Analysis: EIA Sees Crude Stocks Plunge as Exports Surge


   
Karim Bastati
DTN Analyst

   VIENNA (DTN) -- Total crude oil inventories have plummeted by 16 million bbl 
last week amid surging exports and ongoing releases from the Strategic 
Petroleum Reserve, U.S. Energy Information Administration (EIA) data showed 
Wednesday (6/3). The 8 million bbl draw to commercial crude oil inventories in 
the week ended May 29 left them 3.3% below the five-year average.

   The unprecedented export pace amid the largest oil supply disruption in 
history has since mid-April accelerated the seasonal decline in crude oil 
inventories. Over the past six weeks, commercial stocks alone shrank by more 
than 32 million bbl, representing a deficit of 762,000 bbl per day, compared to 
the five-year average 110,000 bpd decline. While refiners are running harder 
than last year in light of high product cracks, the bulk of the rapid pull-on 
inventories came from international rather than domestic demand.

   U.S. crude oil exports clocked in at 5.87 million bpd last week according to 
the EIA, marking the second-fastest weekly pace on record. Sustained high 
exports have also pushed the four-week average to unseen heights. Over the past 
four weeks, crude exports averaged more than 5.35 million bpd, some 1.58 
million bpd, or nearly 42%, more than in the same period last year.

   The Brent-WTI spread, under normal circumstances a solid indicator of future 
U.S. exports, has been subject to extreme volatility since the start of the 
U.S.-Israeli war on Iran in late February. Refiners globally turned to U.S. 
crude to plug part of the gap left by the loss of more than 10 million bpd of 
crude oil from the Middle East as flows from the Persian Gulf have remained 
almost idle for the past three months. The correlation between the export pace 
and the benchmark spread has all but disappeared since, as the surge in 
international demand came out of necessity and not bargain-hunting.

   WTI's discount to Brent has over the past month narrowed considerably and 
recently slipped even below pre-war levels. This may in part be a reflection of 
high demand and shouldn't necessarily be read as heralding the end of the 
recent export surge. A lack of alternative crude supply will keep international 
buying interest elevated, and current refining economics more than justify the 
steep premiums refiners have been paying to secure supplies and guarantee 
uninterrupted operations.

    




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