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Stock Movements - October 06

Source: OPEC_RP061012 10/16/2006, Location: Europe

USA
Total commercial oil inventories in the USA rose by 22.0 mb or 0.7 mb/d to 1,088.7 mb in September, which was 7.6% and 10.0% higher than the year-ago level and the five-year average. The stock-build came entirely from products as crude oil stocks declined on a monthly basis.

Crude oil stocks declined by 1.8 mb to 328.8 mb in September from the previous month, but stayed at comfortable levels of 7.1% above the same month last year and 14.0% above the five-year average. The drop in crude oil stocks on a monthly basis was lower than in August due to a recovery in production to 5.1 mb/d along with lower demand and a slight decline in refinery inputs from 15.8 mb/d to 15.7 mb/d. It must be noted that contrary to expectations crude oil inventories were boosted by over 3.4 mb in the week ended 29 September compared to the previous week. Likewise, crude production recorded a recovery to 5,000 b/d while crude runs fell by 1 mb/d in the week ended 29 September following reports of a recovery in BP’s Alaskan Prudhoe Bay field. The drop in demand for crude is explained by refinery maintenance in the USA and was also reflected in the 2.5% decline in refinery runs during this week. In terms of forward cover, at 20.6 days crude inventories were still 6% above the fiveyear average.

In line with seasonal patterns, gasoline stocks inched up by 8.2 mb to 215.1 mb in September, 9.5% and 7.0% over a year ago and the five-year average respectively. The upward trend in gasoline inventories was linked to a 3.7 % decline in domestic demand despite a drop in production and imports of both conventional gasoline and blending components on a monthly basis, based on EIA’s four-week average. Forward cover stood at 23.3 days, a gain of 5% and 2% against the year-ago level and the five-year average. Moving to middle distillates, inventories scaled up a further 11.1 mb to 151.0 mb in September and 17.9% and 19% above the year-ago level and the five year average. Forward cover also increased by 2.5 days to stand at 36.6 days, widening the gains against the year-ago level and the five-year average to 12% and 8%, respectively. In the week ending 29 September, diesel contributed the most with 7.8 b, which left the level at 88.5 mb or 25.6% higher than a year earlier and 24% above the five-year average. The 2.0 mb drop in regular diesel fuel (15 ppm to 500 ppm sulphur) was outpaced by a 9.8 mb build in ultra-low sulphur diesel (ULSD). Increased production of ULSD was behind the build in diesel stocks. Heating oil inventories rose by 3.7 mb to 63 mb, an increase of 9.4% and 14% over the year-ago level and the five-year average.

In the week ending 6 October, crude oil stocks saw a larger-than expected build of 2.4 mb week-on-week, reaching 330.5 mb or 8% and 14% against the year-ago level and the five-year average. As crude imports declined, the build in crude stocks was related to higher production, which increased by around 100,000 b/d on a weekly basis to 5.3 mb/d and a decline in refinery runs which decreased by 0.7% to 89.2% from the previous week. In terms of forward cover, crude oil stocks were 5% above the five-year average, but 9% below one year earlier. Gasoline stocks ended the week with a slight surplus of 0.3 mb to 215.4 mb standing 21.1 days in terms of forward cover. Middle distillate inventories unexpectedly declined by 1.5 mb weekly to 150.0 mb, but were still at very comfortable levels of 20% and 19% higher than one year ago and the five-year average. The drop in middle distillate inventories was entirely due to a draw on heating oil stocks of 1.8 mb to 61.2 mb as diesel rose by 0.2 mb. The trend in heating oil inventories was attributed to an 110,000 b/d fall in weekly production which may be linked to seasonal refinery maintenance in the USA and healthy inventory levels, which exerted downward pressures on margins. Despite the draw heating oil stocks were 8% and 11% above the year-ago level and the five-year average and, at 72.5 days, the forward cover was high compared to the previous year. Diesel inventories edged up a slight 0.3 mb to 88.7 mb owing to falling production but were still at very high levels compared to a year ago and the five-year average.

Western Europe
In Eur-16 (Eu-15 plus Norway) total commercial stocks declined by 6.4 mb to 1,141.1 mb in September, a drop of 0.6% compared to the same month last year but still 6.4% above the fiveyear average. The draw was mainly due to a further reduction in crude oil inventories as well as a draw on middle distillate stocks.

Crude oil stocks slipped a further by 7.5 mb to stand at 487.2 mb in September, narrowing the y-o-y surplus to 3.6 mb, 29.5 mb over the five-year average. This trend took place despite an important cut in refinery runs as offshore maintenance limited output in the North Sea and lower BFO prices encouraged eastbound crude shipments. Refinery runs decreased by 150,000 b/d in September from August, which meant a cut of 2% to 92% in the operable utilization rate. Lower gasoline and fuel oil prices resulted in negative margins, leading to an early start to the turnaround season. On the product side, gasoline stocks continued building up in September, growing by 2.6 mb to 132.5 mb on a monthly basis as a result of the closed arbitrage window to the USA where gasoline inventories increased. Nevertheless, gasoline stocks were 2.7% and 2.4% lower than a year ago and the five- year average.

The surplus in middle distillate stocks in August turned into a deficit in September, decreasing by 2.9 mb to reach 384 mb month-on-month, 3% lower than the same month last year, but still around 8% above the five-year average. The draw on middle distillate stocks was prompted by strong demand for both diesel and heating oil which has been partially matched by imports from the USA and Asia-Pacific. It must be noted that data on middle distillate stocks for Eur- 16 was revised up in August after a downward revision in July, which resulted in a further stock-build in August. In the case of residual fuel oil, inventories remained unchanged at 111 b in September compared to August which saw a considerable draw based on revised data. Problems related to pressure on European storage have been overcome by exports to Asia- Pacific, but independent stocks in Rotterdam are still reported to be 35% near to tank top and turnarounds have cut local output.

Japan
Total commercial oil inventories in Japan rose by 11.9 mb in August compared to the previous month to reach 195.8 mb or more than 4% higher than the year-ago level and the five-year average respectively. Both crude and products contributed to the build.

Crude oil inventories in Japan reversed the downward trend of the previous month increasing by 1.1 mb in August which left inventories on par with the year-ago level and 2.9% above the five-year average. This trend took place despite a 6.3% increase in refinery runs and a slight 0.7% expansion of imports compared to the previous month. On a yearly basis, crude throughput was 1.6% lower triggering a 4.0% drop in August crude imports. The moderate growth in crude imports was due to lower imports by Iran compared to the huge rise in July. In July, crude imports rose by 19.8% month-on-month due to a huge 164% rise in the flow coming from Iran.

Product inventories continued to recover, increasing a further 10.8 mb to stand at 78.3 mb which represented a cushion of more than 6% against the year-ago level and the five-year average, respectively. A 12.6% drop in imports of total products was offset by an expansion in production and a fall in domestic oil product sales, which dipped 4.7% to 3.6 mb/d in August from the previous month when domestic sales for products, although low relative to the yearago standards, still rose on a monthly basis. Product oil sales were 8.3% lower in August than in the same month last year. The unusually weak demand for gasoline in July owing to high prices continued during August when it was 4.0% below the year-ago level. The slowdown in domestic product sales was also linked to falling demand for kerosene and jet fuel which declined by 31.2% and 12.4% respectively. The lower gain in stocks corresponded to gasoline which reported a 0.6 mb rise to 12.7 mb in August from July which left the level 3.1% higher than a year ago but 1.1% lower than the five-year average. Higher production and a slowdown in domestic gasoline sales, which grew by 2.4% in August compared to 10.1% in July, partially counterbalanced by the considerable 34% drop in imports and increased exports from July.

Middle distillate inventories edged up 8.8 mb which left the level at 44.4 mb, an increase of 10.3% and 9.1% over a year earlier and the five-year average. Apart from naphtha, all middle distillates contributed to the stock-build in products headed by kerosene, jet fuel, gasoil and fuel oil. In the case of kerosene, higher imports and production together with weaker demand combined to pull stocks 35.5% higher in August than in July, despite greater exports. It should be noted that the considerable drop in product demand boosted inventories encouraging refiners to reduce crude processing rates for September and October.

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