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Stock Movements - Oct 12

Source: OPEC_RP121011 10/12/2012, Location: Europe

OECD
Preliminary data for August shows that total OECD commercial oil stocks dropped by 29.0 mb over the previous month. Crude oil led the fall, declining by almost 20.0 mb, while products saw a stock-draw of 9.3 mb. At 2,674 mb, OECD commercial stocks were 46 mb below the five-year average. But the picture among the components had two sides to it. Crude commercial stocks showed a surplus of 26.3 mb, while product stocks saw a deficit of 72 mb. At the end of August, OECD commercial stocks slipped to 28.0 mb below the level of the same period a year ago.

On a regional basis, the bulk of the drop in OECD commercial inventories came from stocks in North America falling by 21.6 mb, reflecting lower imports into the US combined with falling US production due to Hurricane Isaac. OECD Europeís inventories saw a decline of 5.6 mb, following a weak performance in North Sea production as well as the backwardation structure of Brent which does not encourage stockpiling. OECD Pacificís commercial stocks declined by a marginal 1.8 mb, reversing the build of last month. When compared with the five-year average, the picture within the OECD regions was mixed. Europe and the Pacific saw deficits of 65.4 mb and 8.4 mb respectively, while commercial stocks in North America stood 27.7 mb above the latest five-year average. It should be noted that the deficit observed in OECD commercial stocks could diminish in coming months, as global supply is expected to be running ahead of demand and the market will continue to be well supplied, especially with crude.

In terms of days of forward cover, OECD commercial stocks stood at around 58.4 days at the end of August, 0.4 days higher than the last five-year average. This level looks comfortable and is not expected to fall, since demand in the OECD is considered likely to continue to decline in 2013. Indeed, OECD demand for next year is expected to fall by 170,000 b/d vis-ŗ vis this year.

Europe
The latest available data for August shows that European stocks reversed the build of the last month and fell by 5.6 mb to stand at 1,058.7 mb. At this level, they ended the month 22.5 mb or 2.1% lower than a year ago and 65 mb or 5.8% below the five-year average. Both crude and products contributed to this draw, declining by 3.9 mb and 1.6 mb respectively. European crude inventories edged lower in August for the second consecutive month to stand at 453.0 mb, which was 5.5 mb or 1.2% higher than a year ago for the second time in 20 months. However, they still remained 15 mb or 3.2% below the seasonal norm.

The drop in crude oil stocks was attributed to the North Sea disruptions following the Norwegian strike in July. Limited exports from Iraq due to pipeline sabotage also contributed to the drop in European stocks. However, this decline happened despite a fall in refinery throughputs. Indeed, refinery runs processed 10.9 mb/d, around 175,000 b/d less than in the previous month, when they reached 11 mb/d for the first time since January 2011. At 605.7 mb, product stocks in Europe were 28.0 mb or 4.4% below the same period last year and 50 mb or 7.6% lower than the five-year average. Within products, the picture was mixed. Gasoline and residual fuel saw draws, while distillate and naphtha stocks witnessed a build. Gasoline stocks fell 1.3 mb to end August at 105.7 mb, almost in line with a year ago, but they remained 9.0 mb or 8.2% below the seasonal average.

Lower output, following a decline in refinery runs, along with export opportunities to the US, was behind the drop in gasoline. Distillate stocks ended August slightly higher than the previous month, following the 3.4 mb build in July. At 375.8 mb, they dropped by 12.0 mb or 3.1% from a year earlier, and they remained 25 mb or 6.1% lower than the five-year average. With diesel fundamentals expected to remain bullish throughout the winter months, the trend for distillate stocks will likely be downward. Fuel oil stocks declined by 1.2 mb to end August at 89.5 mb, which was 14 mb below the same period last year and 18.5 mb lower than the five-year average. This stock-draw was driven by higher exports to Asia.

US
US total commercial oil stocks rose in September after a substantial draw in August, increasing by 9.7 mb to stand at 1,101.4 mb/d. With this build, they switched the deficit with a year ago last month to a surplus of 16.5 mb or 1.5%. However, the difference with the five year average remained at a comfortable level, indicating a surplus of 28.6 mb or 2.7%. The build in US total commercial oil stocks was attributed to both crude and products, as they increased by 7.6 mb and 2.1 mb respectively.

In September, US commercial crude stocks reversed the downward trend of the last two months and increased by 7.6 mb to stand at 364.7 mb. With this build, they widened the surplus with a year ago to 32.9 mb from only 7.8 mb last month. The surplus with the five-year average also remained at a healthy level, at 36.3 mb or 11.1%. This build came mainly from lower crude oil refinery inputs, which declined by more than 600,000 b/d to average 14.7 mb/d, reflecting the refinery maintenance that had usually occurred at this time of the year. The level of US crude runs was also lower than the same period a year ago, by more than 480,000 b/d. In September, US refineries operated at 87.3%, which was 2.7 percentage points (pp) lower than in the previous month, and 0.4 pp below the same month last year. Lower crude oil imports limited a further build in crude oil inventories. In fact, US crude oil imports decreased in September by around 86,000 b/d or 0.9% from the previous month to average 8.5 mb/d.

This level was also lower, by about 390,000 b/d or 4.3%, from the same time last year. In contrast with the build in total crude commercial stocks, inventories in Cushing showed a decline of about 1.1 mb to stand at 43.9 mb, but they were still significantly above last yearís level.

Product inventories also increased by 2.1 mb in September, reversing the draw of 8.9 mb observed last month. At 736.7 mb, they remained 16.5 mb or 2.2% below last yearís level and 7.7 mb or 1.0% lower than the five-year average. Within products, the picture was mixed; gasoline and distillates saw declines, while all other products experienced builds. Gasoline stocks fell for the second consecutive month, declining by 3.0 mb to finish the month at 195.9 mb. At this level, inventories were 20.2 mb or 9.3% below those of a year ago and 12.0 mb or 5.8% below the historical average. The fall in gasoline stocks came mainly from lower gasoline production which declined by 260,000 b/d to average 9.0 mb/d, and it was also 250,000 b/d below last yearís level at the same time. With the driving season coming to an end, the decline in gasoline demand should contribute to the build in gasoline stocks in the coming months. Indeed, US gasoline demand declined in September by around 470,000 b/d to average 8.7 mb, about 30,000 lower than the same period a year ago. Strong exports at almost 400,000 b/d limited the build in gasoline stocks. Distillate stocks reversed the build of the last two months and declined by 3.0 mb, to end September at 124.1 mb. With this draw, they were now 29.6 mb or 19.3 %, below the year-ago level and 26.9 mb or 17.8% lower than the seasonal norm. Lower distillate production averaged 4.5 mb/d, around 50,000 b/d less than the previous month, and supported the stock-draw in distillates.

The continued strength of distillate exports also contributed to the draw on distillate stocks. The draw was also supported by higher apparent demand, which rose by about 200,000 b/d to 3.7 mb/d. Distillate inventories are at the bottom of the range ahead of peak demand winter season, but, with the expectation of increasing production, inventories should start building in the coming weeks. Jet fuel stocks rose for the third month running, by 1.3 mb from a month ago. At 44.4 mb, they stood at the highest level since October 2011 and were 1.6 mb or 3.6% lower than a year ago, but they switched the deficit with the seasonal norm during the previous month to a surplus of 0.4 mb or 1.0%. Residual oil stocks rose by 2.0 mb in September, after two months of draws. At 35.1 mb, they were 0.6 mb or 1.6% lower than the same month a year ago and 2.0 mb or 5.4% below the latest five-year average.

Japan
In August, commercial oil stocks in Japan reversed the builds incurred over the last five months, declining by 1.9 mb to 176.4 mb. Despite this draw, they remained 0.3 mb or 0.2% above a year ago, but still showed a deficit of 6.7 mb or 37% with the five-year average. The total stock-draw came from crude, which declined by 3.0 mb, while product stocks abated this fall, increasing by 1.3 mb.

Japanese commercial crude oil stocks fell by 3.0 mb for the third consecutive month to end August at 101.4 mb. At this level, they were 3.9 mb or 4.0% above the same time a year ago and around 1.0 mb above the latest five-year average. The drop was due mainly to higher crude throughput, which increased by around 200,000 b/d or 3.6% over the previous month to average 3.4 mb/d, although remaining 2.8% below the year-ago level. In August, Japanís refineries were running at 76.9%, which was 2.6 percentage points (pp) higher than in the previous month and 0.2 pp higher than in the same period last year. It should be noted that direct crude burning in power plants in August reversed the downward trend seen over the last two months and increased by 53% from the previous month to 257,180 b/d, which was 35.1% above the level of August 2011. The crude stock-draw in August was limited by higher imports, which increased by nearly 200,000 b/d or 5.3% from the previous month to average 3.6 mb/d, and was 2.9% above the same period last year.

Japanís total product inventories continued their upward trend, rising by 1.3 mb for the fifth consecutive month to end August at 75.1 mb, the highest level since November 2011. Despite this build, they showed a deficit of 3.6 mb or 4.6% with a year ago and were 7.4 mb or 9.0% below the seasonal average. This stock-build for total products came mainly from higher output, reflecting improved refinery utilization rates. This build came despite healthy oil product sales in August, which increased by almost 190,000 b/d or 5.9% to average 3.4 mb/d. At this level, product sales in Japan were 2.1% above the same level a year earlier and represented the ninth straight month of y-o-y gains, helped by robust demand for kerosene and fuel oil used for power generation.

Within products, distillates saw a build, while naphtha, gasoline and residual fuel oil experienced falls. Distillate stocks rose for the fifth consecutive month, up by 3.2 mb to end August at 34.5 mb, the highest level since November 2011. Despite this build, they still showed a deficit of 3.1 mb or 8.2%, compared with a year ago, and were 4.5 mb or 11.6% below the five-year average. All distillate components saw builds, with the bulk of the overall increase coming from kerosene stocks as they rose by nearly 19%. This build was due mainly to higher production of almost 22%, while the rise of 8.6% in kerosene sales limited the build in inventories. Jet fuel inventories rose by 5.4%, driven by an increase of 13% in production. Gasoil stocks also rose by 1.6%, supported by a huge jump in imports, which doubled the level from the previous month. Higher output, which rose by 5.7%, contributed to the build in gasoil stocks too.

Gasoline stocks fell slightly by 0.2 mb, reversing the build of the previous month. At 13.9 mb, gasoline stocks were 0.7 mb or 5.1% higher than a year ago, representing a surplus of 0.7 mb or 5.6% with the seasonal average. The build in gasoline stocks could be attributed mainly to higher production, which increased by 9.5%. Healthy domestic sales limited the build in gasoline inventories. Residual fuel oil stocks declined by a slight 0.1 mb in August to 17.2 mb. At this level, they were 0.2 mb or 1.4% above the same period a year ago and 1.0 mb or 5.7% below the five-year average. Within the components of fuel oil, fuel oil A saw a decline of 1.3%, while fuel oil B.C stocks remained unchanged. Higher imports, combined with lower domestic sales, were behind the build in fuel oil inventories.

Naphtha inventories saw a fall of 1.6 mb, ending August at 9.5 mb. At this level, they remained 1.5 mb or 13.4% below a year ago and 2.6 mb or 21.3% lower than the fiveyear average. The fall in naphtha stocks came from higher domestic sales, combined with lower production. Preliminary weekly data from PAJ showed Japanese total commercial oil stocks rose in September by 6.8 mb to end the month at 183.2 mb. The build was driven by both crude and products as they increased by 5.7 mb and 1.1 mb respectively. Within products, the picture is mixed as gasoline, distillate and naphtha saw builds, while residual fuel oil stocks experienced a draw. The bulk of the build in product stocks came from distillates, which increased by 1.1 mb, followed by naphtha with a build of 0.8 mb, while gasoline saw a minor build of 0.3 mb. In contrast, residual fuel oil declined in September by 1.1 mb.

Singapore and Amsterdam-Rotterdam-Antwerp (ARA)
At the end of August, product stocks in Singapore declined for the second consecutive month, falling by 3.3 mb to end at 35.7 mb. With this drop, they remained below the level of the same time a year ago, showing a deficit of 7.9 mb or 18.1%. Within products, middle distillate stocks saw a build, while light distillate and fuel oil stocks experienced drops. Light distillate stocks ended August 1.7 mb lower than in the previous month to stand at 8.6 mb, the lowest level for almost three years. Also, they were 0.2 mb or 1.8% below the year-ago level. The fall in light distillate stocks came from strong gasoline demand from Malaysia and Indonesia, combined with low imports of naphtha from Taiwan. Fuel oil stocks also dropped, by 2.2 mb, to stand at 17.6 mb at the end of August. At this level, they were 3.9 mb or 18.1 mb below the same period a year ago. Lower imports from Latin America, combined with strengthening Chinese demand, were behind the drop in fuel oil stocks. Middle distillate stocks rose by a slight 0.5 mb to 9.4 mb, the highest level since March. At this level, they were 3.8 mb or 29.0% below the same time last year. This build was due mainly to higher imports from the Middle East as demand was firm during this period of the year.

Product stocks in ARA at the end of August rose by just 0.3 mb to 32.0 mb, the highest level for five months. This meant that they were 1.2 mb or 3.7% below last yearís level over the same period. Within products, the picture was mixed, as gasoline, gasoil and jet fuel saw builds, while fuel oil and naphtha witnessed declines. Gasoline stocks rose by 0.2 mb to 5.3 mb, leaving inventories 0.4 mb or 8.2% above the same time a year ago. The build in gasoline came from lower demand from West Africa and the Mediterranean. However, this build was limited by the backwardation structure of the gasoline forward curve, which did not encourage an increase in stocks. Jet fuel inventories rose for the third consecutive month by 0.4 mb, ending August at 3.1 mb, and this represented a decline of 1.2 mb or 28.0% from the same period last year. This build occurred as imports from South Korea outpaced exports to the US. Fuel oil stocks fell for the second consecutive month by 0.3 mb to stand at 4.7 mb, representing a deficit of 1.7 mb or almost 27% with a year ago. The drop was mainly due to VLCCs, which left for Singapore. Naphtha inventories reversed the build of the previous month and declined by 0.4 mb to end August at 1.1 mb, nearly double the level of a year ago.

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