–Crude Imports Outstripped Demand
–Also Sees Possible Effect From February Snowstorms
–Monitor Diesel Demand For Early Indications Of GDP
By Brai Odion-Esene
WASHINGTON (MNI) – A huge weekly build in U.S. crude oil stocks is
primarily due to increased crude imports, driven by a possible order
backlogs due to weather as well as delayed deliveries to refineries, the
chief economist for the American Petroleum Institute told Market News
International Wednesday.
The API late Tuesday said that for the week through March 19, crude
stocks rose a substantial 7.5 million barrels, gasoline stocks dipped
81,000 barrels and distillate stocks fell 2.5 million barrels. The
estimate helped drive commodities prices lower.
The main reason behind the huge crude stock build, according to the
API’s John Felmy, is a heavier flow of crude imports.
“What we saw was a sharp increase in crude imports week over week
of over 1.2 million barrels a day,” he told MNI. “That was the main
reason that you saw the increase.”
Felmy added that there was a slight decline in refinery inputs
which would also contributed to the build. “It was basically those two
factors which had the build-up.”
Asked if that means there is increased demand in the U.S., Felmy
replied that demand is, in fact, up “a little bit,” but added that the
API so far only has preliminary data for the first half of March, making
it hard to know for sure.
Total petroleum demand is up roughly 3%, he said, which is
consistent with past Department of Energy estimates.
“What happened is that even though demand was up, imports were up
even more,” Felmy said, which offset the increase in demand.
So imports outstripped demand? “That’s correct,” he said.
Explaining why the U.S. could import more oil than the actual
demand for it, Felmy noted that import data is really “lumpy.” On a
week-to-week basis, he said, storms and other factors can cause a
slowdown one week and with a rebound the next.
Another factor that can influence the level of oil imports, he
continued, is refinery runs, as refinery throughput usually is
relatively slow this time of year because they are going through
maintenance and turnaround.
“As they come out of that of course their demand for crude is going
to go up,” he said, and as in all likelihood they have already placed
their orders, it comes in lumps.
It is also possible that the severe weather seen in February from
the Northeast down to the Gulf region of the U.S. had an impact in the
crude stock build, Felmy said.
“We don’t know exactly what the reasoning behind the data is,” he
added, but it certainly could have with major snowstorms in Oklahoma and
North Texas.
The Energy Information Administration will release its estimate of
U.S. commercial crude oil inventories midmorning Wednesday, and Felmy
noted that last week, the API estimate for crude stocks was exactly the
same as the EIA at 344 million barrels for the March 12 week.
“On a week-to-week basis we are all within a percent or so of each
other in terms of the totals,” he said, “but the changes in the week can
be different.” For example, Felmy added, last week the API estimated a
400,000 build in crude inventories while the EIA saw a 1 million barrel
build.
Looking at overall U.S. oil demand, Felmy noted monthly API data
showed oil deliveries — a measure of demand — were up 0.6% in February
this year vs. last year. While gasoline demand was also up, diesel
demand was 6%.
“Diesel demand is fairly closely correlated with GDP,” he said.
Going forward it will be important to monitor what happens with
consumers — and how that affects gasoline demand — as well as business
travel (for jet fuel demand).
“And everything is shipped with diesel so that’s the key factor,”
Felmy said, “what we’ve seen historically is the correlation between
diesel demand and GDP is about 0.97 … but that does not mean it will
continue.”
The U.S. Energy Information Administration reports its own crude
oil stocks numbers at 10:30 ET.
** Market News International Washington Bureau: 202-371-2121 **
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