Inventories of crude, gas and distillates have grown substantially
April 30th, 2020
The inventory report released yesterday is giving support to the market as there was a smaller build to crude stocks than expected, a slowing down of the rate that Cushing is filling up, an increase in the barrels going into refineries, and some pickup in demand for refined fuels. This is giving optimism to traders that there is some stabilization to the market. All these things are positive signs but after the tremendous crash in the market it is almost necessary that there be a corrective bounce. But the market has a long way to recovery and a sustain uptrend.
Yesterday’s first read of US first quarter GDP was down at an annualized rate of -4.8%, the fastest decline since the fourth quarter of 2008, during the last recession. The number was worse than economist estimates and the real impact is likely going to get worse as this time frame doesn’t include the full impact of the shutdown.
The EIA in their inventory report showed crude oil stocks up 9 million barrels which was more than 1 million less that the market expected and much less than the 15.89 million barrel average weekly rise over the past 4 weeks. Cushing, Oklahoma crude oil stocks rose by 3.7 million barrels, which was also much less than the last 4-week average. The EIA also reported a surprise draw in gasoline stocks by 3.7 million barrels versus a 1.1 million barrel rise expected by the market. Also supportive to the market from yesterday’s report was the fact the US crude oil production fell by 100,000 bpd down to a total of 12.1 million bpd. This is 900,000 bpd less than the production 2 months ago at 13 million bpd.
Rystad Energy is predicting that US shale production will fall even more by 300,000 bpd for May and June, which is slowing inflows to the US storage. Gasoline implied demand was up by 549,000 bpd and giving some support to the gas price. However, on the bearish side, gasoline implied demand is 44% below last year’s 4-week average. US refinery runs were up 2% for the week ending April 24th but remain at only 69.7% of capacity, which is well below the typical 90% for this time of year.
Inventories on crude, gasoline, and distillates have grown substantially in the recent weeks with limited demand due to the impacts of the virus. Inventories are high and it will take time to work all this down in the coming months. Total US crude inventories are at 527.631 million barrels. Last year at this time there were 470.567 million barrels, so there are 57.064 million more barrel in storage than last year at this time. Total gasoline inventories are at 259.565 million barrels compare with 226.743 last year at this time and positive 32.822 million more than last year. Distillate inventories are at 141.972 million barrels compared to last year there were 125.722 million barrels putting the US with 16.250 million more barrels than last year at this time.