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US crude, diesel stocks pile up on lackluster fuel demand

June 01/2020

MOSCOW (MRC) -- US crude oil and distillate inventories rose sharply last week, the Energy Information Administration said, while fuel demand remained slack even as various states eased movement restrictions that were put in place to stem the coronavirus pandemic, reported Reuters.

Crude inventories posted a gain of 7.9 million barrels in the week to May 22, largely due to imports. That brought overall US stocks, excluding strategic reserves, to 534.4 million barrels, about 1 million barrels away from an all-time record.

Analysts expected stocks to fall by 1.9 million barrels.

Overall, weak consumer demand has kept stocks of crude and fuels brimming nationwide. Distillate stockpiles, which include diesel and heating oil, rose by 5.5 million barrels in the week, to levels not seen since 2017.

Despite the inventory increases, US oil futures rose. US crude futures jumped 3.2% to USD33.85 as of 3:00 p.m. ET (1900 GMT), while Brent gained 2.1% to USD35.48 a barrel.

"The data didnt seem to indicate the optimism that were seeing from the market," said Regina Mayor, global and US head of energy at KPMG in Houston. "Generally speaking, the oil price indicates more optimism than frankly were sensing in the industry."

Crude stocks had been declining as refining picked up in recent weeks due to a recovery in fuel demand from a drastic fall in April.

Still, four-week moving average figures on products supplied, a rough proxy for demand, shows gasoline demand down 25% from the year-ago period, while diesel demand is off 14%.

Diesel product supplied fell in the most recent week while gasoline demand rose.

"The rally still has its legs on it but if theres any deviation in any factors like demand returning or production being reduced, given how high global supply is, that could still change," said Gene McGillian, vice president of market research at Tradition Energy.

The big jump in crude inventories came even as stocks at the Cushing, Oklahoma, delivery hub for crude futures fell by 3.4 million barrels in the week, the EIA said. Total stocks rose due to a hefty jump in net crude imports of 2.1 million barrels per day.

Refinery utilization rates increased 1.9 percentage points to 71.3% of total capacity, the EIA said.

US gasoline stocks fell 724,000 barrels to 255 million barrels, the EIA said, compared with analysts expectations in a Reuters poll for a 100,000-barrel rise.

As MRC informed previously, global oil consumption cut by up to a third in Q1 2020. What happens next in the oil market depends on how quickly and completely the global economy emerges from lockdown, and whether the recessionary hit lingers through the rest of this year and into 2021.

Earlier this year, BP said the deadly coronavirus outbreak could cut global oil demand growth by 40 per cent in 2020, putting pressure on Opec producers and Russia to curb supplies to keep prices in check.

We remind that, in September 2019, six world's major petrochemical companies in Flanders, Belgium, North Rhine-Westphalia, Germany, and the Netherlands (Trilateral Region) announced the creation of a consortium to jointly investigate how naphtha or gas steam crackers could be operated using renewable electricity instead of fossil fuels. The Cracker of the Future consortium, which includes BASF, Borealis, BP, LyondellBasell, SABIC and Total, aims to produce base chemicals while also significantly reducing carbon emissions. The companies agreed to invest in R&D and knowledge sharing as they assess the possibility of transitioning their base chemical production to renewable electricity.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 557,060 tonnes in the first three month of 2020, up by 7% year on year. High density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments rose because of the increased capacity utilisation at ZapSibNeftekhim. Demand for LDPE subsided. At the same time, PP shipments to the Russian market was 267,630 tonnes in January-March 2020, down 20% year on year. Homopolymer PP and PP block copolymers accounted for the main decrease in imports.
Author:Margaret Volkova
Tags:Europe, PP, PE, LLDPE, crude and gaz condensate, PP block copolymer, homopolymer PP, propylene, LDPE, HDPE, ethylene, petrochemistry, BASF, Borealis, BP Plc, LyondellBasell, Sabic, Total Petrochemicals, Rossiya, USA.
Category:General News
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