Analysis of Weekly EIA Data

Refining Rates

Total crude oil input to US refineries recorded on April 28, 2017 was17.177 MMBD, just 108 thousand barrels per day (MBD) lower than the week before, and still slightly above the four week average of 17.024 MMBD. Almost all of the decrease occurred in west coast (PADD 5) region where refineries continue to upgrade excess distillate and residual oil to gasoline, making demand for crude oil in this region soft. Refining across the US is running at 93.3 percent utilization. But, West Coast refineries are operating at 88.6 percent utilization, based on crude oil inputs. Again, this is a reflection of upgrading as opposed to straight crude oil distillation. The rates of production for refined products in PADD 5 remain stable.

Crude Oil Inventories

Total US crude oil inventories remain well above the 10 year average at 1,217 million barrels (MMB). The decrease of 2.4 MMB is primarily related to lower receipts of crude oil in PADD 5.

Cushing Inventories

Crude oil stocks in PADD 2 remain high, with Cushing oil tanks running full, which must continue to have some impact on futures contracts. As of May 2nd, Net Long Positions (Open interest) in CFTC NYMEX WTI Crude oil decreased by 27,424 contacts to a total of 429,219, continuing a steady decline since peaking close to 600,000 contracts in February.

Gasoline Inventories

Total gasoline inventories remained stable at high historical levels. High prices seem to be tamping down demand. PADD 5 refineries have been holding product off the market, causing inventories to rise. However, depending on how refiners managed the two refinery fires last week at Valero and Chevron refineries, excess gasoline may have been used recently to cover reduced production.

Distillate Inventories

Even though PADD 5 refineries have been drawing down distillate oil to make gasoline for the spring run, total distillate inventories across all regions remain high. Refiners will have to pull these inventories down over the next couple of months if they hope to sustain high crude still utilization rates because they need room in tanks to store distillate production during the summer months.

The result of this inventory management is that crude oil will be backed out of primary refining units, reducing demand for crude oil. Price pressure will occur in the WTI futures, spot and import markets with refiners relying primarily on contract crude oil.

Imports

Last week, the US imported 8.264 MMBD of crude oil, and exported 536 MBD, for a Net receipt of 7.726 MMBD, which is about 45% of total crude oil fed to US refineries — a long way from energy independence. Fortunately, 41.5% of our imports are coming from Canada. Table 8, copied from EIA weekly data, shows that Canada leads the list of foreign crude oil sources for US refineries, with Saudi Arabia a distant second. Completion of the Keystone pipeline should add to Canada’s lead.