Recent data reveal that commercial crude stockpiles in the United States experienced an unexpected draw last week, with significant declines noted in both motor gasoline and distillate fuel inventories. According to the Energy Information Administration (EIA), inventories of crude oil, not accounting for the strategic petroleum reserve, fell by 2.2 million barrels, bringing the total down to 420.5 million barrels as of the week ending Friday.
This outcome deviated from market expectations, which anticipated a gain of 1.5 million barrels as per a Bloomberg poll. Additionally, the current inventory levels now sit 5% below the five-year average for this time of year. The decline in motor gasoline stocks was also notable, falling by 2.2 million barrels from the previous week.
Meanwhile, distillate fuel inventories saw an even sharper reduction, decreasing by 3.5 million barrels. In contrast, propane and propylene inventories rose by 3.4 million barrels during this period. Overall, total commercial petroleum inventories contracted by 7 million barrels, according to the EIA's report. In terms of crude refining, outputs averaged 15.8 million barrels per day, which represents an increase of 165,000 barrels compared to the daily average of the preceding week.
Refineries operated at 87.7% of their capacity, marking a rise from the previous week's 86.7%. Gasoline production, however, witnessed a decrease, falling to 9.3 million barrels per day from 10.2 million barrels the week before. Distillate fuel production also saw a notable dip, declining to 4.8 million barrels per day from 5 million barrels week over week. In market trading, West Texas Intermediate (WTI) crude oil saw a slight uptick of 0.4%, reaching $70.69 per barrel by Thursday afternoon.
Concurrently, Brent crude increased by 0.3%, trading at $74.47 per barrel. In geo-political developments, Israel announced the killing of Hamas leader Yahya Sinwar on Wednesday, contributing to market tensions, as reported by CNBC. "The market remains cautious amid the evolving situation in the Middle East, although demand concerns continue to loom large," stated ING in a Thursday market note. Adding to the atmosphere of uncertainty, the International Energy Agency (IEA) recently revised its global oil demand growth outlook for 2024 downwards.
Similarly, the Organization of the Petroleum Exporting Countries (OPEC) has slashed its projections for both 2024 and 2025. These reports have indicated a trend of sluggish demand along with a significant supply surplus anticipated for the upcoming year, which is further applying downward pressure on oil prices, as noted by ING..