Rare Crude Build Highlights a Market Still Torn Between Deficit and Surplus

U.S. commercial crude oil inventories rose by 2.01 million barrels last week, a build that came in well above the roughly flat weekly change analysts had been looking for. Even with the addition, crude stocks remain 7.3 million barrels below year-ago levels and a much deeper 47.4 million barrels below the five-year seasonal average, a gap that has widened notably over the past several weeks. The build looks consistent with a pattern that has accompanied the recent run of Strait of Hormuz disruptions: cargoes rerouted or delayed during the escalation in tanker incidents tend to arrive in clusters several weeks later, temporarily lifting a single week’s count even as the underlying import trend continues to run well below last year’s pace. Continued releases from the Strategic Petroleum Reserve, which has been drawn down further to help supply the commercial market, likely also cushioned what would otherwise have been a tighter print.

At the Cushing, Oklahoma delivery hub for the WTI contract, stocks are reported to have extended their recent drawdown, continuing a choppy multi-week pattern of alternating builds and draws at the storage point. Domestic crude production has continued to edge higher and is running modestly above year-ago levels, a trend that has offset some of the import weakness even as refiners keep processing rates elevated heading into late summer.

Gasoline inventories drew down again last week, extending a stretch in which stocks have run comfortably below their seasonal norm. The persistent deficit appears consistent with refiners directing more of their crude slate toward distillate production even as gasoline demand has held up reasonably well through the back half of the summer driving season. Distillate stocks, by contrast, posted another build, the latest in a run of weekly additions, though the category remains one of the more structurally tight corners of the barrel and continues to sit well below its own five-year average. Strong distillate output against softer freight and industrial demand appears to be the main driver of the rebuild, a dynamic that has now persisted for more than a month.

Propane and propylene inventories continued to build at a brisk pace and remain well above their seasonal norm. Mid-summer is the seasonal injection window for propane, and with heating-related demand dormant and steady supply flowing from gas processing plants, the surplus has continued to widen week after week. Taken together, the crude build was only partly offset by the draw in gasoline, leaving total commercial petroleum inventories little changed on net for the week.

Refinery crude inputs have been holding near seasonal highs, running close to 17 million barrels a day in the most recent weeks, a pace consistent with refiners maximizing throughput to meet peak summer fuel demand. Total products supplied, the broadest gauge of domestic petroleum demand, has averaged a bit above 20 million barrels a day over the trailing four weeks, running slightly ahead of the same period a year ago, even as the distillate component of that demand has lagged its own year-ago pace in recent weeks.

^{Commodity Interest Trading involves risk and, therefore, is not appropriate for all persons. Past performance is not necessarily indicative of future results. Neither this trading advisor nor any of its trading principals offer a trading program to clients, nor do they propose guiding or directing a commodity interest account for any client based on any such trading program.}

The "Hedging Advisory Firm of the Year" and "OTC Trading Platform of the Year" awards were presented to AEGIS CTA, LLC and AEGIS SEF, LLC (d/b/a AEGIS Markets), respectively, by Energy Risk, a publication owned by Infopro Digital. These awards are part of the Energy Risk Awards program, which recognizes excellence in commodity trading, risk management, and related services. Award recipients are selected based on editorial judgment, industry nominations, and a review of company performance, innovation, and client feedback.

The “Top Workplaces” award was presented to AEGIS by the Houston Chronicle based on anonymous employee survey results conducted by Energage. Rankings are determined by comparing employee feedback against benchmarks for workplace culture and employee satisfaction.

Statements describing AEGIS as the leading revenue intelligence platform and/or a global leader in hedging technology and solutions (and similar claims) reflect AEGIS’ opinion. These views are based on a combination of industry awards and recognition, the company’s unique technology capabilities, and internal market analysis.