MOSCOW (MRC) -- US crude oil inventories moved sharply lower during the week ended Jan. 22 as exports surged and imports tested multimonth lows, reported S&P Global with reference to US Energy Information Administration data Jan. 27.
US commercial crude inventories declined 9.91 million barrels during the week ended Jan. 22 to a 10-month low of 476.65 million barrels, according to EIA data. It was the largest one-week draw since the week ended July 24 and left inventories just 6% above the five-year average, the narrowest supply overhang since early April.
All regions outside of the Rockies saw crude inventory draws last week, but the bulk of the decline was concentrated on the US Gulf Coast, where stocks fell 6.43 million barrels to 256.62 million barrels.
Midwest inventories moved 2.68 million-barrels lower on the week to 136.98 million barrels, driven largely by a 2.28 million-barrel decline at the NYMEX delivery point of Cushing, Oklahoma. Stocks there fell to 50.292 million barrels, the lowest since the week ended July 17.
Front-month NYMEX March WTI settled up 24 cents on Jan. 27 to USD52.85/b.
The crude draw came as exports surged 1.1 million b/d to 3.36 million b/d. The rise took exports to their highest average weekly level since the week ended on Jan. 1, and kept the four-week moving-average above 3 million b/d.
The uptick comes despite difficult arbitrage economics. The arbitrage for WTI MEH crude into Rotterdam against local Forties crude fell to a minus 34 cents/b incentive on Jan. 26 and has averaged just a 4 cents/b incentive through the first 26 days on January, according to the S&P Global Platts Crude Arbflow calculator. Through December, by comparison, the arbitrage incentive averaged 57 cents/b.
Adding further pressure to inventories, crude imports sank 980,000 b/d to a 12-week low of 5.06 million b/d. USGC imports slid 39% on the week and were the lowest since late August at 880,000 b/d, while Midwest imports were down around 18% from the week prior at 2.41 million b/d.
Resilient refinery demand likely also contributed to the crude draw. Total net crude inputs edged down just 40,000 b/d to 14.72 million b/d as the nationwide utilization rate fell to 81.7% of total capacity, a 0.8-percentage-point decline.
Refinery demand typically sees much larger declines in late January, and operators begin to idle capacity for shoulder season maintenance. EIA data shows a typical decline of net crude inputs of around 600,000 b/d over this period, and the relatively weak pullback seen last week pushed net inputs to just 8% behind the five-year average, the weakest deficit since the week ended March 20.
Notably, USGC net inputs were the strongest since late March after climbing 110,000 b/d to 8.11 million b/d as margins continued to edge higher. USGC WTI MEH cracking margins inched up 4 cents to USD8.43/b, while USGC coking margins for WCS ex-Nederland gained 31 cents to average USD8.32/b.
Total gasoline inventories climbed 2.47 million barrels to 247.69 million barrels as implied demand slipped 3.4% to 7.83 million b/d. The counter-seasonal decline left demand nearly 12% behind the five-year average, in line with levels seen earlier this month.
Apple Mobility data shows US driving activity was higher for a third straight week last week, climbing nearly 2% from the week prior and up nearly 3% from a late-December nadir. This discrepancy suggests a possible disconnect between actual end-user demand and the EIA figures, which are a proxy based on product disappearing from primary sources.
Front-month NYMEX February RBOB settled down 36 points at USD1.5771/gal on Jan. 27, while February ULSD finished up 1.05 cents at USD1.6089/gal.
Gasoline inventories climbed in all regions during the week ended Jan. 22, but stocks lost ground compared with the five-year average on the US Atlantic Coast and Midwest amid weaker-than-normal builds. USAC inventories moved to around 1.9% above normal, in from 3.4% the week prior, and Midwest stocks fell 7.7% behind average, up from a deficit of 6.9% last week.
Total distillate stocks declined 820,000 barrels to 162.85 million barrels, widening the surplus to the five-year average to 8%.
As MRC informed previously, oil producers face an unprecedented challenge to balance supply and demand as factors including the pace and response to COVID-19 vaccines cloud the outlook, according to an official with International Energy Agency's (IEA) statement.
We remind that the COVID-19 outbreak has led to an unprecedented decline in demand affecting all sections of the Russian economy, which has impacted the demand for petrochemicals in the short-term. However, the pandemic triggered an increase in the demand for polymers in food packaging, and cleaning and hygiene products, according to GlobalData, a leading data and analytics company. With Russian petrochemical companies having the advantage of access to low-cost feedstock, and proximity to demand-rich Asian (primarily China) and European markets for the supply of petrochemical products, these companies appear to be well-positioned to derive full benefits from an improving market environment and global economy post-COVID-19, says GlobalData.
We also remind that in December 2020, Sibur, Gazprom Neft, and Uzbekneftegaz agreed to cooperate on potential investments in Uzbekistan including a major expansion of Uzbekneftegaz’s existing Shurtan Gas Chemical Complex (SGCC) and the proposed construction of a new gas chemicals facility. The signed cooperation agreement for the projects includes “the creation of a gas chemical complex using methanol-to-olefins (MTO) technology, and the expansion of the production capacity of the Shurtan Gas Chemical Complex”.
Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).
According to MRC's DataScope report, PE imports to Russia decreased in January-November 2020 by 17% year on year and reached 569,900 tonnes. High density polyethylene (HDPE) accounted for the greatest reduction in imports. At the same time, PP imports into Russia increased by 21% year on year to about 202,000 tonnes in the first eleven months of 2020. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.
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