Massive SPR release boosts commercial US inventories

Commercial US crude inventories have surged 8.49 million bbls higher in the week to 6 May with gains across regions, according to fresh data from the Energy Information Administration.

The US announced in early April it would release about 1 million b/d of crude from its Strategic Petroleum Reserves (SPR) for six months in an effort to rein in runaway fuel prices amid rampant inflation and higher costs for consumers.

SPR stocks have been drawn in every week since late March. The first week of May saw a 6.99 million bbl release – the most since a record 16.89 million bbls was released in early April.

Refiners have responded to strong demand ahead of the peak summer driving season by ramping up runs again. Refinery utilisation rose back up above 90% again in the first week of May, after a temporary dip in the preceding week. Utilisation rose across major regions.

But higher production has not helped prop up gasoline and distillate inventories, which fell by 2% and 1% on the week, and are down to their lowest levels since early February.

East Coast distillate stocks have been halved since late December.  

“The shortage is likely to be intensified later in 2022 and 2023 as a result of U.S. and European Union sanctions on Russia's petroleum exports because Russia is a major supplier of distillate fuel oil,” Reuters columnist John Kemp said last week, drawing on research on economic and commodity cycles.

He argues that the acute distillate shortage has driven up prices for not just diesel and gasoil, but also crude, and does not expect the shortage to ease until consumptions growth slows or reverses.