Recent government data has unveiled an unexpected increase in commercial crude oil stockpiles in the United States, with significant developments noted in propane and propylene inventories last week. According to the Energy Information Administration (EIA), inventories of crude oil, excluding the strategic petroleum reserve, surged by 5.8 million barrels, reaching a total of 422.7 million barrels for the week ending last Friday.
This rise surpassed the market consensus, which anticipated an increase of only 1.6 million barrels, according to a Bloomberg poll. It is also important to highlight that current inventories stand 4% below the five-year average for this time of the year. Propane and propylene stocks experienced a notable rise too, adding 1.9 million barrels week-over-week.
However, total motor gasoline inventories witnessed a decline, dropping by 6.3 million barrels, while distillate fuel stocks fell by 3.1 million barrels. The overall decrease in commercial petroleum inventories accounted for a significant 8.1 million barrels last week, as reported by the EIA. Refinery operations were recorded at 86.7% of their capacity, down from the previous 87.6%.
Despite this, gasoline production saw a noticeable uptick, climbing to 10.2 million barrels per day from the prior week's 9.6 million barrels. Similarly, production of distillate fuel rose to 5 million barrels per day from 4.8 million barrels, indicating a robust output despite the slowing refinery activity. In terms of pricing, West Texas Intermediate (WTI) crude oil experienced a slight decrease of 0.4%, settling at $73.28 a barrel by Wednesday afternoon.
Brent crude also saw a decline of 0.7%, trading at $76.61. Analysts from D.A. Davidson noted that oil prices pulled back as robust supply concerns overshadowed potential disruptions related to the ongoing conflict in the Middle East and Hurricane Milton. Trading dynamics have been affected further as WTI and Brent crude prices faced downward pressure earlier this week, driven by apprehensions about demand from China and a bearish inventory report from the American Petroleum Institute (API), as mentioned by ING in their Wednesday analysis.
Adding to the mounting concerns, the EIA's latest short-term energy outlook, published on Tuesday, displayed negative revisions to US crude production forecasts for 2024 and 2025. ING attributed this to the ongoing decline in the number of operational oil rigs within the United States, a trend that has been observed for quite some time now.
The fluctuations in inventory, production levels, and global supply dynamics paint a complex picture of the current oil market landscape, revealing significant pressures that could impact future pricing and production strategies..