Recent government data revealed that commercial crude stockpiles in the United States rose more than anticipated last week. This increase follows a notable rebound in motor gasoline after a substantial draw reported the previous week. According to the Energy Information Administration (EIA), inventories of crude oil, excluding the strategic petroleum reserve, increased by 5.5 million barrels, bringing the total to 426 million barrels for the week ending Friday.
Analysts had predicted a gain of only 1 million barrels based on a Bloomberg poll, making this rise particularly noteworthy as it positions inventories at 4% below the five-year average for this time of year. Additionally, total stocks of motor gasoline saw an uptick of 900,000 barrels week to week.
In contrast, distillate fuel inventories witnessed a decline of 1.1 million barrels, while propane and propylene inventories decreased by 1.4 million barrels. Cumulatively, total commercial petroleum inventories experienced a significant increase of 5.9 million barrels last week, reflecting broader trends in supply and demand dynamics in the sector. Refinery operations also showed a positive trend, as crude refinery outputs hit an average of 16.1 million barrels per day last week, representing an increase of 329,000 barrels compared to the previous week’s daily average.
Refineries operated at 89.5% of their capacity, a rise from 87.7% in the prior period. This improvement in refinery capacity utilization may signal a healthy demand for refined products. Moreover, gasoline production surged to 10 million barrels per day, up from 9.3 million barrels the week before, while distillate fuel production also rose to 5 million barrels per day from 4.8 million barrels week over week, indicating a shifting landscape in production that could influence market pricing. On the trading front, West Texas Intermediate crude oil prices fell by 1.3% to $70.78 a barrel by Wednesday afternoon, while Brent crude prices dropped 1.4% to $75.
Analysts are observing a state of nervousness in the futures market, with buyers and sellers alike adopting a cautious approach. Saxo Bank's Head of Commodity Strategy, Ole Hansen, noted that crude oil futures have entered a 'wait-and-see' mode amid current economic indicators. Hansen pointed out that besides stimulus news emerging from China, the most significant short-term risks to prices seem tied to geopolitical developments in the Middle East.
Of particular concern is the reported killing of Hezbollah top official Hashem Safieddine in an Israeli airstrike, which could escalate tensions and impact oil supply dynamics in the region further..