LONDON (Reuters) - Global oil producers and refiners are struggling with a series of unprecedented dislocations as the simultaneous epidemic and volume war between Saudi Arabia and Russia rip through every element of the supply chain.
Some idea of the extraordinary speed and scale of the disruptions was evident in the “Weekly Petroleum Status Report” published by the U.S. Energy Information Administration on Wednesday.
The United States is the world’s largest oil consumer and producer, though it is not entirely representative of the whole global market.
But its weekly oil data have an outsized influence because they provide the fastest and most readily available statistics on the changing production-consumption balance.
The latest weekly report reveals an industry in crisis – unable to cope with the simultaneous collapse in fuel consumption and rise in crude production.
Inventories are increasing an unsustainable rate that will soon fill up all available storage space in onshore tank farms as well as tankers moored off the coast.
Petroleum products supplied to the domestic market, a proxy for total consumption, fell by 7 million barrels per day (bpd) or one-third over just three weeks between March 13 and April 3.
The decline was equivalent to more than eight standard deviations for any three-week period since 1992. The abrupt collapse in consumption has no parallel in history, not even the depression years of the 1930s.
In volume terms, gasoline consumption has been hit hardest, as business lockdowns, home-working, and stay at home orders cut deeply into private motoring.
Gasoline supplied to the domestic market fell by 4.6 million bpd or almost 48% between March 13 and April 3, implying household travel has halved.
But in percentage terms, jet fuel consumption has been hit even harder, down by almost 1 million bpd or 56%, as airlines cancel flights and ground planes.
So far, distillate consumption has been least-affected, down by just 0.2 million bpd or 5%, presumably because most factories and freight transport remain are still running, for now.
As consumption has disappeared, refineries have been forced to cut back on the volume of crude they process to avoid an unsustainable build up of unused fuels.
U.S. refineries cut crude processing by almost 2.2 million bpd over the last three weeks, a reduction only ever before seen when the Gulf Coast refining centres have been hit directly by a major hurricane.
Refiners processed just 13.6 million bpd of crude last week, down from 16.1 million bpd at the same point last year, and the lowest seasonal rate for at least 15 years.
DROWNING IN OIL
Despite the reduced processed rates, inventories of unused products as well as unrefined crude are surging, threatening to overwhelm tank farms and pipelines.
Total U.S. stocks of crude and petroleum products, excluding the strategic petroleum reserve, have jumped by 56.5 million barrels in the last three weeks.
Total inventories soared by a record 33 million barrels last week, after increasing by 21 million barrels the week before, itself the fourth-largest weekly increase since 1990.
Inventories are now just 15 million barrels below their highest recorded level for this time of year, set in April 2017, and 54 million barrels below their highest level at any time of year, set in August 2016.
Even more crude is in transit to the United States from Saudi Arabia, which will swell inventories further.
At least seven very large crude carriers have left Saudi Arabia so far this month with destinations reported as the United States, hauling a total of 14 million barrels, headed towards a market already flooded with excess oil.
Editing by David Evans
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