*Unexpected Rise in US Stocks
Both US oil and distillate stocks rose unexpectedly and fuel demand slipped according to data released by the EIA yesterday. Crude stocks rose 4.9 million bbls last week to a total of 536.6 million bbls; this was despite an analysts’ expectation of a draw of 2.1 million. Distillate stockpiles rose 1.1 million barrels to 177.9 million barrels, their highest since December 1982 even though analysts had expected a 618,000-barrel drop. Gasoline stocks fell 1.8 million barrels as refinery utilization rates fell 0.6 percentage point to 77.9% of capacity. U.S. East Coast refinery rates plunged to 36.6%, their lowest on record, according to the data going back to 2010.
*US Gasoline Demand Still Not Back
With increasing problems with a second wave of the virus in the US, this is hampering the return of diesel demand. The rolling four-week average fell 15,000 bbls to 8.63 million bbls, which was the first contraction since April.
*Chinese Diesel Exports Lowest Since Sep 2018
Exports from China of diesel have fallen to 1.04 million tonnes from 1.45 million tonnes in May and 2.07 million tonnes in June according to Reuters. China had pivoted to focus on domestic production in the wake of the virus outbreak worsening in the rest of the world. However, the Chinese summer period, June to September, is usually a period where construction projects slow and diesel demand drops. So, this could be a period where the trend since May reverses.
*The Russian Hedge
Bloomberg is reporting that Putin has given the go ahead for the Russian State to utilise a Mexico style hedge to manage the country’s risk from an unexpected oil price collapse. They would utilise put options from banks and oil majors to protect financially against any price drops in what has been predicted as up to $6 billion a year insurance. Russia has previously considered the scheme but has never executed it.