The news this week centers on faltering refined product consumption (demand) and shockingly weak refinery runs
Consumption
Total product supplied and gasoline supplied were respectively 7% and 11% below normal (the same week in 2019) on a 4 wma basis
Moreover, both total product and gasoline supplied were also at lows not seen since early September
Refinery runs were down more than 16% on a 4 wma basis compared to normal (2019).
Inventories
Despite weak consumption and an anemic level of runs, refined product inventories remained at typical levels, primarily due to exceptionally high product exports. This is probably related to gasoline and diesel stocking in the EU prior to the implementation of the product import embargo starting on Feb. 5th.
Crude inventories builds have been tapering, still up a hefty 27 mb in the last month
The SPR was unchanged compared to last week
Low runs, faltering consumption and crude builds are sometimes associated with the beginning of an economic downturn
Meanwhile, C+C (i.e., oil) production remains stuck at 12.2 mbpd, materially unchanged since April
Finally, oil prices remain in soft contango to mid-year before reverting to typical backwardation levels in the second half of the year.
With the current contango, owners of physical oil have an incentive to store crude, and that is exactly what they have been doing in the US
If Russian refined product exports do not fall with the Feb 5th embargo, there is a downside case for oil prices, and a $10 / barrel sell-off is not out of the question.