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Stock Movements - NOV 11

Source: OPEC_RP111111 11/9/2011, Location: Europe

After a strong stock-draw in September, US commercial oil inventories fell for the second consecutive month, declining by 9.8 mb to stand at 1,064.7 mb, the lowest level since April 2011. This drop was attributed solely to product stocks which fell by 13.1 mb, while crude commercial inventories rose by 3.2 mb. With this decline in total US commercial oil inventories, the deficit with a year ago remained at 54.3 mb or 4.9%; however, they were broadly in line with the five-year average.

US commercial crude stocks reversed the sharp fall in September and rose in October to stand at 339.5 mb. Despite this build, US commercial crude oil stocks still indicated a deficit of 26.3 mb, or 7.2%, with a year ago at the same period, while they presented a surplus of 8.0 mb, or 2.4%, over the five-year average. The build came mainly from the decline in crude oil refinery inputs, which decreased by more than 400,000 b/d to average 14.6 mb/d, as refinery runs in the US remained relatively soft before the heating oil season begins. However, US crude runs remained almost 0.5 mb/d higher than a year ago during the same period.

In October, US refineries operated at 84%, some 3.4 percentage points (pp) lower than in the previous month, and 1.8 pp higher than the same month last year The build in US crude commercial stocks came despite unchanged crude imports to average 8.8 mb/d, but they showed an increase of about 100,000 b/d compared to the previous year at the same time. Cushing stocks reversed the decline observed in September and rose by 1.2 mb to end the month at 32.1 mb. However, this level still remained low compared with the level of 40-41 mb reached in March and April resulting in a narrowing of the WTI-Brent differential in recent weeks to just $15/b.

In contrast to the increase in US commercial crude oil stocks, product stocks declined by 13.1 mb in October, following a sharp drop in September. At 725.2 mb, US product stocks stood at their lowest level since June 2011. The drop in US product stocks in October came on the back of lower refinery output as total product demand remained weak, declining by around 200,000 b/d compared to the previous month. At 18.6 mb/d, US total oil consumption in October remained 1.9% lower than at the same period last year. With this draw, US product inventories remained at 28.0 mb, or 3.7%, below levels during the same period a year ago and 7.8 mb, or 1.1%, less than the five-year average.

Within products, with the exception of residual fuel oil, all products experienced a drop with the bulk coming from middle distillates, which declined by 15.0 mb, followed by gasoline stocks, which fell by 7.5 mb. Meanwhile, jet fuel stocks went down slightly by 0.7 mb. At 141.9 mb. US distillate stocks stood at the lowest level in three years, widening the deficit with a year ago to almost 20.0 mb, or 5.6%, and stood for the first time this year at 3.0 mb, which is 5.6 mb, or 3.8%, below the five-year average. The strength in the distillate market persists as US demand climbs further to 4.2 mb/d in October, 350,000 b/d higher than the previous month.

US distillate demand reached nearly 4.4 mb/d at the week ending 28 October, on a combination of increased heating demand and strong exports, with preliminary data showing upwards of 900,000 b/d. Lower distillate output, which declined by around 100,000 b/d and averaged 4.46 mb/d, also contributed to the draw in distillate stocks. The return of refinery runs to the market should offset some of the bullishness in the distillate market in the coming weeks. Gasoline stocks also fell to stand at 206.3 mb, remaining at 3.5 mb, or 1.7%, below last year at the same period, while showing a surplus of 2.5 mb, or 1.2%, over the seasonal norm.

It should be noted that during the week ending 28 October, gasoline stocks rose by 1.3 mb, reflecting weak demand averaging 8.7 mb/d, well below the seasonal norms. Overall gasoline production has remained around 9 mb/d, which is about 200,000 b/d less than the previous month. With the recent reopening of the arbitrage window from Europe, refiners will likely need to restrain further gasoline production. Jet fuel oil stocks also decreased slightly by 0.6 mb to end the month at 45.8 mb but remained the second highest level since September 2010. Jet fuel stocks showed a surplus of 1.6 mb, or 3.6%, with a year ago and are 3.8 mb, or 9.1%, higher than the five-year average. Residual fuel oil stocks reversed the decline that occurred last month and rose by 2.7 mb, ending the month at 36.3 mb. At this level, residual stocks stood at 4.8 mb, or 11.7%, below last year and 3.0 mb, or 7.6%, less that the seasonal norm.

In September, commercial oil stocks in Japan reversed the draw experienced the previous month and rose by 6.9 mb to stand at 183.1 mb, the highest since the end of 2008. At this level, Japanese commercial oil stocks widened the surplus with a year ago to 13.8% from 2.7% a month earlier, while the deficit with the five-year average narrowed to 0.3% from 6.2% in the previous month. This stock build was attributed to the rise in crude and product stocks as they increased by 2.4 mb and 4.5 mb, respectively.

Japanese commercial crude oil stocks also erased last month’s draw and increased by 2.4 mb to end the month at around 100.0 mb. With this build, Japanese crude commercial oil stocks stood at 10.8 mb, or 12.1%, above the previous year during the same month and for the first time in four months, they showed a surplus with the seasonal norm of 2.0 mb or 2.1%. The build in crude commercial oil stocks in September came from higher crude oil imports which increased by around 100,000 b/d, or 2.8%, to average 3.6 mb/d. Crude oil imports also increased by 4.5% versus a year ago, the first year-on-year increase in monthly crude imports in seven months as refiners faced plant outages after the March earthquake and reduced crude oil imports.

Lower crude throughputs also contributed to the rise in crude oil inventories. Indeed, crude throughput has dropped by almost 200,000 b/d to average 3.36 mb/d, and remained at 5.6% below last year. This corresponds to a refinery utilization rate of 72.6%, 4.1 percentage points (pp) lower than previous month and 3.9 pp less than a year ago over the same period.

Total product inventories also rose for the third consecutive month to stand at 83.2 mb, the highest level in three years. With this build, the surplus with a year ago has widened to 15.9% from 5.9% a month earlier; however, the deficit with the five-year average remained at 6.3 mb or 2.9%. The build in total Japanese products in September could be attributed mainly to the decline of Japanese total sales of 5.5%, averaging 3.13 mb/d. Total oil product sales in September fell 4.9% from a year earlier, hurt by a higher baseline that reflected a prolonged heat wave last summer.

The decline of refinery output, which dropped by nearly 300,000 b/d, or 9.0%, to average 3.1 mb/d has limited the build in product stocks. With the exception of naphtha, which remained almost unchanged, all products saw a build with the bulk of the gain coming from gasoline stocks, which jumped by 4.0 mb followed by a slight build of 0.5 mb in residual fuel oil stocks, while distillate inventories rose marginally by 0.2 mb after experiencing a strong build of 4.4 mb last month. Gasoline stocks rose to end the month at 17.2 mb, representing a surplus of 4.7 mb over the same period a year ago, while they widened the surplus with the five-year average to 4.4 mb from only 0.2 mb last month. The rise in gasoline inventories came on the back of lower gasoline sales, which declined by 10.9% from the previous month.

Gasoline sales were also 5.8% below last year’s level at the same period. Distillate stocks saw a minor build, finishing the month at 37.8 mb to stand at 5.5 mb, or 16.9%, higher than a year ago at the same time, while still indicating a deficit of 3.6 mb, or 8.7%, with the five-year average. Within the components of distillates, the picture was mixed: Kerosene saw a build of 11.3%, while jet fuel stocks and gasoil declined by 15.9% and 8.3%, respectively. The build in kerosene stocks came on the back of higher production, which increased by 26%; however higher domestic sales have limited the build in kerosene stocks. The draw in jet fuel inventories was supported by lower production which fell by almost 20%, while higher domestic sales combined with lower output were behind the fall in gasoil inventories.

Residual fuel stocks also rose by 0.5 mb to end the month at 17.5 mb, indicating a surplus of 1.6 mb, or 10.3%, over a year ago but continued to show a deficit of 1.7 mb, or 9.1%, with the five-year average. Within the components of fuel oil, fuel oil B.C inventories saw a build of 8.5%, while fuel oil A stocks went down by 1.6%. The build in fuel oil B.C came on the back of lower domestic sales, combined with lower production.

However, fuel oil B.C domestic sales were much higher than a year ago at the same time—by almost 18%—as record-low nuclear plant utilization forces utilities to turn to fossil fuels to substitute for the power shortfall. The drop in fuel oil A inventories came mainly on the back of disappointing output, as they declined by 7.0% despite lower domestic sales. Naphtha stocks remained almost at the same level as the previous month to stand at 10.8 mb, indicating a deficit of 3.9% with a year ago over the same period and 9.1% less than the seasonal average.

Singapore and Amsterdam-Rotterdam-Antwerp (ARA)
At the end of September, product stocks in Singapore continued their downward trend for the third consecutive month, falling by 1.2 mb to end the month at 42.4 mb. With this draw, product stocks remained at 4.3 mb, or 9.2%, below levels during the same period a year ago. Within products, the picture was mixed: Light and middle distillates saw a gain of around 0.9 mb and 0.5 mb, respectively, while fuel oil stocks dropped by 2.6 mb.

Singapore light distillate stocks reversed the draw incurred last month and rose in September to end the month at 9.7 mb. However, these higher stocks are unlikely to last after the closure of one the region’s largest exporting refineries: Shell’s 500,000 b/d refinery in Singapore. Light distillate stocks remained at 1.8 mb, or 15.6%, below levels during the same period a year ago. Middle distillates have also experienced a stock build after two consecutive months of draws and ended the month at 13.7 mb. Middle distillate stocks stood at 0.7 mb, or 5.0%, above levels during the same period a year ago.

The build in middle distillate stocks came on the back of higher gasoil from Korea, Japan and Malaysia. Middle distillate stocks are expected to decline in coming weeks, following the closure of a Shell hydrocracker at its refinery, therefore requiring customers in the region to be supplied with products from storage. Fuel oil stocks plunged from 21.5 mb in August to around 19.0 mb at the end of September, the lowest since February. With this draw, the deficit with a year ago has widened to 14.2% from 7.5% last month. The increase in domestic demand for harvest and power generation was behind the drop in fuel oil stocks. However, more exports from the West are expected to come to Asia and should offset the impact of strong regional and domestic demand, resulting in the curbing of the three-month-long draw of fuel oil inventories.

Product stocks in ARA in September fell by 3.0 mb, following a small increase last month and ending the month at 30.2 mb. With this draw, the deficit with a year ago has widened to 21.2% at the end of September from 13.9% a month earlier. With the exception of naphtha, which saw an increase, all other products experienced a drop. Gasoline inventories went down by 0.3 mb to stand at 4.6 mb, the lowest level in almost eight months and stood at 40% less than at this time last year. This drop in gasoline stocks came on the back of crude run cuts, falling US gasoline demand and refineries switching to produce more heating oil ahead of the winter season. Gasoil stocks also dropped by 0.5 mb for the second consecutive month to stand at 16.5 mb, which is 1.4 mb, or 8%, below the same period a year ago.

The backwardation structure of the gasoil forward curve, limiting incentive to store more gasoil, contributed to the decline in gasoil stocks. At the same time, higher exports also supported the drop in gasoil stocks. Within products, fuel oil stocks saw the highest drop in September, falling by 1.3 mb to end the month at 5.1 mb and showing a deficit of 1.1 mb, or 17.3%, over the same period a year earlier. A VLCC was reported loading to Asia, thus contributing to bringing stocks down. Jet fuel oil stocks also declined by 1.2 mb to end the month at 3.1 mb, almost less than half compared to last year at this time. The drop in jet fuel came on the back of higher exports outpacing the incoming flows to the ARA region. Naphtha is the only product showing a build of 0.2 mb to finish the month at 0.8 mb, almost double from the same time last year.

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