Crude storage levels rise as Saudi crude hits shores

Commercial crude stocks rose due to temporary factors – namely, the unloading of Saudi crude tankers. A disastrous storage max-out does appear less probable, demand for finished products remained soft, as gasoline demand rose only slightly while diesel consumption fell. Jet fuel demand showed more signs of life, although not anywhere near pre-pandemic levels. As expected, diesel inventories continued to rise: stocks are already 9% above their 5-year highs and will likely rise even further. Gasoline stocks were flat but remain about 6% above their 5-year highs. As we’ve noted for several weeks, a growing glut of diesel inventories could weigh on refinery operations and lead to diverging outcomes in gasoline and distillate markets. If gasoline demand picks up, refineries will have to respond by also ramping diesel production even as distillates and jet demand is flat. The net effect could lead to an unprecedented expansion of diesel inventories.