DOE REPORT: LOWER DEMAND, HIGHER OUTPUT COULD LEAD TO TOUGH REFINING SUMMER

It’s fairly commonplace for an occasional Department of Energy report to

include statistics that reflect multi-month lows or highs in some of the
specific data sets. But it is quite unusual to see a single report jam-packed
with numbers that reflect multi-year lows for demand and multi-month highs for
production or stocks. Today’s report has that unusual character.

Some examples:
- Four week demand for distillate was measured at 3.449-million b/d in the
most recent report. That is the lowest four week level since July 28,
2000. The stats don’t give detail on what specific sectors of the economy
are using less fuel, but the suspicion is that diesel demand (both on-road
and off-road) is particularly poor.
- Distillate stocks grew to 152.1-million bbl. Not since January 1999 have
we seen distillate stocks this high. The critically monitored East Coast
which has dramatic influence on the NYMEX now boasts 62.2-million bbl, or
the highest numbers since the dead of winter 2007. One probably has to go
back beyond DOE records to find nationwide or regional distillate stocks
this high for late June. DOE does not keep a record of what represents a
“full tank” for any product, but observers feel there is little room left
in the 2009 storage vessels.
- Refinery runs advanced to 87.1 percent of capacity last year, the highest
rate since August 8, 2008. The peak utilization rate last year was 89.1%
and that occurred well before the economic meltdown.
- Gasoline output surged to 9.224-million b/d last week, the highest numberl
since August 29, 2008. That high rate presaged a drop in gasoline cracks
that didn’t end until regular unleaded plunged below the value of sweet
crude.

All of these statistical milestones point to a problematic summer for U.S.

refiners. The one week slide in gasoline demand to 9.129-million b/d (down
225,000 b/d) suggests that higher prices have tempered some driving enthusiasm
as well. Gasoline imports, meanwhile, continue to hang close to 1-million b/d
with prospects for similar numbers into July.

Inventory wise, gasoline is fairly neutral. Stocks rose by 3.9-million bbl

nationally and that included 1-million bbl or so inventory surges in the Middle
Atlantic, Midwest, and Gulf Coast regions. Gasoline production advanced most on
the West Coast where it rose by 150,000 b/d, but about 132,000 b/d less gasoline
was brought to market at the Gulf Coast.

There is nothing in the data that suggests that the commercial part of the
economy is on the verge of recovery. ULSD stocks rose by 2.4-million bbl
nationally and the one week demand figure of 3.383-million b/d was nearly
identical to last week. Despite the predicament of what to do with domestic
distillate coming to market, companies imported 289,000 b/d of distillate last
week, and that’s a recent high.

- Tom Kloza, tkloza@opisnet.com

DOE REPORT AT A GLANCE: (WEEK ENDING 6/19/2009)

PETROLEUM SUPPLY & PRODUCTION DATA NATIONWIDE (in millions/bbls)
Current (Wk. change) Last Week Last Year
Crude Oil Stocks 353.9 (-3.9) 357.7 301.8
Crude Oil Imports 9.284 (+0.247) 9.037 10.251
Crude Oil Runs 15.384 (+0.204) 15.180 15.588
Percent Utilization 87.1% (+1.2%) 85.9% 88.6%

Mogas Stocks 208.9 (+3.9) 205.0 208.8

RFG Only Stocks 1.9 (-0.3) 2.2 2.3
Blending Components 125.4 (+2.1) 123.4 102.5
Gasoline Production 9.224 (+0.093) 9.131 9.057
RFG Production 2.963 (-0.004) 2.967 3.089
Gasoline Imports 0.971 (-0.119) 1.090 1.162
Implied Demand 9.129 (-0.225) 9.354 9.334

Distillate Stocks 152.1 (+2.1) 150.0 119.4

LS Dist (15-500 PPM) 111.6 (+2.2) 109.4 92.9
Distillate Output 4.069 (+0.154) 3.915 4.588
Distillate Imports 0.289 (+0.098) 0.191 0.107
Implied Demand 3.383 (-0.001) 3.384 4.040

PETROLEUM SUPPLY & PRODUCTION DATA BY REGION

PADD 1 Mogas Stocks 54.8 (+0.9) 53.9 58.3
PADD 2 Mogas Stocks 49.8 (+1.1) 48.6 49.9
PADD 3 Mogas Stocks 69.9 (+1.6) 68.3 66.7
PADD 4 Mogas Stocks 5.9 (+0.1) 5.8 6.3
PADD 5 Mogas Stocks 28.6 (+0.2) 28.4 27.6

PADD 1 DIST. Stocks 62.2 (+1.9) 60.2 38.9

PADD 2 DIST. Stocks 32.5 (+1.2) 31.3 31.1
PADD 3 DIST. Stocks 42.8 (-1.0) 43.8 32.6
PADD 4 DIST. Stocks 3.0 unch 3.1 3.3
PADD 5 DIST. Stocks 11.7 unch 11.7 13.5

PADD 1 LS Stocks 30.5 (+0.8) 29.7 21.5

PADD 2 LS Stocks 30.4 (+1.1) 29.4 28.5
PADD 3 LS Stocks 37.2 (+0.3) 36.9 27.9
PADD 4 LS Stocks 2.9 unch 2.9 3.1
PADD 5 LS Stocks 10.5 unch 10.6 11.9