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(John Kemp is a Reuters market analyst. The views expressed are his own)
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By John Kemp
LONDON, April 27 (Reuters) - U.S. refineries processed a record volume of crude last week, making a small dent in the country’s bloated crude stocks but resulting in a big build-up of refined product inventories.
U.S. refineries have ramped up crude processing by 1 million barrels per day (bpd) over the last four weeks and 2 million bpd over the last nine weeks, according to the U.S. government's Energy Information Administration.
Refineries processed an average of almost 17.3 million bpd of crude in the week to April 21, a record for any time of year and coming well in advance of the summer driving season.
Crude throughput was almost 1.4 million bpd higher than during the corresponding week in 2016 and nearly 2.5 million bpd higher than the 10-year seasonal average.
Refiners are responding to robust domestic demand and strong exports of gasoline and distillates, which have resulted in margins above last year’s levels (“Distillate export boom keeps U.S. refiners busy”, Reuters, April 25).
Heavy processing so early in the year has started to pull down U.S. crude stockpiles much earlier than normal.
Commercial crude stocks are still almost 20 million barrels higher than at the same point in 2016, but the year-on-year surplus is down from about 36 million barrels at the start of April.
Crude stocks are now around 49 million barrels higher than at the start of the year, compared with a build of 57 million barrels in 2016 and a 10-year average of 42 million barrels.
But the extraordinary rate of crude processing has also led to a rise in gasoline and distillate stocks, which has led some analysts to question whether it is sustainable.
Gasoline stocks are at a record for the time of year and distillate stocks have started rising when they would normally be falling.
U.S. refiners are exporting record volumes of distillates to Latin America; rare cargoes have been exported from the East Coast to Europe (“Europe lures rare diesel cargoes from U.S. East Coast”, Reuters, April 26).
Gasoline exports are also running well above year-ago levels as refiners and traders try to clear some of the surplus by sending it overseas.
The United States has become an increasingly important refining hub for the western hemisphere and Atlantic basin thanks to cheap domestic crude and investment in sophisticated equipment.
But it is not clear whether such high levels of processing can be sustained for many more weeks without crushing refinery margins.
There is a risk that record processing will simply turn an oversupply of crude into an oversupply of fuels, which likely explains why crude prices failed to rise on Wednesday despite the big stock draw. (Editing by Dale Hudson)