Refineries Ran at 98% of Capacity and Crude Stocks Still Fell 4.5 Million Barrels

The Energy Information Administration's weekly petroleum data for the week ending August 28, released September 2, contains an apparent contradiction worth unpicking. Refineries ran flat out - 98% of operable capacity, 17.5 million barrels a day of crude processed. Crude imports rose 612,000 barrels a day to 6.8 million. And commercial crude inventories still fell 4.5 million barrels, to 424.5 million.

Running refineries hard consumes crude. That is the whole of it. When the input rate sits at the top of its range, higher imports can arrive and stocks can still draw down in the same week.

Four fuels, four positions

The more useful figure in each line of the report is not the weekly change but where the level sits against the five-year average for the same week of the year. This week they disagree with each other.

• Crude oil: 424.5 million barrels, down 4.5 million on the week, 1% above the five-year average
• Motor gasoline: 205.7 million barrels, down 1.2 million, 6% below the five-year average
• Distillate fuel: 104.2 million barrels, up 0.8 million, 14% below the five-year average
• Propane and propylene: down 2.1 million barrels, 25% above the five-year average

Crude sitting slightly above normal while the fuels made from it sit well below is what a high refinery run rate looks like from the inventory side. Propane's position is a separate story: it is a byproduct of gas processing as much as of refining, and its stock build runs on the heating-season calendar rather than the driving one.

Distillate rose and is still the tight one

Distillate inventories increased for the week, which breaks a run of declines. The level is still 14% under the five-year average, and it is not for want of production: refiners made 5.19 million barrels a day of distillate on a four-week average. Domestic distillate demand over the same four weeks was 3.7 million barrels a day, down 6% year on year.

Production above domestic consumption that does not build stocks has to be leaving the country. The weekly highlights do not break out the export figure, so the size of that gap is visible in the arithmetic rather than stated in the release.

Demand is running below last year

Over the four weeks to August 28, total products supplied averaged 20.4 million barrels a day, 4% below the same period a year earlier. Gasoline supplied averaged 8.9 million barrels a day, down 2%. Distillate supplied averaged 3.7 million, down 6%. Gasoline production over the same four weeks averaged 9.72 million barrels a day.

At the pump, EIA put the national average for regular gasoline at $4.071 a gallon and diesel at $5.599 on August 31. The Strategic Petroleum Reserve held 286.6 million barrels.

What comes next in the calendar

A 98% utilization rate is close to the practical ceiling and is not a level refiners hold indefinitely. Autumn is when units come down for maintenance, ahead of the switch to winter fuel specifications. Run rates normally fall through September and October. With gasoline 6% below its five-year average and distillate 14% below, the size of this year's turnaround programme is the thing to watch in the coming weeks.