MOSCOW (MRC) -- US petroleum inventories show clear signs of trending lower as consumption slowly recovers from the epidemic and lockdowns, while Saudi Arabia restricts production and directs volumes away from North America, according to Hydrocarbonprocessing.
Total petroleum inventories fell last week for the fourth time in five weeks, and are now down more than 17 million barrels since early July, according to data from the USEnergy Information Administration.
The drawdown has started to whittle away some of the 222 million barrels built up between the end of March and the end of June.
Petroleum inventories are still 148 million barrels (7.5%) higher than at the same time last year and 137 million barrels (7.0%) above the five-year average.
But the relentless increase in stocks during the second quarter has given way to consistent draws which indicates the market has switched from a production surplus to deficit.
The first phase of rebalancing has been concentrated entirely in crude, where stocks have fallen 27 million barrels since early July, accounting for all the total draw over this period.
Crude inventories, including the strategic petroleum reserve, are still 46 million barrels (4%) above the five-year average, but the surplus has shrunk from 64 million (6%) in mid-July.
The drawdown in crude stocks has been accelerated by a sharp slowdow in crude oil imports, especially from Saudi Arabia.
Crude imports are running well under 6 million barrels per day, close to recent lockdown lows, and among the slowest rates since the early 1990s.
For the fourth week running, imports from Saudi Arabia were well below the average for the past year.
Volume warfare, which sent US inventories surging when extra tankers discharged their cargoes into the United States between late May and early July, has given way to an effort to starve the US market to bring stocks down.
By contrast, inventories of refined fuels and intermediate semi-refined products, have not shown a consistent down trend. Distillate fuel oil stocks, in particular, have remained stubbornly high.
Fuel consumption and refinery crude runs are edging slowly higher but remain 8% and 15% respectively below the prior-year five-year average.
In turn, weak fuel consumption and bloated stocks are weighing on product prices and keeping margins, especially for distillates, close to multi-year lows.
By restricting crude processing well below prior-year levels, refiners are gradually digesting the excess stocks built up during lockdown, but progress is much slower than the rebalancing of the crude market.
As MRC informed before, US crude oil inventories moved sharply lower during the week ended July 24 as exports and refinery demand climbed to multi-month highs, US Energy Information Administration data showed July 29. Commercial crude stocks fell 10.61 million barrels to 525.97 million barrels that week, EIA data showed. While the draw pushed stockpiles to 14-week lows, they remained more than 17% above the five-year average for this time of year.
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.
And 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 DataScope report, PE imports to Russia dropped in January-June 2020 by 7% year on year to 328,000 tonnes. High density polyethylene (HDPE) accounted for the main decrease in imports. At the same time, PP imports into Russia rose in the first six months of 2020 by 21% year on year to 105,300 tonnes. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.
MRC