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Stock Movements - Oct 09

Source: OPEC_RP091011 10/13/2009, Location: Europe

USA After having dropped in August for the first time since September 2008, US commercial oil stocks resumed their upward trend increasing 10.4 mb in September to stand at nearly 1,109 mb, resulting in an overhang of around 90 mb with the five-year average. It is worth noting that US commercial oil stocks increased by more than 100 mb since September 2008, compared to a draw of 22 mb a year ago.

The build in September is attributed to products while crude oil stocks continued the downward trend. Crude oil inventories dropped a further 2.4 mb to 338 mb, bringing the cumulative draw over the last five months to 32.6 mb. However, despite this draw, US crude oil stocks remained above the upper end of the five-year range, keeping the overhang at 32 mb.

Driven by both gasoline and distillates, product stocks increased 12.8 mb to offset the draw of the previous month. Gasoline inventories went against the seasonal trend and jumped more than 6 mb to offset the draws of July and August and stand above 211 mb.

The build in gasoline inventories was driven by a decline in demand as the driving season has ended. Following the same trend, distillate stocks moved against the seasonal trend and continued increasing. They rose a further 7 mb to move around 172 mb, the highest level since December 1982. It is worth noting that 26 mb have been added to distillate stocks since the beginning of the year, resulting in an overhang of 40 mb or 30% in September compared to just 12 mb or 10% in January.

Again, the ample level of distillate stocks is attributable to sluggish demand due to the ongoing impact of the economic crisis. Jet fuel oil stocks increased slightly 0.3 mb to stand close to 46 mb, up 8 mb or 20% over September 2008 while residual fuel oil inventories reversed the downward trend and rose 1.4 mb to stand above 35 mb but remained lower than a year ago.

Due to weak demand, both crude oil and product stocks are very comfortable in terms of forward demand cover. However, crude oil stocks correspond to 23 days of forward cover, one day and half better than the average of the previous five years while gasoline inventories corresponded to 23.7 days, almost 2 days higher than the five-year average. Ample distillate stocks and sluggish demand has let days of forward cover reach a new record of almost 51 days, a gain of 18 days or 55% over the five-year average.

Strategic Petroleum Reserve (SPR) resumed the upward trend and gained 1 mb to stand at a new record of 725.1 mb which approaches the total capacity of 727 mb.

Western Europe
European total oil inventories (EU- 15 plus Norway) continued to alternate between builds and draws of the same amplitude to some extent since last May and dropped almost 5 mb to stand at around 1,142 mb in September, the same level as the one seen five months ago. Despite the draw, the overhang remained at around 16 mb with the five-year average and 30 mb higher than a year ago.

The draw in inventories was driven by distillates, which dropped for the first time since October 2008. Despite an increase in refinery runs, lower imports let European distillate stocks lose 6 mb, in line with the seasonal trend, but stood at more than 410 mb to remain above the upper end of the five-year range for the seventh consecutive month. Following the same trend, crude oil stocks dropped, but for the sixth month in a row. They lost 0.4 mb to stand at 476 mb, in line with the five-year average.

The draw in crude oil inventories was due an increase in refinery runs. However, the rise in refinery runs was at some extent offset by an increase in supplies within the region, leaving stocks to decrease by just a marginal 0.4 mb. Gasoline stocks rose 1 mb to 117 mb but remained 10 mb below the five-year range. It is worth mentioning that gasoline stocks moved for the first time within the five-year range in September after having been below the range since the beginning of the year.

The build in gasoline inventories was attributed to the combination of higher production from refineries and weak demand within the region. Similarly, weaker demand in addition to closed arbitrage to Asia-Pacific let residual fuel oil stocks increase a further 0.8 mb to 111.3 mb whereas naphtha stocks fell a marginal 0.1 mb to 27.2 mb, down 1.3 mb from a year earlier.

Japan total commercial oil stocks remained comfortable, standing slightly below 178 mb in August, almost nchanged from the previous month. Nevertheless, inventory components saw mixed movement with crude oil losing a hefty 6 mb and products increasing by almost the same amount.

Crude oil inventories fell 6.2 mb to move below 100 mb for the first time since April of last year. At 98 mb, crude oil inventories remained below last year’s level and the five-year average but are still comfortable considering demand. The highest draw in crude oil stocks since end 2007 was attributed to a recovery in refinery throughput, albeit it remains below the seasonal rate as domestic demand for products is still weak.

In contrast, product inventories led by distillates increased a further 5.5 mb to stand at nearly 80 mb, the highest level so far this year. All the components of product inventories increased except gasoline. Driven by stronger supply from refineries and lower domestic demand, distillate stocks continued their upward trend, adding 3.3 mb to stand at a comfortable level of nearly 38 mb. On the other hand, gasoline stocks fell — albeit marginally — for the fourth consecutive month but stood within the five-year range at 12.5 mb, the lowest so far this year. The draw in gasoline inventories was attributed to a combination of an increase in domestic sales and higher exports. Residual fuel oil and naphtha stocks rose by around 1.5 mb each to stand at 17.0 mb and 12.3 mb, respectively.

Preliminary data shows that Japan’s commercial oil inventories rose by almost 4 mb between the last week of August and early September. Again, the build was driven by distillates which added more than 2 mb while crude oil inventories fell a further 4 mb and contrary to August, gasoline stocks recovered and posted a build of around 0.5 mb, the first since the end of the third quarter 2009.

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