US crude stocks saw a surprise build last week, despite record-high exports, while gasoline and distillate inventories were mixed, Energy Information Administration data showed Wednesday.
* Crude exports top 2.3 million b/d
* Domestic output climbs further
* USAC diesel stocks tightening
Higher imports and less refinery activity drove crude stocks up 2.17 million barrels to 429.737 million barrels the week ending April 20.
Analysts surveyed Monday by S&P Global Platts were looking for a decline in crude stocks of 1.1 million barrels. For the same period, stocks rose 931,000 barrels on average from 2013-17.
Inventories remain below the five-year average, but the size of the deficit was trimmed to 3.3% compared with almost 3.6% the week prior.
Oil futures weakened right after the release of the EIA data, with NYMEX crude flipping into negative territory.
Front-month crude firmed shortly afterward and was roughly $67.90/b in the early afternoon, up 20 cents from Tuesday's settle. That contract has been around $68/b since last week, its highest level since late 2014.
One factor likely to support prices is the start of consistent US crude draws, which typically last from May until the end of August.
After a draw the week ending April 13, there was the possibility that this period of seasonal declines could be underway earlier than normal. US crude imports rose 539,000 b/d last week to 8.469 million b/d, pushing stocks higher. Imports have averaged 7.8 million b/d year to date.
The difference between imports and exports -- or net imports -- still dipped because exports jumped by 582,000 b/d last week to 2.331 million b/d, an all-time high.
The previous record for most crude exports was set only three weeks prior at 2.175 million b/d, according to EIA data.
Last week saw crude stocks build even though net imports fell, which stands as an exception to the recent trend showing flows have been a significant determinant of weekly stock changes.
For eight of the last 10 weeks, net imports and crude inventories have moved in the same direction. That is, a week-on-week drop in net imports has accompanied stock draws, and vice versa.
The broader trend shows a decline in net imports, which could be expected given the boom in domestic production. Net imports have averaged 6.3 million b/d year to date, versus 7.4 million b/d in 2017 over the same period.
US production averaged 10.586 million b/d last week, up 46,000 b/d. So far this year, output has averaged 10.2 million b/d, compared with 9.07 million b/d in 2017, according to EIA weekly estimates.
A wider Brent/WTI spread has served as price signal for US producers to ship more crude overseas. That spread was around $5.84/b Wednesday afternoon, more than double the level from a year ago.
REFINERY ACTIVITY EASING
After rising six straight weeks, refinery utilization has dropped the last two weeks. It averaged 90.8% the week ending April 20, down 1.6 percentage points. Analysts expected a decline of 0.2 percentage point.
The significance of refinery utilization will soon grow as market observers try and gauge how hard facilities will be running during the peak driving season this summer. A major question moving forward is whether higher prices at the pump will curb consumer demand.
US retail gasoline prices are expected to be 14% higher this summer than last, with regular grade averaging $2.74/gal from April to September, according to the US Energy Information Administration.
US gasoline stocks built 840,000 barrels last week to 236.807 million barrels, a 4% surplus to the five-year average.
Stocks on the Atlantic Coast increased 544,000 barrels to 60.798 million barrels, a deficit of 2.7% to the five-year average.
The NYMEX RBOB crack spread against WTI was 60 cents lower Wednesday afternoon at $19.88/b. That was more than $1/b above 2017, but trailed the levels seen from 2013-16 at this time of year. DISTILLATE STOCKS DRAW
US distillate stocks fell 2.611 million barrels last week to 122.729 million barrels, EIA data showed. Analysts were looking for a distillate stocks to have been unchanged.
Inventories have tightened since early February. Stocks have dropped 18.6 million barrels over the last 10 weeks, moving from a surplus of 1% to deficit of 7.8%.
The Atlantic Coast diesel market has also been tightening amid colder-than-normal weather. Stocks of low and ultra low sulfur diesel fell 1.158 million barrels last week to 32.143 million barrels.
Combined USAC stocks have drawn 10.3 million barrels the last six weeks, going from a surplus of 25% to the five-year average to a 8.4% deficit. As such, the NYMEX ULSD term structure has strengthened. The front-month/second-month spread has been backwardated since March 28.
The last time NYMEX ULSD's front-month/second-month spread was backwardated this time of year was 2014.
The NYMEX ULSD crack spread against WTI was down 19 cents at $21.08/b Wednesday afternoon. That was well-above the levels seen in 2016-17, but below 2015 when the crack was around $24/b.
