(John Kemp is a Reuters market analyst. The views expressed are
* Chartbook: tmsnrt.rs/2oOM5Ol
By John Kemp
LONDON, April 27 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
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
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
But it is not clear whether such high levels of processing
can be sustained for many more weeks without crushing refinery
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)