Recent data from the Energy Information Administration has revealed a significant drop in commercial crude stockpiles in the United States, exceeding expectations. For the week ending last Friday, inventories of crude, excluding the strategic petroleum reserve, decreased by an impressive 4.5 million barrels, reaching a total of 413 million barrels.
The market had anticipated a smaller reduction of only 1.4 million barrels, indicating a robust demand or supply issues that may be developing. It's important to note that this level of inventory is currently 5% below the five-year average for this time of year, further emphasizing the tightening supply situation. In addition to the crude oil declines, distillate fuel stocks also fell by 2.2 million barrels last week.
Likewise, inventories of total motor gasoline and propane/propylene each saw a reduction of 1.5 million barrels. Overall, total commercial petroleum inventories dropped by a staggering 14.6 million barrels, underscoring the increasingly tight conditions in the petroleum market. Refinery activities were also impacted, with crude-oil refinery inputs averaging 16.4 million barrels per day—down by 124,000 barrels from the previous week's average.
This led to refinery operations running at 90.9% of their capacity, a decline from 92.1% the prior week. In terms of production, distillate fuel output has dipped to 4.9 million barrels per day from 5.1 million barrels week-on-week. Conversely, gasoline production saw a slight increase, rising to 9.8 million barrels per day compared to 9.7 million barrels the week before. On the pricing front, West Texas Intermediate crude oil experienced a decline of 2.6%, closing at $69.68 a barrel by Wednesday afternoon.
Brent crude prices were also down 2%, reaching $72.95. Despite these inventory draws and other market pressures, both benchmarks have struggled to surpass critical price levels, influenced by various factors such as the recent reports from the American Petroleum Institute, escalating geopolitical tensions in the Middle East, and fresh stimulus measures introduced in China. A report from Saxo Bank highlighted these market dynamics in a note issued Wednesday, drawing attention to the ongoing volatility in oil prices. Furthermore, the Organization of the Petroleum Exporting Countries (OPEC) has released projections indicating that global oil consumption is expected to surge to 112.3 million barrels per day by 2029 and reach 120.1 million barrels per day by 2050.
This is a significant increase from the current consumption level of 102.2 million barrels per day in 2023, as noted in an analysis from ING. Significantly, OPEC also anticipates that US crude oil supply will peak by 2030, followed by a gradual decline attributed to the expected downturn in shale oil production, providing a mixed outlook for the US energy sector in the coming years..