US distillate stocks at 70-year low: EIA
Quantum Commodity Intelligence - US distillate stocks hit the lowest October level since 1951, according to the EIA, and expects them to remain well-below average next year, until prices ease on higher production and a fall in seasonal demand.
US distillate stocks totalled 104 million barrels at the end of October, the Energy Information Administration (EIA) said in its Short-Term Energy Outlook this week, and expects inventories to stay 17% below their five-year average in 2023.
"Low global distillate supplies mean that there is limited potential for distillate imports to supplement U.S. domestic production, particularly after the EU's ban on seaborne refined product imports from Russia beginning in February 2023.
Stocks will only rebuild again after margins come down, which the EIA sees starting in early 2023 on lower seasonal demand and higher refinery output.
The agency forecast distillate refinery margins to moderate beginning in early 2023 as seasonal demand for the fuel decreases and refinery production remains greater than usual because of strong refining margins.
"We expect new refinery capacity coming online in the Middle East, China, and the United States through 2023 to contribute to lowering distillate margins."
The EIA forecasts distillate refinery margins (diesel-Brent) will average $1.14/gal ($56.28/b) in 2023, compared with $1.34/gal ($47.88) in 2022.
Wholesale diesel margins in Europe are currently around $50/b over ICE Brent.
The EIA expects US gasoline prices to fall further in November, after falling for three straight months to October, as refiners increase production to meet distillate demand and gasoline inventories increase.
"Rising gasoline production contributes to inventory builds in our forecast that will return gasoline stocks to levels within the five-year range by early 2023."
US retail gasoline prices should fall to $3.60/gal by February, the EIA estimates, from $3.82/b in October, and remain relatively flat for the rest of 2023.
