The bounce last week in WTI prices occurred as US commercial inventories fell by 5.8Mb on the week. This was fully due to a decline in US imports of 1.06Mb/d or 7.4Mb for the week as trade war issues are impacting the movement of crude oil around the world.
The decline in imports last week came as Saudi Arabia shipped 329Kb/d less to the US or 2.3Mb on the week (Chart #11). Angola, another OPEC member, shipped 288Kb/d less or 2.0Mb on the week and OPEC member Ecuador shipped 138Kb/d less to the US, removing nearly another million barrels. So almost all of the decline in US commercial stocks was due to fewer imports from OPEC. Surprisingly, Venezuela shipped 256Kb/d more or a total of 606Kb/d to the US. Canada, by the way, shipped 106Kb/d less at 3.35Mb/d. However, Canada has a 41.5% market share of US imports. While a decline on the week, Canadian exports to the US are up 4.8% from last year and up 11.1% from two years ago.
As we near the end of the summer driving season, the US has too much gasoline in storage (Chart #12). Days of supply are above last year’s and total inventories are pulling the five-year average up. So once the summer driving season is over and refineries start their turnaround to make winter grade product, there will be a slower ramp up as they move to lower their summer grade inventories before filling the storage tanks for the winter. This implies that commercial stocks will lift quite fast as refiners hold off converting the crude to product too quickly.
Lastly, we disagree with the view that Iranian crude exports will plunge to negligible levels as US sanctions are implemented. Only Europe may fully end importing Iranian crude. In Chart #13, Europe was importing over 850Kb/d of Iranian crude in March which had fallen to 300Kb/d by July as the US sanction deadline neared. Even if this falls somewhat more, the Iranian crude can find a home in China, India and Turkey (defined as part of Europe). China has already switched to Iranian tankers and is increasing imports as the price is at a discount to other similar product imports. By using Iranian ships it bypasses those shippers using US insurers which are subject to the US sanction laws.