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US
US total commercial oil stocks rose for the third consecutive month in July, increasing by 7.3 mb to end the month at 1,105.4 mb, the highest level since October. Thus, they stood at 3.6 mb or 0.3% above the level of a year ago, while the surplus on the five-year average was 27.8 mb or 2.6%. The build was attributed mainly to products, as they increased by 16.6 mb, while crude countered this build, declining by 9.3 mb. In July, US commercial crude stocks fell for the second consecutive month, to end the month down 9.3 mb at 373.6 mb. However, despite this stock-draw, they remained 25.4 mb or 7.3% above the same time last year, representing a surplus of 37.5 mb or 11.1% on the five-year average. This draw came from lower crude oil imports, decreasing by around 214,000 b/d from the previous month to an average of 8.9 mb/d.
This level was also lower, by about 430,000 b/d, than the same time last year. Higher crude oil refinery inputs, increasing by nearly 50,000 b/d to average 15.6 mb/d, also contributed to the fall in US crude oil stocks. The level of US crude runs was also above the same period a year ago, by nearly 250,000 b/d. In July, US refineries operated at 92.5%, which was 0.6 percentage points (pp) higher than in the previous month and 3.5 pp above the same month last year. It should be highlighted here that, on a weekly basis, the bulk of the draw on US crude oil stocks came during the week ending 27 July, when inventories plunged by more than 6 mb. This drop reflected the strong fall in US crude oil imports, as they declined by 1.2 mb/d, averaging just 8.4 mb/d. This was related to the huge fall in US crude imports, as Saudi Arabian crude flowing to the Gulf Coast declined due to long-term maintenance work at the 600,000 b/d Motiva refinery in Port Arthur. The fog last week in Houston Ship Channel, which halted imports, also contributed to the decline in US crude imports. Cushing stocks fell by more than 2.5 mb, to end July at 45.1 mb, but they still remained at a higher level.
On the product side, with the exception of residual fuel oil, all products experienced a build, with the bulk coming from distillate stocks, as they increased by 6.5 mb, followed by propylene inventories, showing a build of 5.2 mb. The build in total product stocks in July came mainly from lower consumption. Indeed, US apparent demand fell by nearly 330,000 b/d from the previous month to an average of 18.8 mb/d. This level was also slightly lower than the same time last year. Gasoline stocks reversed the drop of last week and increased by 2.9 mb to end July at 207.9 mb. Despite this build, they remained 8.9 mb or 4.1% below last year’s level and 4.4 mb or 2.1% below the five-year average.
This build was driven by disappointing demand, which declined by 160,000 b/d to average nearly 8.8 mb/d. This level remained much lower than the same period a year ago, reflecting the bearish macroeconomic prospects. The decline in gasoline production limited the build in inventories. Distillate stocks rose in July, after six consecutive months of decline, to finish the month at 124.3 mb; however, they remained at 33.9 mb or 21.4% below the year-ago level and 26.0 mb or 17.3% lower than the seasonal norm. Lower apparent demand was the main driver behind the build in distillate stocks. In fact, distillate demand fell by 260,000 b/d in July from the previous month to an average of 3.5 mb/d, which was also nearly 90,000 b/d lower than the same time last year. The continued strength of distillate exports, surpassing 1.0 mb/d, was the main factor limiting the build in distillate stocks. Jet fuel oil stocks rose by 2.8 mb from the previous month, following two consecutive months of decline. At 40.6 mb, they were 3.8 mb or 8.6% lower than a year ago, and 3.8 mb or 8.5% below the seasonal norm. Residual oil stocks fell by 0.9 mb, ending July at 34.1 mb/d. At this level, they were 3.3 mb or 8.9% lower than the same month a year ago and 3.8 mb or 8.5% below the latest five-year average.
Japan
In June, commercial oil stocks in Japan rose for the fourth consecutive month, by 0.5 mb to stand at 177.5 mb, the highest level since October. With this build, they switched the deficit with a year ago a month earlier to a surplus of 1.6 mb or 0.9%. This build also helped change the deficit with the five-year average into a surplus of 1.1 mb or 0.6%. The total stock-build came from products, as they increased by 1.3 mb, while crude stocks countered this build and decreased by 0.9 mb.
Japanese commercial crude oil stocks reversed the build of the last three months and fell by 0.9 mb, ending June at 106.6 mb. Despite this drop, they remained at 3.2 mb or 2.1% above the same time a year ago and showed a surplus of 2.1 mb or 2.0% on the seasonal average. The drop in crude oil stocks came mainly from lower imports, which declined by 344,000 b/d or 9.6% to an average of 3.2 mb/d. However, this level was still 6.0% above that of the same time a year ago. This stock-draw came despite lower refinery runs averaging 3.1 mb/d, around 100,000 b/d lower than the previous month; but they remained 0.8% higher than the same period last year. In June, refineries were running at 68.0%, which was 2.4 pp lower than in the previous month, but 2.6 pp higher than the same period last year. It should be highlighted that direct crude burning in power plants in June eased from the previous month, when they declined by 24% to stand at 234,400 b/d, but they remained 72% higher than the level of June 2011.
Japan’s total product inventories rose for the third consecutive month, by 1.3 mb, to end June at 70.8 mb, the highest level since the beginning of this year. Despite this build, they remained 1.7 mb or 2.3% below the same period the previous year and 1.0 mb or 1.4% lower than the seasonal average. This stock-build for total products came on the back of weaker domestic product sales, which declined by about 50,000 b/d or 1.7% to average 3.0 mb/d. But, at this level, Japanese demand was still 2.5% higher than a year earlier and showed the seventh straight month of year-on-year gains, driven by higher fuel oil sales used for power-generation. Within the products, the picture was mixed; gasoline and fuel oil stocks experienced drops, while distillates and naphtha saw builds. Gasoline stocks fell by 0.5 mb, ending June at 13.6 mb. At this level, they were 1.0 mb or 7.8% higher than a year ago at the same time, representing a surplus of 0.3 mb or 2.3% on the seasonal average.
The fall in gasoline stocks could be attributed to lower production, as they declined by 6.1%. Lower domestic sales limited the fall in gasoline stocks. Residual fuel oil stocks also dropped for the second consecutive month in June, by 0.6 mb to stand at 16.2 mb. At this level, they were 0.7 mb or 4.1% below the same period a year ago and 1.2 mb or 7.1% below the five-year average. Within the components of fuel oil, fuel oil A saw a drop of 4.6%, while fuel oil B.C stocks declined by 3.5%. Domestic sales of B.C fuel oil, which is used partly for power utilities, jumped by 43.9% in June from a year ago. However, domestic sales remained almost at the same level as a month earlier. Fuel oil A domestic sales were also higher, but to a lesser degree, as they increased by 4.1% from the same month last year. Distillate stocks rose for the third month running, by 0.3 mb, to end June at 30.0 mb, the highest level since the beginning of this year. Despite this build, they still showed a deficit of 2.1 mb or 6.6%, compared with a year ago, and were 0.2 mb or 0.7% below the five-year average. Within the components of distillates, jet fuel and kerosene saw builds, while gasoil stocks experienced a drop. Jet fuel inventories rose by 5.7%, driven by higher production as they increased by 4.3%, combined with lower domestic sales, declining by around 12%. Kerosene stocks rose by 2.8%, supported by lower demand, as they decreased by about 1%, while the stockdraw of 3.8% in gasoil came from higher domestic sales combined with relatively healthy exports. Naphtha inventories rose by 2.3 mb in June from a month earlier and ended the month at 11.1 mb, the highest level since October. At this level, they turned the deficit with a year ago in the previous month into a surplus of 1.4%. This build also helped change the deficit with the five-year average to a surplus of 1.0%. The build in naphtha stocks came on the back of lower domestic sales, as they declined by 9.6% from a month early. Higher imports, which increased by about 15%, also helped the build in naphtha stocks.
Singapore and Amsterdam-Rotterdam-Antwerp (ARA)
At the end of June, product stocks in Singapore reversed the drops of the last three months and rose by 3.2 mb to end the month at 41.2 mb. Despite this build, they remained at 3.5 mb or 7.9% below the same time a year ago. Within products, the picture was mixed; light distillates and fuel oil stocks saw a build, while middle distillate stocks declined. Light distillate stocks ended June 2.2 mb higher than in the previous month and stood at 11.2 mb, the highest level since November. At this level, they were 2.2 mb or 1.6% above a year ago at the same time. Higher gasoline exports to Singapore from South Korea and India contributed to push inventories higher. At the same time, Thailand’s gasoline exports to Singapore were more than double, also helping the build in light distillate stocks. Fuel oil stocks rose by 1.7 mb in June, ending the month at 22.0 mb and representing a surplus of 2.6 mb or 13.3% on the same period a year ago. Higher arrivals from Western countries, which increased by nearly half, were behind the build in fuel oil stocks.
However, the fall in Middle East exports to Singapore, as domestic demand for power-generation peaked during summer, limited the fuel oil inventory-build. In contrast to the increases in light distillate and fuel oil stocks, middle distillates fell for the fourth consecutive month, decreasing by a further 0.7 mb to 8.1 mb at the end of June. At this level, they were 7.7 mb or almost a half lower than a year ago at the same time. The shutdown of the refinery in Singapore curbed the supply of diesel, leading to more stock-draws in the country. Additionally, healthy diesel demand in Australia and Malaysia, encouraging exports to those countries, also contributed to the fall in middle distillate inventories. Product stocks in ARA at the end of June reversed the falls of the last two months and increased by 0.7 mb to 31.6 mb. At this level, they were at 4.7 mb or 13.0% below last year’s level in the same period.
Within products, gasoline and naphtha saw declines, while gasoil, jet fuel oil and fuel oil witnessed builds. Gasoline stocks fell by 0.8 mb to 5.0 mb, leaving them 1.0 mb or 16.4% below a year ago. The fall in gasoline came as exports to the US, Mexico and West Africa outpaced arrivals from France and the UK. Naphtha stocks also went down, by 0.1 mb, ending June at 1.0 mb. At this level, they were 0.1 mb or 9.7% above the year-ago level. The decline came on the back of higher demand for naphtha, which is blended into the motor fuel in the region. Gasoil oil saw a slight increase of 0.5 mb, finishing the month at 17.4 mb, and was 3.4 mb or 16.3% below the same time last year. This build was supported by higher demand from Germany, as prices came down, and German consumers used this opportunity to fill their fuel tanks. However, steep backwardation limited the build in gasoil inventories. Fuel oil stocks also went up, by 0.9 mb, to stand at 5.6 mb, leaving them 0.4 mb or 6.9% above a year ago. This build was supported by greater arrivals from France, Brazil and the UK. Jet fuel inventories rose by 0.2 mb to stand at 2.6 mb. At this level, they were 0.8 mb or 24% below last year’s level. This build was supported mainly by arrivals from the UAE.
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