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US commercial crude stocks swell to all-time high as refinery demand sputters

June 26/2020

MOSCOW (MRC) -- US commercial crude stocks notched a fresh all-time high last week amid still-weak refinery demand and flagging exports, US Energy Information Administration data showed June 17, reported S&P Global.

Commercial crude stocks climbed 1.22 million barrels to 539.28 million barrels in the week ended June 12, US Energy Information Administration data showed. Inventories are now 14.5% above the five-year average for this time of year.

An additional 1.73 million barrels entered storage at the Strategic Petroleum Reserve, pushing stockpiles there to 65.17 million barrels.

In a pattern echoing recent weekly reports, the commercial crude build was again concentrated on the US Gulf Coast. Stockpiles there pushed 3.81 million barrels higher on the week to a fresh all-time high of 307.49 million barrels.

In contrast, inventories at the NYMEX delivery hub of Cushing, Oklahoma, fell for a sixth consecutive week, drawing 2.61 million barrels down to 46.84 million barrels. Cushing stocks are now down 18.61 million barrels from their late-April peak, a slide of more than 28%.

Refinery net crude inputs were up 120,000 b/d on the week at 13.6 million b/d, but despite climbing for five consecutive weeks inputs remain nearly 20% behind the five year average. Crude inputs were as much as 25% behind the five-year average in early May, but rising refinery demand has only slightly outpaced the typical late-spring uptick, leaving runs well behind normal.

USGC refinery crude inputs were 14.4% behind the five-year average last week, in from more than 22% in early May, but runs on the US Atlantic Coast and West Coast were still, respectively, 51% and 31% below normal.

US crude exports averaged at 2.46 million b/d, up slightly from 2.44 million b/d the week prior but down over 28% from year-ago levels.

While tight arbitrage economics due to a particularly narrow Brent/WTI spread has impacted US export volumes, low freight ratesparticularly for Trans-Atlantic Aframaxes - have been more supportive.

However, a global glut of crude in floating storage continues to present headwinds to stepped-up US exports. Global floating storage stood at a record-high 199.49 million barrels on June 17, according to data from Kpler, going back to January 2016.

Commercial crude inventories climbed despite production dropping 600,000 b/d to 10.5 million b/d. Production realized its biggest one-week decline since late-March and was at the weakest since March 2018.

Notably, the bulk of this production decline is likely temporary and the result of Gulf of Mexico production shut-ins ahead of Tropical Storm Cristobal, which made landfall at Louisiana on June 6.

At its peak June 7, Gulf of Mexico operators reduced output by 636,000 b/d. By June 12, just 120,079 b/d of crude output remained down, according to the US Bureau of Safety and Environmental Enforcement.

Nationwide distillate inventories saw their first weekly decline since late March, falling 1.36 million barrels to 174.47 million barrels last week, as demand climbed nearly 8% on the week to 3.56 million b/d.

Jet demand rose 11% last week to reach 788,000 b/d, and is now more than double its all-time record-low 352,000 b/d reported the week ended May 8.

Rising demand has contributed to an improvement in cracks for both jet and ultra-low sulfur diesel. Consequently, refiners have for the most part stopped using jet fuel to blend into with ULSD as seen earlier in the year. This blending activity had been a major contributor to the massive build in distillate stocks seen in recent weeks.

Total US gasoline stocks dipped 1.67 million barrels last week to around 257 million barrels, but stocks are still ample at around 9.8% above the five year average.

Total gasoline demand edged 30,000 b/d lower to 7.87 million b/d. The outlook for gasoline demand remains uncertain. On the one hand, major USAC cities, which were among the hardest hit by the COVID-19 pandemic this spring, have just started their reopening in recent days, however, nine states that eased restrictions on non-essential travel and trade in recent weeks are now reporting record numbers of cases.

USAC gasoline stocks saw the first weekly draw since the week ended May 1, dropping 970,000 barrels to 74.14 million barrels.

As MRC informed before, 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 721,290 tonnes in the first four month of 2020, up by 4% year on year. Low density polyethylene (LDPE) and linear low density polyethylene (LLDPE) shipments grew partially because of the increased capacity utilisation at ZapSibNeftekhim.  At the same time, PP shipments to the Russian market totalled 347,440 tonnes in January-April 2020 (calculated by the formula production minus export plus import). Supply exclusively of PP random copolymer increased.
Author:Margaret Volkova
Tags:Europe, PP, PE, LLDPE, crude and gaz condensate, PP random copolymer, propylene, LDPE, ethylene, petrochemistry, BASF, Borealis, BP Plc, LyondellBasell, Sabic, Total Petrochemicals, Rossiya, USA.
Category:General News
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