According to a July 26 S&P Global Platts study, US Crude Oil inventory reductions likely started in the week ending July 23, owing to an expected increase in refinery operations and greater exports. According to analysts polled by Platts, total commercial crude oil stocks fell by about 2.5 million barrels to 437.2 million barrels last week, more than erasing a 2.11 million-barrel rise the week before and putting inventories at their lowest level since the week ended Jan. 31, 2020.
However, the predicted draw is lower than usual for this time of year, and it would reduce the shortfall to 6.8% of the five-year average of US Energy Information Administration statistics, down from 7.1 percent the week before. Refinery utilisation is forecast to rise to 92.2 percent of overall capacity this week, up 0.8 percentage point from the previous week. The increase would end three weeks of declines and return refinery utilisation to levels last seen in late June.
According to S&P Global Platts Analytics, US refinery runs have been reduced in recent weeks due to a series of unforeseen outages that took 3.16 million b/d of capacity offline during the week ended July 16. Downtime is likely to drop to around 3 million b/d for the week ending July 23, increasing the draw on petroleum supplies.
Last week’s refinery runs were presumably aided by an increase in profits. In the five days ended July 23, US Gulf Coast WTI MEH cracking margins averaged $13.81/b, up from a July to-date average of $13.09/b. Meanwhile, according to Platts trade flow software, US Crude exports averaged 2.74 million b/d in the week ended July 23, up more than 11% from the previous week’s EIA-reported 2.46 million b/d.The lasting impacts of a narrowing arbitrage witnessed in late spring are likely to blame for the latest decline in US exports. The ICE Brent-WTI gap, a measure of US Crude international competitiveness, has decreased from roughly $4/b in late April to $1.51/b in July1.