Crude and Product Prices Rebound on Inventory Statistics and Market Developments

Strategic Insights -

Crude and product prices witnessed a bounce back on Wednesday as bullish inventory statistics, coupled with the downed U.S. refinery and the ongoing Brazilian strike, helped mitigate the losses. The June crude contract on the New York Mercantile Exchange (Nymex) settled up 14 cents at $19.75/bbl, while the June gasoline contract settled up 0.73 cents at 63.29 cents/gallon. The American Petroleum Institute (API) reported that crude imports fell to 6.12 million b/d last week, compared with total U.S. production of 6.61 million b/d, marking the first time imports fell below domestic production in several weeks.

Key Takeaways:

  • Crude prices rebounded on Wednesday, with the June crude contract on Nymex settling up 14 cents at $19.75/bbl, after falling to a daily low of $19.52.
  • Inventory draws were heavily influenced by imports that fell below levels of domestic production for the first time in several weeks, with crude imports dropping to 6.12 million b/d last week.
  • The API reported that imports to the West Coast fell about 400,000 b/d from last week, while imports to the East and Gulf coasts fell 1.51 million b/d.
  • The arbitrage is there, and there isn't a shortage to keep barrels from coming into the United States, according to a Midcontinent foreign crude trader.
  • Recent deliveries of Oman grade crude into the Gulf Coast were cited as another factor supporting crude prices, with Oman being sold into the Gulf Coast at a $1.30/bbl discount to West Texas Intermediate (WTI) for late June.
  • Refineries finally cut back on runs by 1.1 percentage points, which was seen as supportive of product prices, particularly cash gasoline prices.
  • The potential long-term problem at BP Oil Co.'s Toledo, Ohio, refinery perked up cash gasoline prices, while the June gasoline contract on Nymex settled up 0.73 cents at 63.29 cents/gallon.
  • The Brazilian strike, which saw eight of the country's 10 refineries remain closed, also lent strength to crude and product prices, with normal refinery output totaling 1.4 million b/d, including 50,000 b/d of gasoline headed to the United States.

Statistics:

  • Crude imports fell to 6.12 million b/d last week, compared with total U.S. production of 6.61 million b/d.
  • Imports to the West Coast fell about 400,000 b/d from last week, while imports to the East and Gulf coasts fell 1.51 million b/d.
  • Refineries cut back on runs by 1.1 percentage points.
  • Cash gasoline prices were supported by the potential long-term problem at BP Oil Co.'s Toledo, Ohio, refinery.
  • The June gasoline contract on Nymex settled up 0.73 cents at 63.29 cents/gallon.
  • Midcontinent unleaded prices rose to 2.5 cents over the June Nymex contract.
  • Gulf Coast prices were trading 0.25 cents over the June contract.
  • Brazilian refineries were operating at 40,000 b/d, compared to normal output of 1.4 million b/d.
  • 50,000 b/d of gasoline was headed to the United States from Brazil.

Sources:

  • American Petroleum Institute (API)
  • New York Mercantile Exchange (Nymex)
  • BP Oil Co.
  • Bloomberg
  • Reuters