MOSCOW (MRC) -- US crude oil stockpiles unexpectedly fell last week, but diesel inventories surged as fuel demand remains impaired due to the coronavirus pandemic, reported Reuters with reference to the Energy Information Administration's statement.
Most US states have eased restrictions on movements to halt the spread of COVID-19, but activity is picking up slowly. Crude stockpiles have dropped, but consumption is not keeping up with refining production, boosting inventories.
Crude inventories dropped 2.1 million barrels for the week to May 29 to 532.3 million barrels, compared with analysts’ expectations in a Reuters poll for a 3 million-barrel rise.
Distillate stockpiles, which include diesel and heating oil, rose by 9.9 million barrels to 174.3 million barrels, versus expectations for a 2.7 million-barrel build. Overall demand for diesel and similar fuels is down 13% from the year-ago period over the last four weeks.
"That headline number is really substantial for diesel and has to be a concern," said Tony Headrick, energy markets analyst at CHS Hedging. "That increase in products particularly diesel fuel, is so far weighing on the market."
U.S. crude futures were little changed after the data release, rising 1 cent to USD36.82 a barrel as of 10:57 a.m. EDT (1457 GMT). Heating oil futures, which reflects distillate markets, were down 2.6% on the news.
US gasoline stocks rose by 2.8 million barrels, exceeding a forecasted 1 million-barrel build. Gasoline product supplied, a proxy for demand, picked up last week, but the four-week average still shows a 23% drop from the year-ago period.
Imports edged off the previous week’s surge built on arrivals of large tankers of crude from Saudi Arabia, but overall imports were still higher than most recent weeks. Net US crude imports fell last week by 639,000 barrels per day to 6.2 million bpd.
Refinery utilization rates increased 0.5 percentage points, the EIA said.
As MRC informed previously, global oil consumption cut by up to a third in Q1 2020. What happens next in the oil market depends on how quickly and completely the global economy emerges from lockdown, and whether the recessionary hit lingers through the rest of this year and into 2021.
Earlier this year, BP said the deadly coronavirus outbreak could cut global oil demand growth by 40 per cent in 2020, putting pressure on Opec producers and Russia to curb supplies to keep prices in check.
We remind that, in September 2019, six world's major petrochemical companies in Flanders, Belgium, North Rhine-Westphalia, Germany, and the Netherlands (Trilateral Region) announced the creation of a consortium to jointly investigate how naphtha or gas steam crackers could be operated using renewable electricity instead of fossil fuels. The Cracker of the Future consortium, which includes BASF, Borealis, BP, LyondellBasell, SABIC and Total, aims to produce base chemicals while also significantly reducing carbon emissions. The companies agreed to invest in R&D and knowledge sharing as they assess the possibility of transitioning their base chemical production to renewable electricity.
Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).
According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 721,290 tonnes in the first four month of 2020, up by 4% year on year. Low density polyethylene (LDPE) and linear low density polyethylene (LLDPE) shipments grew partially because of the increased capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market totalled 347,440 tonnes in January-April 2020 (calculated by the formula production minus export plus import). Supply exclusively of PP random copolymer increased.
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