 2012

U.S. gasoline stocks surged 7.86 million barrels during the week that ended November 30 as refiners along the U.S. Atlantic Coast increased refinery run rates, while demand waned, data released Wednesday by the U.S. Energy Information Administration (EIA) showed.

Gasoline stocks rose in all regions of the country, with the U.S. Gulf Coast leading the gains, where stocks up 2.5 million barrels. In the Midwest, gasoline inventories climbed 2.3 million barrels and the U.S. Atlantic Coast – home of the New York delivery point for RBOB futures – posted a 500,000-barrel build in stocks.

Despite the rise on the Atlantic Coast, gasoline stocks there remain below the five-year average. As of last week, that deficit was around 6.301 million barrels, or 11.6%, which is more than the previous week's deficit of 5.52 million barrels, or 10.4%.

For total U.S. gasoline stocks, however, the rise in stocks put inventories 3.149 million barrels above the five-year average, marking the first time since the week ending April 27 that gasoline stocks were higher than the five-year average.

Implied demand for gasoline* fell 73,000 barrels per day (b/d) to 8.354 million b/d last week and was 219,000 b/d below the same reporting week a year earlier, the agency said.

Jim Beck, lead analyst for the EIA's weekly petroleum supply team, said the dip in demand was expected as it came a week after the U.S. Thanksgiving Holiday. Also, heavy rain along the West Coast has also dampened gasoline demand, he said.

Beck said the large rise in U.S. gasoline stocks also was prompted by a jump in U.S. gasoline blending component production, which rose to 9.197 million b/d, up 450,000 b/d from the prior week.

The EIA's total gasoline stock figure far outpaced analyst expectations of a 2-million-barrel build and was more than the 5.7 million-barrel build reported late Tuesday by the American Petroleum Institute (API).

Part of the rise came as U.S. refiners upped run rates by 2 percentage points to 90.6% of capacity, based on EIA data, with the Atlantic Coast rising 11.4 percentage points to 77.1% of capacity.

The jump in Atlantic Coast run rates was likely due to the return of Phillips 66's 238,000 b/d Bayway refinery in Linden, New Jersey, which had been flooded by a storm surge created by Hurricane Sandy.

Also, a 19,000 b/d increase in gasoline imports to 513,000 b/d supported the rise in stocks.

Crude Stocks Draw More Than Expected

U.S. crude stocks fell 2.357 million barrels last week, the EIA data showed, exceeding analysts’ estimates of a 1.25-million-barrel decline. The draw was near the API's figure of a 2.217 million-barrel pull.

At 371.766 million barrels, crude stocks remain well above the five-year average. Last week, the surplus rose to 41.037 million barrels to the five-year average, up 578,000 barrels from the week prior.

Crude stocks fell by 3.1 million barrels on the Gulf Coast and by 400,000 barrels in the Midwest.

At the New York Mercantile Exchange’s crude oil futures contract delivery hub at Cushing, Oklahoma, stocks were down 300,000 barrels to 45.6 million barrels last week.

At the same time, West Coast crude stocks rose 400,000 barrels.

Imports of crude were up 112,000 b/d to 8.230 million b/d, with the majority from Canada, which boosted imports to the US by 412,000 b/d to 2.252 million b/d last week.

Also, Saudi Arabian imports rose 118,000 b/d to 1.450 million b/d and Kuwait imports climbed 265,000 b/d to 414,000 b/d, while Mexican imports fell 222,000 b/d to 966,000 b/d.

For U.S. distillates, stocks rose 3.027 million barrels to 115.069 million barrels, far more than analysts’ expectations of an 800,000-barrel build.

A sharp drop in distillate demand, which fell 294,000 b/d to 3.544 million b/d, was the main driver of the rise in stocks.

Within distillates, stocks of ultra low sulfur diesel rose 3.1 million barrels, while heating oil stocks declined 500,000 barrels.

* Implied demand is the amount of product that moves through the U.S. distribution system, not actual end consumption.

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