US Distillate Stocks Fall Below 100 Million Barrels for the First Time Since 2003
Distillate inventories dropped 3.6 million barrels to 99.3 million, 13% under the five-year average, and Washington is lending heating oil out of its Northeast reserve to cool a $6.29-a-gallon diesel market.
The US distillate cushion has gone. Commercial stocks of diesel and heating oil fell 3.6 million barrels in the week to Oct. 30 to 99.3 million barrels, the first print below 100 million since 2003 and 13% under the five-year average of 114.5 million barrels, according to the EIA's Nov. 4 Weekly Petroleum Status Report. Crude stocks fell 865,000 barrels to 409.8 million, 4% below the five-year average, and gasoline slipped 222,000 barrels to 209 million, 2% below. Total commercial petroleum inventories dropped 8.2 million barrels.
Refiners are running hard but making less of the barrel that matters. Crude runs rose 199,000 barrels a day and utilisation climbed 1.7 points to 94.5%, yet distillate output fell to 5.2 million barrels a day, while four-week distillate product supplied averaged 4.2 million barrels a day, up 8.7% year on year. Exports of crude dropped to 3.675 million barrels a day from 4.854 million a week earlier, so the draw happened while fewer barrels were leaving the country.
Prices show the strain. NYMEX ultra-low-sulphur diesel settled at $4.332 a gallon on Nov. 6, up about 74% year on year, putting the diesel crack over Brent at $83.62 a barrel, roughly $42 wider than a year ago. The EIA's Nov. 2 survey put average US retail diesel at $6.292 a gallon, $2.14 above gasoline. The Department of Energy responded by lending 300,000 barrels from the Northeast Home Heating Oil Reserve to four companies, nearly a third of that stockpile, and heating oil futures fell about 7% on the news.
The odd part is that this is happening while crude collapses. Brent settled at $98.29 a barrel on Nov. 6 and WTI at $90.52, down 11.3% and 11.3% respectively on the week, as the midterm result was read as a path to ending the Iran war. Product cracks have not followed crude down: New York Harbor ULSD wholesaled at $4.757 a gallon in the week to Oct. 30, down 8.5% week on week but still far above the crude-equivalent, leaving refiners an unusually wide margin to defend and a Jan. 12 weekly report that will show whether the draws persist.