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Stock Movements - Aug 07

Source: OPEC_RP070810 8/14/2007, Location: Europe

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USA
US total commercial oil stocks stood at 1,034.1 mb at the end of July, the highest level so far this year since end-January and 20 mb above the five-year average. The increase of 6.8 mb from the end of the previous month was driven by products while crude oil inventories fell for the first time since end of February. The build in product stocks and the drop in crude oil inventories came as a result of the improvement in refining utilization rates and increasing gasoline imports.

Crude oil stocks dropped 12 mb to stand at 341.6 mb but remained well above the five-year average and close to a nine-year high. Most of the draw on crude oil stocks took place during the week ended 27 July when inventories dropped by 6.5 mb, the highest draw since the 8.1 mb seen in the week ending 22 December 2006. This strong decline is attributed essentially to the jump in refinery inputs which averaged more than 16.2 mb/d, the highest level since the week ending 26 August 2005.

Gasoline inventories continued to build for the third consecutive month to stand at around 205 mb, up 0.3 mb from the previous month, due to a rise in the refining utilization rate, which reached almost 93% for the first time in eight months during the last week of July. In addition, record-high imports of 1.7 mb/d during the week ending 27 July contributed largely to the build in gasoline stocks despite strong seasonal demand. Consequently, the gap with the fiveyear average shrank to just 3.2 mb or 2% compared with around 15 mb during the first half of last May.

Distillate stocks rose 5.4 mb, offsetting the draw of the previous month, to stand at 127.2 mb, the same level as the five-year average and the highest level since last January. The rise in distillate stocks was due to increasing production from refineries, particularly in the second half of the month. By product, the picture remained almost unchanged with heating oil showing a deficit of 15 mb from the five-year average and diesel oil displaying a surplus of the same level. Similarly, residual fuel oil and jet fuel rose 3.2 mb and 0.5 mb to 38.2 mb and 41.3 mb respectively, which corresponded to 4% and 5% above the respective five-year averages.

The return of refineries to normal activity in combination with continuous high imports is expected to leave product stocks — gasoline and distillates — at comfortable levels for the remainder of the driving season and ahead of winter. However, in contrast, crude oil inventories are showing yet a surplus of 35 mb above the five-year average and are expected to drop but to stay at a comfortable level in the coming next weeks.

In its latest report, the EIA estimated that both crude oil and gasoline stocks dropped in the week ending 3 August. Crude oil inventories fell 4.1 mb despite a pullback in the refining utilization rate, but remained above the five-year average. The decline, which was the fifth in a row, was attributed to the 167,000 b/d drop in imports and the effect of backwardation in the market. In contrast to crude oil, gasoline stocks remained slightly below the five-year average after having dropped 1.7 mb to 203 mb, as production from refineries dropped by almost 300,000 b/d.

Following the opposite trend, distillate inventories moved up nearly 1 mb to 127.5 mb and remained in line with the five- year average, due to heating oil, which jumped by almost 2 mb but remained below the five-year average while gasoil stocks stayed well above the five-year average.

As a result, total commercial oil stocks inched down by 0.3 mb to 1,034 mb, showing a deficit of 21 mb from a year ago and a surplus of 31 mb over the five-year average, respectively.

Western Europe
The latest data for July show that total commercial oil stocks in EU-16 (Eur-15 plus Norway) dropped a minor 2.3 mb to 1,150 mb to slip below the corresponding month’s level of last year for the first time since March but remained well above the five-year average. Both crude oil and product stocks declined, with crude accounting for 86% of the losses with nearly 2 mb to stand at 485 mb. However, despite this decline, which resulted from increasing refinery runs and lower North Sea supplies, crude oil stocks remained at a comfortable 15 mb above the five-year average.

The increase in refining runs did not prevent product stocks from falling due to strong demand for diesel and high exports. Nevertheless, despite a marginal draw of 0.3 mb, product stocks remained at extremely high levels above the upper range of the last five years. At 665 mb, the surplus over the five-year average stood at 33 mb. Distillate stocks remained the main product behind the comfortable level even after a decline of nearly 0.4 mb ending the month slightly below 399 mb, due to healthy exports to Latin America, and showed a surplus of 8 mb over last year’s level and 35 mb above the five-year average. Following their normal trend, motor gasoline stocks fell a further 0.5 mb to stand at 125.6 mb, the first time this year above the level of the corresponding month last year, but remained below the five-year average. The drop was driven by exports and lower crack spreads. Following the same trend, residual fuel oil inventories fell 0.3 mb to 113.5 mb, slightly higher than last year’s level. The only exception was naphtha, which saw inventories increase by almost 0.9 mb to 27.3 mb, helped by higher production from refineries, which returned from seasonal maintenance.

Japan
In June, Japanese commercial oil stocks rose 7.4 mb or 4.2%, the highest increase since last September, to stand at 186.1 mb at the end of the month, which corresponds to 1 mb above the five-year average. With this level, the gap to the corresponding month of the previous year was halved to 10 mb compared to 20 mb in May. More than 60% of the build in stocks was attributed to crude oil, which saw a second consecutive increase, to remain above 110 mb due to the combination of a low refining utilization rate of less than 76% and an increase of 6.4% in imports. However, despite this build of 4.7 mb or 4.5%, crude oil stocks were below the lower range of the five-year average for the first time this year. In contrast to crude oil, total products, which rose 2.7 mb to 76 mb, continued to hover alongside the upper range of the five-year average, reflecting lower demand for petroleum products. Nevertheless, the detailed picture was mixed with distillate stocks continuing to increase to remain at a comfortable level above the five-year average, while gasoline experienced a further downward trend. The drop in gasoline stocks followed the seasonal norm as gasoline stocks usually fall in May-July as a result of planned refinery maintenance. At 12.3 mb, gasoline stocks showed a deficit of 1.2 mb from a year earlier and the five-year average. Distillate inventories increased further to stand at 31.4 mb, 2.4 mb over the previous month, and continued to hover around the same levels of last year and the five-year average since April. The build in distillate stocks came essentially from naphtha, which surged by 1.5 mb to 13.1 mb, representing a nine-month high.

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