Crude market on the way to recovery

May 6, 2015 09:15 AM
Weekly Energies Analysis

According to the latest data from Genscape (for more information on Genscape data products visit its website) pipeline outflow from Cushing increased strongly after decreasing during the previous week. The combined flow rate on the TransCanada Gulf Coast and the Seaway pipelines increased strongly with the largest increase on the Seaway Twin line which heads to the Gulf. For the week ending May 1st total net outflow from Cushing increased by an average of 155,571 bpd. The Seaway pipeline increased by 20,836 bpd and averaged 360,854 bpd while Seaway Twin increased strongly on the week and averaged 310,395 bpd for the week ending May 1. The inflow into Cushing decreased modestly on the week as the Flanagan South Pipeline pumping rate decreased compared to the previous week. The Hawthorn pipeline decreased slightly this week compared to the previous week.

I am expecting an average build in crude oil stocks in PADD 3 as the outflow of crude oil from PADD 2 into the Gulf increased last week. Following is the status of PADD 3 crude oil stocks compared to working storage capacity in the region. As shown working storage capacity in PADD 3 crude oil inventories increased to 85.4 percent utilization level. Cushing stocks are now running at 87.1 percent of workable capacity as Cushing inventories after increasing during the previous week. I am now expecting Cushing inventories to decrease again in this week’s report as mentioned above.

With refinery runs expected to increase by 0.4 percent I am expecting a build in gasoline stocks. Gasoline stocks are expected to increase by 0.5 million barrels which would result in the gasoline year over year surplus coming in around 14.8 million barrels while the surplus versus the five year average for the same week will come in around 15 million barrels.

Distillate inventories are projected to increase by 0.5 million barrels even as exports of distillate fuel out of the US Gulf were steady but heating demand was likely below normal last week. If the actual EIA data is in sync with my distillate fuel projection inventories versus last year will likely now be about 15.8 million barrels above last year while the deficit versus the five year average will come in around 0.2 million barrels.

The following table compares my projections for this week's report with the change in inventories for the same period last year. As you can see from the table last year's inventories are not in directional sync with the projections. If the actual data is in line with the projections there will be modest changes in the year over year inventory comparisons for everything in the complex.

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