Canada To The Rescue

Bring us your heavy oil! U.S. Oil imports surged last week by over 1 million barrels a day. Almost half of that was from Canada. It seems our friends in Canada that had cut back production are now trying to fill the void of that lack of heavy oil from Venezuela. This is critical because based off U.S. demand expectations, we will be short of product unless U.S. refiners produces a record amount of gas and diesel. That will be difficult without the heavy oil that many U.S. refiners are geared up to deal with. While the oil market was shocked by the 7.1-million-barrel increase in crude supply reported by the Energy Information Administration (EIA), a big drop in oil products gave us support. The EIA reported a much bigger than expected 4.2 million barrels drop in gas supply and a 2.4 million barrels drop in distillate supply leaving those inventories 3% below the five-year average. This came as demand for gasoline and distillates rose last week with gas consumption back over 9 million barrels a day approaching summer like numbers even as most of the country is in a deep freeze. Distillates also fell and it is great that Canadian heavy oil imports are up because we will need it ahead of the planting season where farmers will be buying a lot of diesel to run their planting equipment.

Overall demand on the four-week moving average is still impressive. The EIA reported that total products demand was 20.4 million barrels per day, up by 0.9% from the same period last year. Gasoline demand averaged 8.9 million barrels per day, down by 2.0% from the same period last year due to bad weather but jumping back this week. Distillate fuel demand averaged 4.1 million barrels per day over by 0.3% from the same period last year. Refineries ran higher than expected at 87.5% of their operable capacity last week. Still deep in maintenance season, gasoline production increased last week, averaging 9.9 million barrels per day. Distillate fuel production increased last week, averaging 4.9 million barrels per day. U.S. crude production held steady at a record 12.1 million barrels a day.

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