LONDON U.S. crude stocks have shown a sustained decline over the last five weeks, giving oil bulls new inspiration that the market is rebalancing.
Commercial crude inventories have fallen by 13 million barrels since the end of March, according to data from the U.S. Energy Information Administration (tmsnrt.rs/2r39psy).
Crude stocks generally follow an annual cycle driven by seasonal variations in fuel consumption and the maintenance schedule for U.S. refineries.
Stocks typically rise during the first four months of the year, reaching an annual peak in early May, before falling steadily through the middle of September.
During the decade between 2007 and 2016, crude stocks increased by an average of 45 million barrels between the start of the year and the annual peak on or about May 5 (tmsnrt.rs/2q62TDS).
In 2017, crude stocks started increasing much faster than usual, rising by 56 million barrels between the start of January and the end of March (tmsnrt.rs/2q6g1Zv).
Since then, however, stocks have fallen every week, a much earlier start to the draw down season than normal.
At the end of March, crude stocks were 35 million barrels higher than at the corresponding point in 2016 and 196 million barrels over the 10-year average.
By May 5, stocks had fallen to just 13 million barrels over the prior year and 168 million barrels over the 10-year average (tmsnrt.rs/2pClGDT).
Commercial stocks have drawn down, despite sales from the government’s strategic petroleum reserves during the period.
The drawdown has been the result of slightly slower crude imports and a record rate of refinery crude processing (tmsnrt.rs/2pnjXXb).
Processing peaked at 17.3 million barrels per day (bpd) in the middle of April when it was almost 1.4 million bpd higher than in 2016 and 2.4 million bpd higher than the 10-year average.
But such rapid rates of processing are unlikely to be sustainable and refiners have already begun to scale back crude throughput.
Record run rates have left gasoline stocks at similar levels to 2016 when excessive inventories prompted refiners to ease back processing rates over the summer to return stocks to more normal levels (tmsnrt.rs/2q6dLSh).
So the critical question is whether the big crude stock draws will continue if refinery processing returns to a more sustainable level.
(John Kemp is a Reuters market analyst. The views expressed are his own.)
(Editing by Alexander Smith)