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Stock Movements - OCT 11

Source: OPEC_RP111011 10/11/2011, Location: Europe

US
In September, US commercial oil inventories fell for the second consecutive month, declining by 13.4 mb. At 1,074.6 mb, US commercial oil stocks are at the lowest level since April 2011. This drop was attributed solely to crude, which fell by 16.8 mb, while product inventories rose by 3.4 mb. The decline in total US commercial oil inventories widened the deficit with a year ago to 55.7 mb or 4.9% from 3.8% a month earlier; however, they were broadly in line with the five-year average.

US commercial crude stocks fell sharply in September, reversing the build seen in the previous month to stand at 336.3 mb, the lowest level since the end of last year. Despite this draw, US commercial crude oil stocks still indicated a surplus of 7.7 mb or 2.3% with the five year average, but stood 23.8 mb or 6.6% below a year-ago. The draw came mainly from the decline in crude imports which fell by around 0.4 mb/d in September, compared with the previous month. At around 8.8 mb/d, US crude oil imports showed a decline of around 0.4 mb/d compared to the same period last year.

It should be highlighted that during the week ending 30 September, US crude oil imports plunged by one million barrels following the seasonal pattern. The fall in US crude commercial stocks came despite lower crude runs which declined by 340,000 b/d, averaging 15.1 mb/d. This corresponds to a refinery operation rate of 87.7%, some 1.7 percentage points (pp) lower than in the previous month, but 1.6 pp higher than the same month last year. Cushing stocks continued their decline in September, falling by nearly 2.6 mb to end the month at 30.1 mb, which should lend some support to the Nymex WTI crude price.

During the first week of September, nearly all the 30.6 mb of US SPR was released as part of the IEA coordinated release of strategic reserve. Currently, US SPR stands at 695.9 mb. In contrast to the decline in US commercial crude oil stocks, product stocks rose by 3.4 mb to end the month at 738.3 mb, the second highest level since the end of last year. The build in US product stocks in September came on the back of lower demand reflecting a weak US economy. Total product demand in September averaged just under 19.0 mb/d, down by almost 400,000 b/d or 2.1% from the previous month and 220,000 b/d or 1.3% less than the same period last year. Despite this build, US product inventories remained at 31.8 mb or 4.1% below a year ago at the same period and 8.4 mb or 1.1% less than the five-year average.

Within products, the picture was mixed. Gasoline, jet fuel and middle distillates experienced a build of 4.9 mb, 2.5 mb and 0.1 mb respectively, while residual fuel and other unfinished product stocks declined by 4.0 mb and 3.9 mb respectively. At 213.7 mb, gasoline stocks reversed the stock-draw incurred last month, widening the surplus with the five-year average to 3.0% from 1.6% a month earlier. However, the deficit with a year ago remained at 5.6 mb or 2.6%. The build in gasoline stocks came on the back of lower demand, which declined by around 200,000 b/d to average 8.9 mb/d, down 1.7% from the same period last year. The decline in gasoline production has limited the build in gasoline stocks. In fact, US gasoline production fell by about 100,000 b/d to average 9.2 mb/d.

Overall, the gasoline market is expected to remain quiet, as the seasonal transition continues with the focus switching to the heating oil market. Jet fuel oil stocks also increased by 2.5 mb to end the month at 46.4 mb, the highest level since September 2010. Jet fuel stocks are almost in line with a year ago, while they indicated a surplus of 3.3 mb or 7.6% with the seasonal norm. Distillate stocks saw a slight build, reversing the stock-draw of the last month to end the month of September at 156.8 mb, the highest level since the beginning of this year. Distillate stocks stood at 9.8 mb or 5.9% below a year ago, remaining at 6.8 mb or 4.5% above the five-year average. Distillate markets are slowly gaining strength, with production rising to 4.6 mb/d, an increase of 270,000 b/d over the same period last year.

Domestic demand showed some improvement relative to recent levels, rising to 4.1 mb/d during the week ending 30 September. Residual fuel oil stocks decreased by 4.0 mb, after almost three months of negligible movement and ending the month at 33.6 mb. At this level, residual stocks stood at 6.2 mb or 15.6% below last year and 5.3 mb or 13.6% less that the seasonal norm.

Japan
In August, commercial oil stocks in Japan reversed the build experienced last month and fell by 1.4 mb to stand at 176.2 mb. At this level, Japanese commercial oil stocks stood at 4.6 mb or 2.7% above a year ago over the same period, but remained at 11.7 mb or 6.2% below the five-year average. This stock draw was attributed to the decline of 6.9 mb in crude, while product stocks abated this drop, rising by 5.5 mb. Japanese commercial crude oil stocks also erased last month’s build, falling sharply by nearly 7.0 mb to end the month at 97.5 mb, the lowest level since February 2011.

Despite this stock draw, crude commercial oil stocks in Japan remained in line with the previous year during the same month, but showed a deficit of 5.4 mb or 4.3% with the five year average. The draw in crude commercial oil stocks in August came from lower crude oil imports as they decreased by 0.2% to stand at 3.5 mb/d. Crude oil imports still remained 2.5% less than a year ago. Higher crude throughput also contributed to the decline in crude oil inventories. Indeed, crude throughput has increased by more than 200,000 b/d to reach 3.55 mb/d, but still remained 5.0% below last year. It is worth noting that direct crude burning continued the upward trend, increasing in August by more than 26%, reflecting efforts by the country to outcome the shortage in nuclear output.

In contrast to the decline in crude oil stocks, total product inventories rose for the second consecutive month to stand at 78.7 mb, the highest level since September 2009. With this build, the surplus with a year ago has widened to 5.9% from 1.8% a month earlier; however, the deficit with the five-year average remained at 11.7 mb or 6.2 %. The build in Japanese total products in August could mainly be attributed to the increase in refinery output which rose by almost 240,000 b/d or 7.5% to average 3.4 mb/d. However, the build in oil product stocks came despite higher domestic sales as they increased by around 160,000 b/d or 5.1%, averaging 3.31 mb/d. Japan’s total oil products sales in August rose also versus a year ago by 0.9% and marks the first year-on-year climb since the March quake and tsunami disrupted refinery operations and damped economic activity.

The increase in domestic oil sales was supported by growing demand for oil for power generation. This recovery in oil sales was in line with the improvement in Japanese factory activity which rose by 0.8% in August. With the exception of naphtha, which remained unchanged, all products saw a build with the bulk of the gain coming from distillate stocks, which jumped by 4.4 mb following the build of 1.1 mb last month. At 37.6 mb, distillate stocks stood at 4.7 mb or 14.4% above a year ago at the same time, while, remaining 2.8 mb or 6.9 % below the five-year average. Within the components of distillates, all the products saw a build with kerosene stocks rising by 16.6% followed by gasoil which rose by 12.2%, while jet fuel inventories showed the lowest build, increasing by 4.7%. The build in kerosene stocks came on the back of lower domestic sales which decreased by 7.5%. Higher kerosene output by more than 11% also supported the build in inventories.

Higher output, which increased by almost 6%, combined with a fall of 5% in domestic sales was behind the build in gasoil inventories. However, the build in jet fuel stocks was solely attributed to higher output, as they went up by 20% offsetting the increase in domestic sales. Residual fuel stocks also rose by 0.7 mb to end the month at 17.0 mb, indicating a surplus of 1.8 mb or 11.6% with a year ago, but they continued to show a deficit of 2.1 mb or 11.2% with their five-year average. Within the components of fuel oil, fuel oil B.C inventories saw a build of 4.6% followed by a build of 3.7% in fuel oil A. The build in fuel oil B.C came on the back of higher imports as they doubled in August from the previous month and increased by 22.2% from last year. Higher production, which increased by almost 2.0%, also contributed to this build.

This build came despite the increase in sales of B.C type fuel oil, used mainly for power generation by utilities and as transport fuel for large vessels. The build in fuel oil A inventories came on the back of disappointing domestic sales as they declined by 5.6% combined with a 2.8% increase in production. Gasoline stocks rose slightly by 0.5 mb for the second consecutive month to end August at 13.2 mb and remained 3.4% above a year ago and 1.3% higher than the seasonal norm. This build came on the back of higher imports, which increased by almost half, combined with healthy gasoline output which rose by 6.5%. This build came despite an improvement in gasoline sales. Naphtha stocks remained almost at the same level from the previous month to stand at 10.9 mb, indicating a deficit of 2.5% with a year ago over the same period.

Singapore and Amsterdam-Rotterdam-Antwerp (ARA)
At the end of August, product stocks in Singapore continued their downward trend for the second consecutive month, but the drop was smaller than in July, to end the month at 43.58 mb. With this draw, product stocks remained at 4.5 mb or 9.4% below a year ago at the same time. Within products, the picture was mixed; light and middle distillates saw a drop of around 1.2 mb and 0.6 mb respectively, while fuel oil stocks increased by 1.8 mb. Singapore light distillate stocks plunged to a 21-month low below 9 mb, and stood at 2.9 mb or 24% lower than a month earlier over the same period.

The drop in light distillate stocks came on the back of strong gasoline demand in the region, especially in the Middle East, Indonesia and Malaysia. Tight supplies also contributed to the fall in light distillate stocks as Formosa’s refinery has not fully recovered from a fire at a secondary unit in the end of July. Middle distillates have experienced a stock draw for two consecutive months ending the month at 13.26 mb, but stood slightly above the last year at the same time. Middle distillate stocks have declined due to stronger imports from Japan, South Korea and Thailand. However, muted demand from Vietnam and Indonesia has limited the draw in middle distillate stocks. Fuel oil stocks climbed for the second consecutive month to the highest level since April to stand at 21.5 mb.

However despite this build, fuel oil inventories indicated a deficit of 1.7 mb or 7.5% with a year ago at the same period. Higher Western inflows have been behind the increase in stocks. Easing marine bunker demand in Singapore also contributed to the surge in Product stocks in ARA in August fell by 0.14 mb, for the second consecutive month to stand at 33.0 mb and show a deficit of 5.6 mb or 14.4% below last year at the same time. Within products, the picture was mixed; fuel oil and jet fuel stocks saw a build of 0.9 mb and 0.6 mb respectively, while gasoline, naphtha and gasoil went down by 0.9 mb, 0.04 mb and 0.7 mb respectively. At 6.4 mb, fuel oil stocks jumped to their highest level since March 2010, driven by more arrivals in the ARA from France, Russia and the US, which reached the highest level so far this year. Jet fuel oil stocks also rose to end the month at 4.3 mb, representing a deficit of 1.3 mb or 22.6% with a year ago at the same period.

The build in jet fuel stocks was driven by higher imports from the Middle East as no exports were reported. At the end of August, gasoil inventories fell to 17.1 mb, and stood at 3.7 mb or 17.8% below a year ago at the same period. The drop in stocks came on the back of lower imports combined with the backwardation structure of the gasoil forward curve limiting incentive to store the gasoil product. Gasoline stocks also fell to their lowest level since December 2010 to stand at 4.9 mb. At this level, gasoline stocks stood at 2.2 mb or 30.1% below a year ago at the same period. As gasoline demand has dropped in the US due to the disappointed economic situation, there is no need to store gasoline for export to the US. Naphtha stocks went down slightly to end the month of August at 0.35 mb, remaining at almost half of the level experienced last year at the same time.

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