The U.S. Energy Information Administration (EIA) released data on Thursday, revealing that U.S. crude oil inventories fell more than anticipated last week. However, stocks of gasoline and distillate fuels experienced significant increases, indicating sluggish demand for these products.
Crude Oil Stocks
The EIA reported that commercial crude oil stocks, excluding the Strategic Petroleum Reserve (SPR), decreased by 5.5 million barrels to 431.1 million barrels during the week ending on December 29. This figure is approximately 2% below the five-year average for this time of year. Analysts surveyed by The Wall Street Journal had predicted a smaller decline of 2.7 million barrels.
Meanwhile, storage in the SPR rose by 1.1 million barrels, reaching a total of 354.4 million barrels.
Oil Storage at Cushing
Oil stored at Cushing, Oklahoma, the Nymex delivery hub, saw an increase of 706,000 barrels, reaching 34.7 million barrels. This growth can be attributed to refineries increasing their capacity use to 93.5% from the previous week’s 93.3%. Experts had projected a slight decline in refinery runs.
Crude Oil Production and Trade
According to the EIA, U.S. crude oil production slightly eased to 13.2 million barrels per day compared to the record high of 13.3 million barrels per day recorded the previous week. Additionally, crude oil imports rose by 619,000 barrels per day to 6.9 million barrels per day, while exports experienced a substantial increase of nearly 1.4 million barrels per day, reaching 5.3 million barrels per day compared to the previous week.
Stock Increases in Gasoline and Distillate Fuels
The data presented in the report caused crude futures to decline and extend losses. This outcome is primarily due to the report indicating significant increases in stocks of gasoline and distillate fuels, which surpassed 10 million barrels.
Overall, while U.S. crude oil inventories showed a decline, the notable increases in stocks of gasoline and distillate fuels suggest a slow demand for these products.
Fuel Demand Stalls, Putting Pressure on Crude Futures
Fuel demand is once again stalling, leading to increased pressure on crude futures, according to Dennis Kissler, senior vice president at BOK Financial.
Crude Oil Prices Decline
The Nymex crude contract for February experienced a decline of 1.9%, reaching $71.33 per barrel, while the international benchmark Brent for March delivery decreased by 1.9% to $76.78 per barrel.
Significant Increase in Gasoline Stockpiles
Gasoline stockpiles witnessed a substantial rise of 10.9 million barrels, reaching a total of 237 million barrels. This increase exceeded the expected 400,000-barrel build projected in the Journal survey. The current gasoline inventories were slightly above the five-year average for this time of year, as reported by the EIA.
Distillate Stocks Surge
Distillate stocks, primarily consisting of diesel fuel, experienced a notable surge, growing by 10.1 million barrels to 125.9 million barrels. These new levels were 6% below the five-year average. The forecast indicated a distillate stock build of 400,000 barrels.
Decline in Gasoline and Distillates Demand
Gasoline demand witnessed a decline of 1.2 million barrels per day, reaching just under 8 million barrels per day. Similarly, distillates demand decreased by 1.3 million barrels per day, totaling 2.7 million barrels per day, as reported by the EIA.
Lack of Winter Demand Impacts Crude Price
Unusually warm temperatures this winter have contributed to the lack of winter demand during January. This, in turn, has negatively affected the price of crude oil. Dennis Kissler commented on this issue, stating that the expected winter demand has yet to show up.
Change in U.S. oil inventories for the week ending December 15:
- Crude: -5.5 million barrels
- Gasoline: 10.9 million barrels
- Distillates: 10.1 million barrels
- Refinery Use: 0.2 percentage points
- Crude: -2.7 million barrels
- Gasoline: 0.4 million barrels
- Distillates: 0.4 million barrels
- Refinery Use: -0.2 percentage points
Note: All figures are in millions of barrels, except for refinery use, which is represented in percentage points.
