New York — Crude futures fell Wednesday after government data showed US crude inventories climbing 3.8 million barrels last week on a slowdown in exports.
September NYMEX crude settled $1.10 lower at $67.66/b, while October ICE Brent was down $1.82 at $72.39/b.
The climb in US crude inventories for the week ended July 27 was led by a rise in US Gulf Coast stocks due to a slowdown in crude exports, US Energy Information Administration data showed Wednesday.
The EIA reported a 5.6-million-barrel crude stock build in the US Gulf Coast, to 217.33 million barrels.
US crude exports fell 1.37 million b/d to 1.31 million b/d last week. Week to week fluctuations are not unusual, considering the lag time for vessels to load and unload barrels.
However, the four-week moving average shows US crude exports slowing for the third week in a row, from 2.43 million b/d for the week ended July 6 to 1.87 million b/d for the week ended July 27.
"A surprising drop in crude exports for the second time in three weeks does cause some concern about the global oil supply/demand balance," IAF Advisors principal analyst Kyle Cooper said in a note.
The decline could be due in part to a drop in exports to China, which at 427,000 b/d was the single-largest buyer of US crude in May.
S&P Global Platts vessel tracker cFlow shows China's crude imports from the US in July have fallen, and could fall further in August.
Market sources said Unipec, the trading arm of China's state-run Sinopec, resold its June-loading US cargoes after Beijing said it was considering a 25% import tariff on US crude. And a Sinopec executive said last week the company would slow its purchases of US crude after August.
US crude exports could also be slowing as more OPEC and Russian crude is available. Kuwait crude production at 2.8 million b/d in July was at its highest since December 2016, the country's oil minister said Wednesday. The UAE boosted its crude production in July, while Iraq's southern exports hit a record high 3.543 million b/d in July.
More Iranian crude has been available as well in recent months, with China and India the main buyers. However, US sanctions on Iran are due to kick back in November 4, which could remove up to 1 million b/d from the market.
The EIA crude data was not entirely bullish. Cushing, Oklahoma, inventories continued to decline, falling 1.34 million barrels last week.
Cushing stocks have fallen 14.8 million barrels since mid-May to 22.39 million barrels, leaving them 65% under the five-year average. This has been supportive for the Cushing-delivered NYMEX crude contract.
Also, US refinery crude runs remain high, lured by strong margins. USGC crude inputs climbed 200,000 b/d to 9.23 million b/d the week ended July 27, the EIA data showed, putting refiners there at 94.6% of capacity.
Midwest refiners were running at 99.1% of capacity last week. With crude deliveries from Canada and the Permian limited by pipeline constraints, Midwest refiners are likely drawing down on available inventories.
GASOLINE TIGHTENS
In refined products, September NYMEX RBOB settled 3.54 cents lower at $2.0451/gal, while September NYMEX ULSD settled 4 cents lower at $2.0974/gal.
US gasoline inventories have tightened even as refiners have been going strong, the EIA data showed.
US gasoline stocks fell 2.54 million barrels last week to 230.97 million barrels. Of that, 1.18 million barrels was on the US Atlantic Coast, home of the New York delivery point for NYMEX RBOB.
USAC gasoline stocks at 64.05 million barrels last week were 2% above the five-year average. While not unusual, gasoline is tight overseas, reducing the flow of gasoline imports into the USAC.
Still, European refiners are returning from maintenance, which should add more supply to the market, assuming the recent heat wave in Europe does not cause a reduction in runs. A number of plants have reported temporary outages on power problems, although have not specifically blamed them on the hot weather.
With Rhine River water levels dropping because of hot, dry weather in Europe, refined products inventories at the Amsterdam-Rotterdam-Antwerp endpoint have started to build. This could also have bearish implications for US refined products prices, at least in the short term.
On a four-week moving average, US exports of gasoline have risen to 776,000 b/d for the week ended July 27, from 578,000 b/d June 29. Distillate exports have slowed, however, to 1.22 million b/d from 1.48 million b/d June 22.
US distillate stocks climbed 2.98 million barrels last week, with combined low and ultra low sulfur diesel stocks on the USAC up 1.31 million barrels.
USAC stocks have been largely on an upward trend since mid-May, narrowing the deficit to the five-year average. Stocks at 34.29 million barrels for the week ended July 27 were at a 19% deficit, compared to a 27% deficit the week ended June 22.
