Product Draws Offset Crude Build But More Is Needed
EIA reported a mildly bullish oil storage report today. Refinery throughput once again disappointed to the downside coming in at 14.574 million b/d vs the 15 million b/d we expected. The timing of the Whiting refinery restart may have impacted this figure, so we expect a rebound next week.
Looking at refinery utilization, this is one of the more prolonged retracements we have seen (barring the cold event in 2021). Most of the recent crude build is the result of low refinery throughput.
In turn, and as we've written numerous times on this, product storage should draw steeply.
The pace of the product draws has been disappointing. Most of the disappointment is coming from gasoline, which has been surprisingly weak.
For gasoline storage, we are higher y-o-y, but in-line with 2022 levels. And if we look at implied gasoline demand, we are just below 2023.
Using GasBuddy's data, it does appear that gasoline demand is starting to pick back up, which should translate to higher gasoline draws. The recent pullback in the 3-2-1 crack spread has found a bottom, which is another potential signal that product draws should accelerate going forward.
As we wrote in our WCTW on Tuesday, it is vitally important for the big 4 storage (crude, gasoline, distillate, and jet fuel) to trend lower in the coming weeks.
Looking at our preliminary crude estimate, we do think product draws should once again outpace the crude build: