U.S. crude oil inventories experienced an unexpected increase last week, where stocks of gasoline and distillate fuels also saw above-forecast builds. At the same time, refineries reduced their capacity use, according to data released by the U.S. Energy Information Administration on Wednesday.
Crude Oil Stocks
Commercial crude-oil stocks, excluding the Strategic Petroleum Reserve (SPR), rose by 1.3 million barrels to reach 432.4 million barrels in the week ending January 5. This level is approximately 2% below the five-year average for this time of year, as reported by the EIA. Analysts surveyed by The Wall Street Journal had predicted that crude stockpiles would decline by 600,000 barrels.
Strategic Petroleum Reserve
Storage in the Strategic Petroleum Reserve (SPR) increased by 606,000 barrels to a total of 355 million barrels, according to the EIA.
Oil Storage and Refinery Capacity Use
Oil stored at Cushing, Oklahoma, which serves as the Nymex delivery hub, experienced a decrease of 506,000 barrels, resulting in a remaining total of 34.2 million barrels. In addition, refineries reduced their capacity use from 93.5% to 92.9% compared to the previous week. It was expected that refinery runs would be down 0.8 percentage points from the previous week.
Crude Oil Production, Imports, and Exports
U.S. crude oil production remained stable at 13.2 million barrels per day, as reported by the EIA. On the other hand, imports of crude oil fell by 654,000 barrels per day to a daily average of 6.2 million barrels, while exports were down by 2 million barrels per day, reaching 3.3 million barrels per day.
Impact on Crude Futures
Following the release of the EIA report, crude futures initially experienced gains but then gave them up. West Texas Intermediate (WTI) crude for February delivery remained flat at $72.24 per barrel, while the international benchmark Brent for March decreased by 0.1% to $77.53 per barrel.
Gasoline Stockpiles Increase, Exceeding Expectations
Gasoline stockpiles in the United States have risen by a significant 8 million barrels to reach a total of 245 million barrels, surpassing expectations of a 2.1 million-barrel increase. According to the Energy Information Administration (EIA), gasoline inventories are currently around 1% higher than their five-year average. Moreover, gasoline demand has experienced an uptick, with an increase of 371,000 barrels per day from the previous week, reaching a daily consumption of 8.3 million barrels.
This notable surge in product stocks, which has been impacting oil prices, appears to be linked to year-end inventory management for tax purposes. Analyst Phil Flynn from the Price Futures Group suggests that this rise is not indicative of supply and demand dynamics. He underscores that if gasoline demand had indeed plummeted while supplies increased, it would pose a significant concern. Flynn adds, “Our bet is that we’re going to see inventories tighten,” implying a potential future adjustment in stock levels.
Distillate Stocks See Significant Rise
In addition to gasoline stocks, distillate stocks, mainly consisting of diesel fuel, have also witnessed a considerable increase. Surpassing expectations, distillate stocks have grown by 6.5 million barrels to reach a total of 132.4 million barrels. Despite this surge, distillate stocks remain approximately 4% below the five-year average, as reported by the EIA. Initial forecasts projected a distillates stock build of 1 million barrels.
Overview of U.S. Oil Inventories for the Week Ended Jan. 5
The change in U.S. oil inventories for the week ending January 5 is as follows:
- Crude: 1.3 million barrels.
- Gasoline: 8.0 million barrels.
- Distillates: 6.5 million barrels.
- Refinery Use: -0.6 percentage points.
In conclusion, the marked increase in gasoline stockpiles, surpassing expectations, and the significant rise in distillate stocks reflect the current state of the U.S. oil market. While the surge in inventory levels may be linked to year-end inventory management for tax purposes, experts anticipate a future correction in stock levels, potentially leading to tighter inventories.
