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Stock Movements - Jun 12

Source: OPEC_RP120611 6/12/2012, Location: Europe

US
US total commercial oil stocks reversed the draw of the previous month and rose considerably — by 17.7 mb to end May at 1087.3 mb, the highest level since November 2011. Thus, inventories stood at 9.1 mb or 0.8% above the level a year ago, while the surplus with the five year average was 29.7 mb or 2.8%. The build was attributed to both crude and products as they increased by 8.8 mb and 9.0 mb, respectively. In May, US commercial crude stocks continued the upward trend of the last five months, increasing 8.8 mb for a cumulative build since the start of this year of around 53.7 mb. Having reached a total of 384.6 mb, they stood at the highest level since 1990, widening the surplus with a year ago to 14.9 mb, from 6.5 mb a month earlier. The gain versus the five-year average widened more and stood at 35.7 mb in May from 23.3 mb a month ago. This build came from continued strong crude imports and domestic production. Indeed, US crude imports averaged 8.9 mb/d in May, around 150,000 b/d more than the previous month. Higher crude imports in the US reflect rising inflows from Canada as well as shale production.

An increase in crude oil refinery input in May from the previous month, averaging 15.2 mb/d, limited the gains in crude oil stocks. US crude runs rose by more than 600,000 b/d over a month ago, to stand at around 380,000 b/d higher compared to the same time a year ago. In May, US refineries operated at 89.1%, which was 4.3 percentage points (pp) higher than in the previous month and 3.4 pp above the same month last year. Adding to the bearish sentiment for the US crude market, Cushing stocks rose by 4.8 mb in May to reach an all-time high of 47.8 mb. However, this number should begin to fall as some volumes flow south on the reversed Seaway pipeline. Looking forward, US crude inventories should continue building in other areas as US crude oil imports are expected to rise, reflecting strong OPEC production. But the build in US crude oil inventories could be limited by expected higher crude runs.

Product stocks reversed the drop of the last four consecutive months and increased by 9.0 mb in May to end the month at 702.7 mb. Despite this build, they showed a deficit of 5.8 mb or 0.8% over the same time last year and were 6.0 mb or 0.8% lower than the five-year average. All the build in products came from propylene and unfinished products, while major products such as gasoline and distillates showed a drop. Gasoline stocks fell by 6.2 mb for the fourth consecutive month, ending at 203.5 mb. At this level, gasoline stocks stood at 10.4 mb or 4.9% below the same period last year and showed a deficit over the seasonal norm of 5.5 mb or 2.6%. The stock draw in gasoline came from higher demand, which averaged 8.8 mb/d. This was around 130,000 b/d more than a month ago but much lower than during the same period last year, when demand stood almost at 9.2 mb/d. Continued strong exports also contributed to the drop in gasoline, while steady gasoline production limited the fall in gasoline stocks. Gasoline output averaged 9.1 mb/d, around 200,000 b/d above the previous month but still 250,000 b/d less than the same period a year ago. It should be noted that during the week ending 1 June, US gasoline stocks rose by 2.3 mb after several weeks of decline, mainly reflecting higher production.

Distillate stocks also saw a fall of 6.2 mb in May, following five months of decline and having lost nearly 30.0 mb since the beginning of the year. At 120.0 mb, they were 24.6 mb or 17.0% below the same period last year and 18.1 mb or 13.1% below the seasonal norm. This drop came mainly on the back of stronger exports as higher production limited the decrease. The healthy distillate output, reaching nearly 4.7 mb/d, has alleviated some pressure on the distillate market since, after several weeks of inventory decline, distillate stocks rose during the week ending 1 June by 2.2 mb. Distillate demand decreased in May, averaging 3.7 mb/d and contributing to the build in distillate stocks. Residual oil stocks continued their downward trend and fell for the second consecutive month — by 1.6 mb — to end May at 31.0 mb. At this level, they were 5.8 mb or 15.9% lower than the same month a year ago and 8.5 mb or 21.4% below the latest five-year average. Jet fuel oil stocks remained almost unchanged from the previous month to stand at 39.8 mb. At this level, they were 1.5 mb or 3.5% lower than a year ago, and 2.6 mb or 6.2% less than the seasonal norm.

Japan
In April, commercial oil stocks in Japan rose by 8.3 mb for the second consecutive month to stand at 172.7 mb, the highest level since November 2011. However, despite this build, they stood at 8.4 mb or 4.6% below a year ago at the same period and almost at the same level as the latest five-year average. The total stock-build was divided between crude and products as they rose by 2.8 mb and 5.7 mb, respectively. Japanese commercial crude oil stocks grew further in April, increasing by 2.8 mb to stand at 103.6 mb, the highest level since July 2011. Despite this build, they indicated a deficit of 1.5 mb or 1.4% compared to the same time the previous year. However, they remained at 1.6 mb or 1.5% above the seasonal average. This build came mainly from lower crude throughput, which decline by 150,000 b/d or 4.1% to an average of 3.5 mb/d. However, this level still remained at 8.2% above the level reached at the same time a year ago. The refiners in Japan were running at 78.8%, which was 3.0 percentage points (pp) lower than in the previous month but much higher — 8.2 pp — than the same period last year. The build in crude oil stocks came despite lower crude imports in April declining by around 280,000 b/d, to stand at 3.9 mb/d. But this level rose by 10.2% year-on-year. It should be highlighted that direct crude burning in power plants continued to spike more than a year after Japan’s Fukushima crisis. April’s figures stood at around 320,000 b/d, more than the double the level in April 2011 and about 41,000 b/d higher than the previous month, when Japan’s direct burning stood at 281,000 b/d.

Japan’s total product inventories reversed the decline that occurred in the last two months and rose by 5.7 mb to end the month of April at 69.2 mb. At this level, they still remained at 6.9 mb or 9.0% below the previous year during the same period and 2.5 mb or 3.5% less than the seasonal average. This stock-build for total products came on the back of weaker domestic product sales, which declined by about 570,000 b/d or 15.3% to average 3.14 mb/d. But at this level, Japanese demand was 4.7% higher than a year earlier and represented the fifth straight month of gains. Higher imports also contributed to the build in product stocks. In fact, product imports rose by around 95,000 b/d or 17% in April versus a month earlier. With the exception of gasoline, all products saw a build, with naphtha increasing the most. Gasoline stocks declined slightly by 0.2 mb to end April at 14.1 mb and showed a deficit of 0.8 mb or 5.6% compared to a year ago and 0.3 mb or 2.2% less than the fiveyear average. The fall in gasoline stocks could be attributed to a decline in output as they dropped by 10.9%. Higher exports, which increased almost by half, also contributed to the fall in gasoline stocks. The decline of 5.1% in gasoline domestic sales limited the fall in inventories. Distillate stocks rose 1.9 mb in April, after four consecutive months of decline, ending April at 27.2 mb. Despite this build, they remained 8% below the same period a year ago and 1.8% less than the seasonal norm. All components of distillates experienced a build with the greatest attributed to jet fuel, which increased by 40.3%, followed by kerosene and gasoil rising by 2.9% and 0.4%, respectively.

The build in jet fuel stocks came mainly on the back of lower domestic sales declining by almost 40%. Lower inland consumption also contributed to the build in kerosene and gasoil stocks. Residual fuel oil stocks reversed the decline for the second consecutive month and rose by 1.5 mb to finish April at 16.9 mb. At this level, they were 1.2 mb or 6.4% below the same period a year ago and they are 1.1 mb or 6.1% beneath the fiveyear average. Within the components of fuel oil, fuel oil A saw a build of 8.5% while fuel oil B.C stocks showed a gain of 10.1%. The build in fuel oil A could be attributed to lower domestic sales, which decreased by almost 30%. Lower domestic sales by around 10% were also the main reason behind the build in fuel oil B.C inventories. However, domestic sales for fuel oil B.C, which is mostly used for power utilities, jumped 78.5% from a year ago during the same period Demand for this product is likely to stay high in coming months amid difficulty in restarting nuclear reactors. Naphtha saw the bulk of the build with an increase of 2.5 mb to end April at 10.9 mb, the highest level since October 2011. Despite this build, stocks remained at 2.5 mb or 18.7% lower than the same period a year ago and 0.6 mb or almost 5.1% below the seasonal average. Lower domestic sales, combined with higher imports, were the main driver behind the build in naphtha stocks in April.

Singapore and Amsterdam-Rotterdam-Antwerp (ARA)
At the end of April, product stocks in Singapore fell by 4.3 mb for the second consecutive month to end the month at 38.5 mb. With this drop, Singapore product stocks widened the deficit over the same period a year ago to 5.9 mb from 1.3 mb a month earlier. Within products, middle distillates and fuel oil inventories saw a drop, while light distillates remained almost unchanged. At 8.9 mb, middle distillate stocks ended April at 0.7 mb lower than the previous month, showing a deficit of 1.8 mb or 13.8% compared to the same period a year ago. Higher diesel imports to India due to the shutdown of the Indian Refinery Numaligarh caused a drawdown in stocks. Steady demand from Vietnam also contributed to stock draws in Singapore. However, the return of refineries from maintenance in North Asia, along with weak demand for diesel and jet fuel, is likely to support the build in middle distillates in the coming weeks. Fuel oil stocks reversed the build of the last three months and declined by 3.6 mb ending April at 19.2 mb. At this level, they stood at 3.4 mb or 14.9 mb below the same period a year ago. The bulk of the drop occurred during the week ending 19 April, when inventories fell to 16.4 mb on lower arrivals from the West. Higher exports due to healthy regional demand also contributed to this draw. However, fuel oil stocks climbed at the end of April driven by strong imports from the West. Light distillate stocks finished the month of April at 10.4 mb, almost at the same level as the previous month, and stood at 0.7 mb or 6.5 mb below a year ago during the same period. Firm gasoline demand from Indonesia and Malaysia contributed to the draw in gasoline stocks, while higher exports from China helped the build in gasoline inventories.

Product stocks in ARA at the end of April reversed the build that had occurred last month, falling by 3.4 mb and ending the month at 31.2 mb, the lowest level since the end of last year. With this draw, stocks stood at 8.1 mb or 20.7% below last year’s level during the same period. Within products, gasoline, gasoil and fuel oil saw a drop, while naphtha and jet fuel oil indicated a minor decline. Gasoline stocks fell slightly — by 0.2 mb — to 5.4 mb, which is 1.1 mb or 16.6% below a year ago. The drop in gasoline came on the back of higher exports to Mexico and Nigeria, which outpaced imports. Gasoil stocks also fell by 2.1 mb, ending April at 17.8 mb, the lowest level since the end of December 2011. At this level, they represent a deficit of 4.2 mb or 19.3% compared to the same time a year earlier. Lower imports from Russia — the key exporter of gasoil fuel to Europe — were behind the drop in gasoil stocks. Higher exports to Latin America also contributed to this decline. Fuel oil also saw a stock draw of 1.1 mb to end the month of April at 3.8 mb. At this level, they stood at 1.6 mb or almost 30% below the same period a year ago. Reduced fuel oil imports, especially from Russia, helped increase the stock draw at the end of April. Indeed, preliminary information indicated that Russia’s fuel oil production was down 100,000 b/d in April on the back of restrained throughput. Jet fuel stocks fell marginally to stand at 3.3 mb, the lowest level in almost five months and remained 1.8 mb or 35% below last year’s level during the same period. The drop in jet fuel oil stocks came on the back of lower imports amid a backwardation structure of the forward market, which discouraged stock build. Naphtha also saw a minor decline to end April at 0.9 mb but indicated a surplus of 0.5 mb over the same period last year.

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