May 3, 2019 EIA Data Analysis

Crude Oil Capacity and Utilization Rates

EIA data reported on May 1, 2019 for the week ending April 24 shows total operable crude still capacity of 18.76 million barrels per day (MMBD). Weighted utilization decreased slightly from 90 percent to 89.3 percent, with California refineries operating at 84.2 percent operable capacity, about 4 percent higher than last week. Refinery rates in California remain low, an indication that there is no rush by refiners to fill any real or perceived supply shortfall. West Coast gasoline prices remain high, taking advantage of news stories about product shortages and the switch to spring blends (driven by air quality requirements). Of course, refiners have been making spring blend gasoline for years now and by now each refiner must have a solid plan in place for how it will transition from one blend to another without any difficulties. So, again, the media has taken the bait and continues to be complicit in pushing prices higher.

Overall, Crude oil inventories in the US increased 10.6 million barrels (MMB) from 460.4 to 471 MMB. This increase pushes crude oil into the high range for historical stock levels at this time of year. As a result, there is really no cause for refiners to purchase expensive crude oil on the spot market. Nevertheless, it is common for refiners to anchor product prices to spot crude oil and product prices. The theory is that crude oil used to make products should be priced at the cost of the “last in” barrel, which is often taken to be the spot price of the marker crude oil. The cost of making products from the crude oil, priced accordingly, are then compared to the cost of purchasing a similar product on the spot market. To compete in the market, a refiner will typically price his product at or below the spot price, unless he wants to gain market share, in which case the price is decreased.

You can see in the graph above that spot prices for crude oil and refined products decreased last week. Theoretically, this decrease should drive US product prices lower.

The US is currently importing 45.1 percent of its crude oil supply and obtaining 54.9 percent from local sources, including Alaska. The EIA estimates that the US is producing 12.3 Million Barrels per day (MMBD) of crude oi and exporting 2.6 MMBD, which would leave a net 9.7 MMBD locally produced crude oil flowing to US refineries. However, when actual reported EIA data is entered into a spreadsheet, the calculated local production should be 9.0 MMBD. EIA estimates appear to be running about 658 MBD high.

LINK: The top 10 sources of crude oil imported to the US

The primary source of crude oil for the US is Canada at 3.6 MMBD. The second supplier is Saudi Arabia, a distant second at .5 MMBD. Note that while the US was NOT importing crude oil from Venezuela, those imports restarted in recent weeks and are up to .19 MMBD, making it the third largest supplier to the US.

LINK: Historical data for all U.S. crude oil imports

Gasoline Supply

Checking inventory levels, total gasoline stocks increased from 225.9 to 226.8 million barrels, with the increase occurring in PADD 3, the Gulf Coast region. Inventories were drawn down an insignificant amount in PADD 5, the West Coast region, from 27.9 to 27.5 million barrels.

Gasoline stocks in PADD 5 are still being drawn down and stand at historically low levels. The draw down could be related to a combination of Phillips and Valero using existing product to supply their markets, plus refiners pulling down inventory levels to make room for new spring blend gasoline.

More data and charts can be found at this link:  Energy Information Administration