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Stock Movements - Sep 08

Source: OPEC_RP080909 9/16/2008, Location: Europe

USA
In August, US total commercial oil stocks fell by 5 mb, in line with the seasonal draw, to stand at 983 mb. The draw, the first since the end of the first quarter, kept the deficit with the five-year average at 28 mb or 3% for the fourth consecutive month.

Crude oil inventories added a further 4.5 mb to move above 300 mb and stay slightly below the five-year average (-2.8 mb). The increase of around 150,000 b/d in crude oil stocks, which took place despite a decline in imports, was attributed to lower refinery runs. The gap with the five-year average narrowed significantly from a considerable 27 mb at the end of the second quarter.

In contrast to crude oil, product inventories fell 9.5 mb to more than offset the build of the previous month. This draw was driven by gasoline stocks which lost almost 15 mb, the sharpest decline in the last three years. As result, gasoline stocks fell below 200 mb for the first time this year to stand at around 194 mb, the same level as a year earlier. This strong decline in gasoline stocks can be is attributed to a significant drop of 100,000 b/d in finished motor gasoline imports The move below 200 mb sent stocks again below the five-year average for the second time this year. It is worth mentioning that gasoline stocks witnessed an overhang of nearly 19 mb in February before starting to decline due to the combination of lower imports and weaker production from refineries amid poor margins and crack spreads. Similarly, distillate stocks dropped 2 mb to 131 mb and moved below the five year average again, putting an end to the upward trend which began in April. Residual fuel oil stocks inched up 0.6 mb to stand above 37 mb, implying 1.5 mb or 4% more than the five-year average whereas jet fuel stocks fell 0.3 mb but remained above the five-year average. The Strategic Petroleum Reserve (SPR) added 0.4 mb to hit an all-time high of 707.2 mb, which corresponds to more than 97% of total SPR capacity. This build took place despite a decision, signed by President Bush, to stop filling the SPR effective July. It could be attributed to a delay in deliveries.

According to latest data, US commercial oil stocks fell sharply in the week ending 5 September. This could be attributed to disruptions from refineries and ports due to hurricanes. The draw of more than 15 mb, the highest since end-January 2003 on a weekly basis, resulted essentially from a decline of almost 6 mb in crude oil and gasoline stocks. However, due to lower imports crude oil inventories lost 5.9 mb to move below 300 mb, widening the deficit with the five-year average to 6 mb. Gasoline stocks fell 6.5 mb, the seventh decline in a row, to stand at 188 mb, the lowest level since the week ending 3 November 2002. Distillate stocks fell 1.2 mb with diesel inventories losing 1.9 mb and heating (oil stocks) adding 0.6 mb. With this decline, distillate stocks are now below the five-year average for the first time since mid-May.

Nevertheless, due to weaker demand, crude oil stocks remained comfortable in terms of forward cover, corresponding to 20.3 days, one day better than the average of the previous five years. In contrast, gasoline and distillates stocks were 1 day and 2 days below the average, respectively.

Western Europe
In EU-16 (EU-15 plus Norway), total oil stocks failed to follow their seasonal trend and fell below the five-year average in August, for the first time since last November, after having dropped 11.8 mb, the same amount they have increased in the previous month. At 1,111 mb, stocks are showing a deficit of 11 mb or 1% with the seasonal average while at the end of the third quarter they were 22 mb above the average. The unseasonal draw is attributed to a strong decline of 15.8 mb in crude oil stocks. This drop of an equivalent of 510,000 b/d, the largest since last February, left crude oil stocks at 470 mb, the lowest level so far this year and lower than the five-year average and last year’s level. This draw was due to lower production from the North Sea and a decline in imports from the BTC pipeline. In addition, transatlantic arbitrage opportunities added further pressure.

Increasing imports and production from refineries let product inventories rise for the second consecutive month, adding 5 mb to stand at around 641 mb. The same as crude oil inventories, and despite this build, product stocks moved below the five-year average as the increase was lower than the seasonal build. However, both gasoline and distillate stocks increased but remained below the average. However, gasoline stocks which rose 1.5 mb to 129 mb were just 2 mb below the five-year average whereas distillate inventories, despite a build of 7 mb, were 14 mb below the average compared to 10 mb in the previous month. Nevertheless, when compared to a year ago, gasoline stocks were much better while distillates were lower this year. Both residual fuel oil and naphtha inventories lost around 1.8 mb but remained higher than a year ago.

Japan
Japan’s commercial oil stocks increased 10 mb in July, offsetting the draw of the previous month, to move above 180 mb for the first time since last November. However, despite this build, inventories remained at the bottom of the five-year range. The build was shared by both crude oil and product stocks.

However, despite the build of 5 mb, crude oil stocks, remained well below the lower end of the five-year range. At 106 mb, crude oil stocks still showed a deficit with the five-year average of 12 mb or 10% and 9 mb with last year’s level. This situation resulted from the fact that crude oil stocks hit their all-time low in March when they fell to 90 mb and since then they could not move within the five-year range. The build in crude oil inventories in July, which took place despite an increase of nearly 13% in refinery throughput, was attributed to a surge of 0.8 mb or 22% in imports over the previous month.

In contrast to crude oil and due to weaker demand, product stocks remained comfortable within the upper half of the five-year range. However, within products, gasoline and distillates continued to follow opposite trends with gasoline stocks falling and distillate inventories increasing. Indeed, gasoline inventories lost 1 mb to stand at 13 mb, which corresponded to the five-year average while distillate stocks rose 5 mb, the largest build in ten months, to hit 34 mb, the second highest level so far this year after the 37 mb of January, and stayed within the seasonal range.

Supported by the continuous increase in refinery runs, product stocks added a further 11 mb in August according to preliminary data. Once again, distillate inventories continued to drive product stocks up and accounted for 9 mb to move above the five-year range for the first time since last April to stand at 43 mb. Gasoline stocks added more than 1 mb and remained comfortable above the five-year average and last year’s level. However, in contrast to products, crude oil inventories fell around 6 mb, offsetting the build of the previous month and moved back to around 100 mb to stay at the lower end of the five-year range.

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