According to data released by the U.S. Energy Information Administration (EIA), there was an increase in U.S. crude oil and gasoline inventories last week. However, distillate fuel stocks experienced a decline, and refineries scaled back their capacity utilization.
Crude Oil Stocks
Commercial crude-oil stocks, excluding the Strategic Petroleum Reserve (SPR), rose by 1.2 million barrels to a total of 421.9 million barrels in the week ending on January 26th. Despite this increase, the current stock levels are approximately 5% below the five-year average for this time of year. Analysts surveyed by The Wall Street Journal had initially predicted a decline of 800,000 barrels in crude stockpiles.
In addition to the commercial crude-oil stocks, storage in the SPR also saw an increase of 892,000 barrels, reaching a total of 357.4 million barrels.
Refinery Activity and Cushing Inventory
During the same period, refineries reduced their capacity use from 85.5% to 82.9%, a decrease of 2.6 percentage points. This is in contrast to expectations, which suggested that refinery runs would increase by 1.7 percentage points.
Furthermore, oil stored at Cushing, Oklahoma, which serves as the delivery hub for Nymex, experienced a decrease of 2 million barrels, bringing the total inventory to 28.1 million barrels.
Production and Trade
After severe winter weather caused a decline of approximately 1 million barrels per day in the previous week, crude oil production rebounded by 700,000 barrels per day to reach a daily average of 13 million barrels. Crude oil imports remained relatively stable at 5.6 million barrels per day, while exports decreased by 540,000 barrels per day to a total of 3.9 million barrels per day.
Market Reaction
Following the release of this report, crude futures experienced a decline. West Texas Intermediate (WTI) crude for March delivery dropped by 1.7% to $76.50 per barrel. Conversely, the international benchmark Brent for April, which is the most active contract, dipped by 1.5% to $81.27 per barrel.
Bearish Report on Crude Stocks Shakes the Market
According to Robert Yawger, the executive director for energy futures at Mizuho Securities USA, the latest report is quite bearish. The market was expecting a draw, but unfortunately, that didn’t happen.
The drop in refinery runs and exports might hinder any significant decrease in crude stocks in the immediate future. Yawger explains that refiners are not in a rush to resume operations after the freeze-in. Instead, they might start their maintenance season earlier.
Gasoline stockpiles have risen to 254.1 million barrels, an increase of 1.2 million barrels. Expectations were for a build of 1.4 million barrels, but the actual increase was smaller. Currently, gasoline inventories are slightly above their five-year average.
On the other hand, distillate stocks, particularly diesel fuel, decreased by 2.5 million barrels to 130.8 million barrels. This represents a 5% decrease below the five-year average. The expected draw for distillate stocks was only 800,000 barrels.
Gasoline demand has witnessed a rise of 264,000 barrels a day, reaching a daily consumption of 8.1 million barrels. The demand for distillates remains relatively stable at 3.8 million barrels a day.
Here are the changes in U.S. oil inventories for the week ending January 26:
- Crude: +1.2 million barrels
- Gasoline: +1.2 million barrels
- Distillates: -2.5 million barrels
- Refinery Use: -2.6%
Note: All numbers are expressed in millions of barrels, except for refinery use, which is presented in percentage points.