US crude oil inventories fell sharply for a third week in a row, dipping materially below the levels from the same time last year. As a result WTI crude price remains firmly above $106.
This drop in supplies is surprising because US crude production has recently spiked.
BW: - U.S. crude inventories were forecast to decrease by 2 million in the week ended July 12, according to a Bloomberg News survey of analysts. Stockpiles dropped more than three times that much, even as production surged to the highest since December 1990. The supply gain was offset as refineries processed 16.2 million barrels a day, the most since August 2005...US refineries, particularly in the Gulf Coast, are operating near full throttle. While this time of the year is peak production for refineries, this year's crude oil demand is clearly outstripping last summer's. And the nation's inadequate oil transport system is not helping matters.
EIA: - Crude runs at U.S. refineries have increased steadily since early March to reach some of the highest levels on record. At 16.1 million barrels per day (bbl/d) for the week ending July 5, U.S. crude oil runs were the highest for any week since 2007. This level represented a 2.1-million-bbl/d increase from the first week of March, the low point for the first six months of 2013. While the increase in crude runs since March reflects a particularly strong rebound from spring maintenance, an underlying combination of recent refinery capacity expansions and relatively healthy margins helped drive the absolute level of runs to a multiyear high.As the EIA points out, the refinery demand is driven by larger capacity and "healthy margins". Indeed the gasoline to Brent spread is near a multi-year record. At these levels refineries are quite profitable and will try to sell as much gasoline as possible.
From our sponsor: