Crude is comfortable, distillate is tight
EIA's weekly data show two different storage pictures. Commercial crude stocks rose 0.1 million barrels to 428.9 million barrels, leaving them 1 per cent above the five-year average. In the same week, gasoline stocks fell 2.5 million barrels and distillate stocks fell 2.2 million barrels.[1]
Refineries ran at 97.4 per cent utilization and took in 17.4 million barrels a day, while distillate stocks remained 14 per cent below their five-year average. At such a high run rate, a quick rebuild needs some combination of a yield shift toward distillate, more imports or softer demand. Plants returning from maintenance and ordinary weekly volatility also affect the balance; one week leaves the relative weight of these factors uncertain.[1]
The tank the high margin has yet to refill
The previous column treated a diesel production margin above 100 dollars a barrel as the price signal inviting refiners to shift yield toward distillate. In the new EIA data, distillate stocks fell another 2.2 million barrels even as refineries ran hard. Through this week, the margin's incentive had yet to arrive in storage as additional barrels.[2], [1]
Total products supplied over the latest four weeks averaged 20.5 million barrels a day, 3.0 per cent below the same period a year earlier. Distillate inventories still declined, suggesting that the product mix and trade flows may matter as much as the refinery run rate. A rise in distillate stocks and a narrower deficit to the five-year average are two tests of the high margin's physical counterpart; that tank is the first place to look, ahead of the crude price.[1]