EIA weekly inventory figures show that U.S. commercial crude oil inventories increased by 5.52 million barrels over the past week, exceeding market expectations. This increase was driven by a rebound in crude oil imports, which increased by 1.3 mb/d WoW, while exports also fell by 298,000 b/d WoW. The EIA figures also showed a 300,000 b/d increase in crude oil production. The refined products figures were more constructive. Gasoline inventories fell 3.15 million barrels during the week, while distillate inventories fell 3.22 million barrels. Looking at refinery utilization rates in the Midwest, it doesn’t appear that the data took into account the shutdown of BP’s Whiting refinery, as utilization rates in the region actually rose 4.1 percentage points during the week up to 95.1%. The disruption is likely to be reflected in next week’s figures, suggesting we could see a further drawdown of product stocks.
Falling US gasoline stocks have provided further upward impetus to gasoline cracks, with the rapid RBOB crash surpassing $20 a barrel, a level not seen since September last year. The squeeze on middle distillates also continues to drive up the rapid crack in heating oil. And it is trading at more than $44 a barrel, up from $35 a barrel at the beginning of the year. Rigidity in middle distillates is not limited to the United States. European diesel crack is trading at around $31 per barrel. The European middle distillates market will feel a little tighter due to the current disruptions in the Red Sea.
Strong refinery margins should provide some support to crude oil, driving higher crude demand as refiners look to increase run rates and take advantage of stronger margins.