US Crude Stocks Build As Exports Fall, Output Rises
The United States crude stocks saw a larger-than-expected build last week as exports fell sharply, and domestic production topped 10.5 million barrels per day, Energy Information Administration data showed on Wednesday.
Crude stocks rose 3.306 million barrels to 428.638 million barrels the week ending April 6, EIA data showed on Wednesday, according to Platts.
Analysts surveyed Monday by S&P Global Platts were looking for a build of 100,000 barrels. The five-year average for the same period showed an increase of 1.9 million barrels.
This build marked a reversal from the week prior when record-high US crude exports and a drop in imports led to a draw of 4.62 million barrels.
Last week saw imports rebound 752,000 bpd to 8.65 million bpd, while exports plunged 970,000 bpd last week to 1.205 million bpd.
Exports have averaged 1.5 million bpd year to date, double the amount from 2017 during the same period. Imports have averaged 7.8 million bpd so far this year, versus 8.1 million bpd in 2017.
With US crude production climbing further into record-high territory last week, flows have adjusted to encourage a drop in net imports.
Output rose 65,000 bpd to 10.525 million bpd the week ending April 6, a year-on-year increase of 1.29 million bpd.
Despite far greater supply, US inventories have fallen by nearly 105 million barrels since last year.
The Brent/WTI spread was trading Wednesday afternoon at $5.33 per barrel, compared with $2.44 a year ago. That spread had been around parity to $3 from late 2015 until August 2017 when it began to widen.
A premium for Brent over WTI provides an incentive for US producers to export crude. In a similar vein, Gulf Coast crude prices have strengthened to draw barrels there for export, refining or storage purposes.
Gulf Coasts crude stocks increased 2.632 million barrels last week to 223.468 million barrels, the biggest week-on-week build by region.
The spread for WTI MEH — representing WTI Midland crude at the Magellan East Houston Terminal — and WTI Midland has widened since late March.
That spread exceeded $8 per barrel last week, the biggest gap between Permian and Houston prices since S&P Global Platts began assessing WTI MEH in February 2015.
That also reflects the sheer volume of supply coming from the Permian Basin, which threatens to overwhelm the region’s pipeline capacity, even though additional infrastructure came online in late 2017.
The premium for WTI crude at Cushing, Oklahoma over Midland has also widened — topping $6 per barrel last week — in order to attract barrels.
That differential averaged a premium of $1.72 in March, a premium of 36 cents/b in February and a discount of 91 cents per barrel in January.
As a result, Cushing inventories have built for five straight weeks by 7.8 million barrels. Stocks at the NYMEX crude delivery point rose 1.129 million barrels last week to 36.022 million barrels.
Growing inventories at Cushing have helped widen the Brent/WTI spread after having narrowed to as little as $3.03 per barrel on March 1, in addition to weakening NYMEX crude’s term structure.
NYMEX crude’s M1/M2 spread has averaged a 2 cent/b backwardation this month, a seven cent per barrel backwardation in March, and a 19 cent per barrel backwardation in February.
Crude inventories have increased eight of the last eleven weeks, which is typical for this time of year. However, the size of the builds has been relatively small, allowing stocks to tighten relative to recent levels.