May 13, 2020

US Crude Stocks Decline for the First Time in 18 Weeks

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The EIA reported today a surprising combination of results of oil statistics in the US for the week ending May 8th:

- Crude stocks declined by 720 MB, which percentage-wise is a negligible reduction, but on the overall context of a US crude bottleneck means a lot.

In a typical year US refiners would be ramping up their refinery runs in preparation for Memorial Day – the first big weekend of the driving season. Accordingly, by this week most US refiners would be out of seasonal maintenance and crude nominations would be high.

But the COVID-19 pandemic and its corresponding impact on product demand created a crude bottleneck, which was the largest culprit behind price weakness over the last two months. As long as crude production continued to be high in relation to actual crude processing and the new product demand slate, crude stocks were expected to accumulate. But today's number is a reflection of the combined impact of both a lower crude production and a marginal increase in refinery runs – which together provides upward support for the US oil sector.  

US Commercial Crude Stocks Chart

Crude production declined by another 300 MB/D. Since its highest point of 13,100 MB/D in early March, crude production has declined a whopping 11% by now, or 1,500 MB/D. The current crude production 11,600 MB/D is similar to what the US produced in late 2018, which means the COVID-19 crisis represents a setback of 18 months or so on crude efficiency gains and investments in the industry.

Crude Production Chart


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