Oil Futures Shrug Off EIA Report

Brian L Milne
By  Brian L. Milne , DTN Refined Fuels Editor

CRANBURY, N.J. (DTN) -- Oil futures nearest delivery traded on the New York Mercantile Exchange looked past mostly bearish weekly supply data from the Energy Information Administration that reported across the board supply builds and a big drop in oil product supplied to the primary wholesale market, although the report did show a steep 1.255 million barrel-per-day (bpd) drop in net crude and products imports to 631,000 bpd.

In early afternoon trading, NYMEX March West Texas Intermediate futures were up $1.20 at $54.30 per barrel (bbl), with March ULSD futures 3.5 cents higher near $1.9425 gallon. March RBOB futures rallied 4.12 cents to near $1.4685 gallon.

EIA reported a 3.6 million bbl build in commercial crude stocks in the United States that lifted inventory to a 15-month high at 450.8 million bbl during the week-ended Feb. 8, contrasting with a 998,000 bbl draw in supply reported late Tuesday by the American Petroleum Institute.

A 1.2 million bbl increase in distillate stocks to 140.2 million bbl, the first weekly supply build since mid-January, contrasted with a 2.481 million bbl draw reported by API. A 400,000 bbl increase in gasoline stocks was less than the API reported 746,000 bbl build, with EIA showing stocks at 258.3 million bbl.

The weekly report showed refinery maintenance activity accelerated in early February, with crude inputs at U.S. refineries tumbling 865,000 bpd on the week to 15.768 million bpd -- the lowest processing rate since October 2017. Weather-related outages in California are partly responsible for the decline in inputs, with PADD 5 inputs down 192,000 bpd. In the PADD 2 Midwest, crude inputs tumbled 336,000 bpd to 3.454 million bpd and by 261,000 bpd to 8.555 million bpd in the PADD 3 Gulf Coast.

Lower inputs offset the benefit of a 936,000 bpd drop in U.S. crude imports to 6.21 million bpd, the lowest import rate since January 1997. The U.S. import-export balance narrowed to 3.846 million bpd net-imports, the lowest rate since EIA began reporting weekly export crude data in February 1991.

The step decline in crude imports coincides with U.S. sanctions on Venezuelan state oil company PDVSA, which would affect the Gulf Coast region that averaged about 500,000 bpd of U.S. imports of the heavy crude in 2018, and mandated production cuts in Alberta, Canada of 325,000 bpd in January, and now at 250,000 bpd.

Alberta mandated the production cuts to clear inventory and lift Canadian crude prices that were trading at a steep discount to the U.S. benchmark. The production cuts cleared 5.0 million bbl of excess inventory in January, but narrowed the price differential between Canadian and U.S. crude too much, making it uneconomical to ship crude from Canada by rail. U.S. crude imports into the Gulf Coast dropped 188,000 bpd and fell by 336,000 bpd in the Midwest.

Total U.S. oil product supplied to market tumbled 2.723 million bpd from a nearly two-month high to a 19.114 million bpd six-week low, with the wide weekly variances likely reflecting the "noise" in weekly data.

While domestic product demand tumbled, U.S. gasoline exports increased 64,000 bpd to 959,000 bpd, a nine-week high. U.S. gasoline imports dropped 168,000 bpd to 457,000 bpd, with gasoline net exports at 502,000 bpd.

Brian L. Milne can be reached at brian.milne@dtn.com


Brian Milne