Oil Futures Print Session Lows After EIA Shows Crude Build

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

CRANBURY, N.J. (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange accelerated a sell-off in response to weekly supply data from the Energy Information Administration released at midmorning that showed a 1.3-million barrel (bbl) build in commercial crude stocks that was at the high end of expectations. West Texas Intermediate futures moved below the $62.71 50-day moving average a session after trading at a $67.01 2-1/2 month high.

EIA showed stock levels for oil products drawing down during the week-ended May 14 despite higher imports for both gasoline and distillate fuel, with gasoline stocks down 2 million bbl and distillate stocks drawn down 2.3 million bbl. The national decline in product stocks masked directionally opposing stock changes along the East and Gulf coasts, with East Coast stocks drawn down sharply after a five-day outage of the 2.5 million barrels per day (bpd) Colonial Pipeline following a May 7 ransomware attack. The refined fuels pipeline was partially restarted May 12 and is now fully operational.

Nationally, gasoline stocks at 234.226 bbl as of May 14 were 5.2 million bbl or 2.2% below the three-year average, while a 4.6 million bbl draw for PADD 1 pressed stocks 6.951 million bbl or 10.4% below the three-year average at 60 million bbl. In contrast, PADD 3 gasoline stocks jumped 5.7 million bbl or 6.6% last week to 91.4 million bbl, with Gulf Coast gasoline stocks as of May 14 sitting 7.2 million bbl or 8.5% above the three-year average.

Nationally, gasoline imports were again above 1 million bpd, up 145,000 bpd last week to 1.081 million bpd, with PADD 1 gasoline imports accounting for 910,000 bpd of the total, up 188,000 bpd or 26%. U.S. distillate imports increased 59,000 bpd to a 267,000 bpd six-week high, with PADD 1 the destination point for 245,000 bpd of those imports.

Many in the market expect imports, especially gasoline imports, will again increase this week after last week's pipeline outage that sent bullish price signals to foreign suppliers, with the Colonial system supplying 45% of the gasoline, diesel and jet fuel consumed along the eastern seaboard.

Waterborne deliveries from the Gulf Coast could also reach farther north along the Atlantic coastline after the U.S. Department of Homeland Security Secretary Alejandro Mayorkas late last week approved two Jones Act waiver requests, one each for Valero Energy Corp. and CITGO. Relief from the 101-year old maritime law reduces costs in shipping product by vessel between two U.S. ports.

The 1.3 million bbl build in commercial crude stocks was realized despite a 96,000 bpd increase in crude inputs at U.S. refineries to 15.16 million bpd, with PADD 3 refineries increasing inputs a modest 22,000 bpd to 8.223 million bpd with an 88% utilization rate despite expectations for a decline as several refineries in the region cut back runs for part of the week profiled. PADD 1 refineries lifted their run rate 7.9% to 87.2% of capacity.

Sellers brushed aside a 434,000-bpd jump in gasoline supplied to the U.S. market to a 9.224-million bpd 14-month high, and only the third week with implied gasoline above 9 million bpd since COVID-19 was declared a pandemic in March 2020. However, the jump in the implied demand figure follows panic buying in response to the Colonial Pipeline outage that likely means the sharp increase will fade in the coming weeks as many motorists have already fueled up. Additionally, the outage joined by panic buying pushed the retail gasoline price above $3 gallon as we quickly approach Memorial Day which could prompt some holiday travelers to cut back on road trips during the unofficial kickoff of the summer driving season.

After plunging to a $61.95 three-week low following the release of the EIA report, June WTI futures on NYMEX pared the decline to $63 bbl near the noon hour in New York, down about $2.50 ahead of expiration Thursday afternoon. July WTI futures continue to move in tandem with the expiring contract, while ICE July Brent crude futures were down $2.25 near $66.50 bbl, moving back above the $66.19 50-day moving average after sinking to a $65.30 three-week low on the spot continuous chart.

NYMEX June RBOB futures were down 6.5 cents or 3% near $2.0960 gallon after trading at a $2.0678 gallon better than two-week low. June ULSD futures were down 5.76 cents or 2.8% at $1.9988 gallon after also trading at a two-week low at $1.9733 gallon, testing trendline support.

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

Brian Milne