US DATA: Steep build in product inventories offsets API crude draw

Quantum Commodity Intelligence – US crude oil stocks posted a steeper-than-expected draw the week ending 5 January, while refined products registered sharp builds in a near repeat of the previous week, according to a report released late Tuesday by the American Petroleum Institute.

The latest API numbers revealed crude stocks dropped by 5.21 million barrels, compared to industry forecasts that called a draw of 1-1.5 million barrels, having slumped by 7.418 million barrels in the previous weekly API report.

The key Cushing storage hub, the delivery point for the NYMEX WTI futures contract, also posted a drop of 625,000 barrels. Cushing inventories had been steadily building since early November, reaching almost 35 million barrels last week versus a nine-year low of 21 million barrels registered in October.

But another drop in crude stocks was neutered by large gains in the products sector, as gasoline inventories were up 4.896 million barrels, while distillates added 6.873 million barrels for an overall net oil build of 6.5 million barrels.

WTI prices were marginally higher in opening trade Wednesday, although the gains were largely part of a rebound as global benchmarks recovered from the slump at the start of the week.

Meanwhile, the 3-2-1 crack spread, a measure of US refining profitability against gasoline and heating oil margins, was around $23/b based on Feb24 futures contracts early Thursday.

This was down from the +$24/b at the same stage last week, although higher distillate margins have helped offset the slump in gasoline values, which came after last week's record build in EIA stocks.

The weekly API report serves as a forerunner to the closely watched Energy Information Administration Weekly Petroleum Status Report, which will be published later Wednesday.