U.S. distillate inventories fell more than expected as a winter storm gripped the United States at the end of December and refineries produced fuel at their lowest rate for nearly two years, data from the U.S. Energy Information Administration showed on Jan. 5.
Distillate stockpiles, which include diesel and heating oil, fell 1.4 million in the week to Dec. 30, versus expectations for a 396,000 bbl drop, the EIA data showed. Typically, distillate consumption increases during the winter season in the northern hemisphere due to heating demand.
The drop in distillate inventories pushed U.S. crude futures to above $74/bbl and Brent futures to above $79/bbl.
Meanwhile, refinery utilization rates fell to 79.6%, the lowest since March 2021. They dropped 12.4% from the previous week, the largest weekly drop since February 2021.
Oil refineries such as Marathon Petroleum Corp's 593,000 bbl/d Galveston Bay Refinery in Texas City, Texas and Valero Energy Corp's 335,000 bbl/d Port Arthur, Texas refinery shut in late December because of the cold weather.
U.S. gasoline stocks fell 346,000 in the week, the EIA said, compared with analysts' expectations in a Reuters poll for a 486,000 bbl drop.
While product inventories fell, total product supplied - a proxy for fuel demand - also fell, dropping by a record 4.6 million barrels per day (MMbbl/d), EIA data showed. Total product supplied dropped to its lowest since June 2021.
"Inventories were impacted by the shutdown in supply and refining due to the winter storm," said Phil Flynn, analyst at Price Futures group. "If you look at the big picture, we came in pretty in line with expectations, even with all the turmoil. Inventories, normally, should be building this time of year and they're not."
Crude inventories rose 1.7 MMbbl in the week, compared with analysts' expectations in a Reuters poll for a 1.2 MMbbl rise.
Inventories in the Strategic Petroleum Reserve fell 2.7 MMbbl to the lowest since December 1983.
Crude stocks at the Cushing, Oklahoma, delivery hub rose 244,000 bbl.
Refinery crude runs fell 2.33 MMbbl/d.
Net U.S. crude imports fell 1.28 MMbbl/d.
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