In a surprising turn of events, commercial crude stockpiles in the US demonstrated an unexpected increase last week, as total motor gasoline inventories also experienced a rise, according to government data released on Wednesday. The Energy Information Administration (EIA) reported that inventories of crude, excluding the strategic petroleum reserve, surged by 3.9 million barrels, bringing the total to 416.9 million barrels for the week ending Friday.
This figure caught analysts off guard, as the consensus forecast indicated a decline of 1.4 million barrels based on a Bloomberg poll. Currently, inventories are 4% below the five-year average for this time of year. Furthermore, total motor gasoline inventories escalated by 1.1 million barrels, with propane and propylene stocks adding 300,000 barrels.
Conversely, distillate fuel stocks decreased significantly, falling by 1.3 million barrels. In summary, total commercial petroleum inventories experienced a decrease of 900,000 barrels during the past week, as indicated by the EIA's data. On the production front, crude-oil refinery inputs averaged an impressive 15.7 million barrels per day, which marks a reduction of 662,000 barrels compared to the preceding week's average.
Refineries operated at 87.6% of their capacity, a drop from the previous week’s figure of 90.9%. Gasoline production took a slight hit, sliding to 9.6 million barrels per day from the previous 9.8 million barrels. Distillate fuel output also dipped from 4.9 million barrels per day to 4.8 million barrels. As for the marketplace, West Texas Intermediate (WTI) crude oil saw a modest uptick of 0.8%, reaching $70.42 a barrel by Wednesday afternoon.
Brent crude also experienced an increase of 0.9%, priced at $74.22. Notably, crude futures logged more significant gains on Tuesday, partly due to escalating geopolitical tensions in the Middle East. In a serious development, Iran launched a missile attack on Israel on Tuesday, acting in retaliation for the recent killing of Hezbollah chief Hassan Nasrallah and an Iranian commander in Lebanon by Israeli forces.
Reports suggest that Israel is preparing to deliver a "significant response" to this attack. With the region on high alert, analysts from ING noted that, "The more Iran gets directly involved in this conflict, the greater the risk of oil supply disruptions." Despite these geopolitical tensions, the price movements in the oil market appear somewhat subdued.
As ING elaborated, "Given developments though, the price action still seems fairly modest. This likely reflects the fact that the market has become increasingly numb to developments in the Middle East, which have dragged on for almost a year. However, actual supply disruptions would change this narrative." In conclusion, while the US crude oil inventory experienced an unexpected build, the underlying market dynamics are greatly influenced by the geopolitical landscape, which remains unpredictable and tenuous..