Note: This article was originally published in Boslego Risk Services Premium Marketplace membership site on Seeking Alpha on April 12th. For more information, click here. Next update tomorrow on Premium.

According to the Energy Information Administration (NYSEMKT:EIA), U.S. petroleum inventories fell by 4.7 million barrels last week. They stand about 140 million barrels higher than the rolling 5-year average, which is rising due to the persistence of high stocks. And domestic crude production continues to rise.

U.S. crude imports from Saudi Arabia dropped for a second straight week. They averaged 883,000 b/d last week, about the same as in the prior week. These figures are about 360,000 b/d lower than the prior 4-week trend.

I view this update as modestly supportive for prices. I will be updating my short-term supply/demand outlook following this report.

Crude Production

The EIA estimated that U.S. crude production rose by another 36,000 barrels per day last week to average 9.235 million barrels per day (mmbd) and 9.178 mmbd over the past 4 weeks, up 1.8 % v. a year ago. In the year-to-date, crude production averaged 9.049 mmbd, off 0.7% v. last year.

Other Supply

I have previously noted in an article how the “Other Supply,” primarily natural gas liquids and renewables, are integral to petroleum supply. The 4-week trend in “Other Supply” averaged 5.527 mmbd, off 0.1 % over the same weeks last year. In YTD, it is 2.5 % higher in 2017 v. 2016.

Crude Imports

Total crude imports rose by 28,000 b/d last week to average 7.878 mmbd last week and 8.065 mmbd over the past 4 weeks, up 3.0 % v. a year ago. But net crude imports fell by 86,000 b/d but are 3.0% higher over the past 4 weeks v. the same weeks last year.

Crude exports rose by 114,000 b/d to average 689,000 b/d. Over the past 4 weeks exports averaged 706,000 b/d, 95% higher than a year ago. This is consistent with my recent analysis of OPEC – WTI spreads.

Imports from Canada dropped by 383,000 b/d. Syncrude Canada Ltd had announced that it is moving forward maintenance on its 350,000 b/d upgrader to April. The plant turns bitumen into light, synthetic crude oil. And so Canadian crude availability has dipped temporarily.

Crude Inputs to Refineries

Demand for crude at refineries rose by another 268,000 b/d last week to average 16.697 mmbd. Over the past seven weeks, refinery inputs have risen significantly, as refineries are coming out of turnarounds (maintenance). They are 1.1 % higher over the past 4 weeks than a year ago. This seasonal shift increases crude demand but also results in higher output of petroleum products.

Product exports dropped by 391,000 b/d last week, but have surged this year. Over the past 4 weeks, they averaged 4.766 mmbd, up 18.1 % v. the same weeks last year. In the year-to-date, they have averaged 4,854 mmbd, up 19.6 % v. a year ago.

Crude Stocks

The EIA reported that crude stocks fell from record highs by 2.2 million barrels (mmb) to 533.4 mmb. This figure is 28.1 mmb higher than a year ago. In the year-to-date, crude stocks have built about 54 million barrels.

EIA also reported that stocks in the Strategic Petroleum Reserve (SPR) were draw down by 0.6 mmb. This is part of a sale authorized by Congress to pay for improvements but also fund unrelated bills. It goes into commercial stocks and thus helps offset some of the OPEC cut.

With this week’s build, crude oil supply has exceeded demand by 97,000 b/d over the past 4 weeks. Crude stocks normally build for about another 7 weeks this time of year.

Petroleum Products

The supply-demand trend shows a large undersupply, as is typical seasonally.

Demand

Total petroleum demand rose by 177,000 b/d to average 19.879 mmbd. Total demand over the past 4 weeks averaged 19.678 mmbd, unchanged v. the same weeks last year. In the YTD trend, product demand is off 0.1 % v. 2016 but is the product of blending two methodologies. The EIA admitted that it had been overstating the product demand trend for much of last year due to an underestimation of exports.

Gasoline demand at the primary stock level averaged 9.311 mmbd over the past 4 weeks, down 1.0 % v. the same weeks last year. In the YTD, it reports that gas demand is off 3.8 % v. a year ago.

Distillate fuel demand, which includes diesel fuel and heating oil, averaged 4.242 mmbd over the past 4 weeks, 15.6 % higher v. the same weeks last year. In the YTD, demand is up 12.6% v. a year ago.

Jet fuel demand is up 3.6 % over the past 4 weeks v. the same weeks in 2015. In the YTD, demand was up 3.6 % v. 2016.

Product Stocks

Total product stocks dropped 3 mmb last week, ending at 799 million barrels. This figure is 25 million barrels lower than last year at this time.

The 4-week supply/demand balance is currently in undersupply by 410,000 b/d, more than any of the past three years. That will change as refinery utilization increases.

Gasoline stocks dropped 3.0 mmb to end at 236.1 mmb. The stock deficit v. last year is 3.6 mmb.

Distillate stocks fell by 2.2 mmb to end at 150.2 mmb. The stock deficit by last year now stands at 13.3 mmb.

Conclusions

In total, inventories of crude oil and petroleum products drew by 4 mmb last week and are 5 mmb higher than a year ago. U.S. stocks are 140 million higher than the rolling 5-year average.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.



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