Rising fuel inventories hit crack spreads, likely signaling refining slowdown ahead

Oil futures posted strong weekly gains that offset the big decline that followed OPEC's June 2 announcement of its plan to begin bringing back about 2.2 million barrels per day of crude oil later this year.

It's been a week taught by Conflicting demand forecastsOPEC stuck to expectations of relatively strong oil demand growth of 2.2 million barrels per day, and the US Energy Information Administration raised its demand growth estimates for 2024 slightly, while the International Energy Agency lowered its demand growth expectations to less than 1 million barrels. /day Global demand for oil is expected to reach its peak by the end of this decade.

But all three groups expected a Supply deficit at least until the beginning of winterCommerzbank analysts noted.

Front-month Nymex crude (CL1:COM) settled for July delivery +3.9% At $78.45 per barrel, front-month Brent crude (CO1:COM) ended the week +3.8% At $82.62 per barrel; Both fell 0.2% on Friday.

Nymex Natural Gas July (NG1:COM) closed the week -1.3% to $2,881 per million British thermal units, including a 2.6% decline on Friday.

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U.S. oil refineries are processing oil at the fastest rate for this time of year since before the coronavirus pandemic, but rising fuel inventories are starting to impact refining margins, the Energy Information Administration reported this week.

Refineries processed 17.5 million barrels per day of crude oil and other feedstocks in the week ending June 7, the fastest seasonal rate since 2018, and employed 95% of their operating capacity, the highest since 2019, according to weekly data from the Energy Information Administration.

Gasoline stocks were 1 million barrels above the previous 10-year seasonal average, compared to a deficit of 6 million barrels two months ago.

As a result, the 3-2-1 crack spread has averaged $24 per barrel so far in June, down from $31 per barrel in March, but in line with the average for the 10 years leading up to the pandemic, suggesting that the fuel market is in good shape. comfortable. supplied.

Refiners were responding to relatively high refining margins but rising inventories It is likely to herald a slowdown in processing In the coming weeks.

the The six largest refiners in the United States By processing capacity, as per EIA: Marathon Petroleum (MPC), Valero Energy (VLO), Exxon Mobil (XOM), Phillips 66 (PSX), PBF Energy (PBF), Chevron (CVX).

The energy sector, as indicated by the Energy Select Sector SPDR ETF (XLE), was the worst performer of the week, -2.2%.

Top 5 winners in energy and natural resources over the past 5 days: Nano Nuclear Energy (NNE) +38.8%Texas Pacific Land Trust (TPL) +28.8%flow power (FLUX) +18.9%Ivanhoe Electric (IE) +17.4%ENVX +16.4%.

Top 10 Energy and Natural Resources Gainers in the Last 5 Days: Atlas Lithium (ATLX) -25.2%Contango Ore (CTGO) -21.1%Battalion Oil (Battle) -20%Liquefied Petroleum Gas (BWLP) -18.9%Arcadium Lithium (ALTM) -16.4%Compass Minerals (CMP) -14%NextEra Energy Partners (NEP) -13.7%Goldfields (GFI) -12.8%Solaris Resources (SLSR) -12.5%Profrac Holdings (ACDC) -12%.

Source: Barchart.com