Record levels of drilling and production – particularly in the US – were fundamental factors in the downturn that swept across the oil and gas industry over the last 18 months. Much of the crude oversupply has been sent into storage – either at refining bases, storage hubs, strategic reserves or moored in crude carriers.

Such is the scale of the crude flows that oil prices routinely track movements in inventories at the world’s largest storage and trading hubs. EIA data shows US crude oil stocks hit peak levels of 543 million barrels (excluding the strategic petroleum reserve) in late April, which has since contracted to 523 mmbbls (week ending 29th July).

US storage draws since April have resulted in an uptick in refinery utilization, rising from 89.7% to over ~93% by the end of July. Much of this spike in utilization is due to the summer driving season – typically resulting in a marked increase in gasoline consumption. This has been a feature of the US downstream sector for a number of years, however, current utilization at US refineries is markedly lower than the peak seen in 2015 (96.1% in late July-early August).

It may be surprising that US refinery utilization is down on the same point last year – given the sheer volume of cheap feedstock available – yet, it is not altogether unexpected.

Refining margins which were routinely reaching levels not seen since 2012, are now back to $3-4/bbl due to a saturated products market. Consequently, incentives to delay routine maintenance and sustain high utilization have evaporated.

Early indications from DW’s soon to be released World Downstream Maintenance Market Forecast suggest that this may provide opportunities for those involved in MMO activities. However, consumers at the pumps are not likely to see further falls in prices without large scale storage draws. Fundamentally, operators of refineries must balance the allure of cheap feedstock with the risks of an over-saturated products market.

Matt Adams, Douglas-Westwood London