U.S. Crude Stocks Surge Unexpectedly
U.S. crude stockpiles posted another unexpected build last week, sending oil prices 4% lower, while gasoline and distillate inventories grew more than forecast, the Energy Information Administration said on Wednesday.
Crude inventories rose 6.8 million barrels in the week to May 31, compared with analyst expectations for a decrease of 849,000 barrels, mainly due to a jump in imports, record high production and sluggish refining rates for summer.
Crude inventories have risen in three of the last four weeks in the face of expectations for declines, even as the government released supplies from the Strategic Petroleum Reserve in May.
However, without an SPR release last week, overall commercial crude stocks rose to 483.3 million barrels, their highest since July 2017 and about 6% above the five year average for this time of year.
Net U.S. crude imports rose last week by 1.1 million barrels per day, while crude production added another 100,000 bpd to a new peak at 12.4 million bpd.
Crude stocks at the Cushing, Oklahoma, delivery hub for U.S. crude futures rose 1.8 million barrels to 50.8 million barrels, their highest levels since December 2017, the EIA said.
After the data, U.S. crude dropped 3.7%, or $1.96, to $51.52 a barrel while Brent crude was down $1.50, or 2.4%, at $60.46 a barrel as of 11:04 a.m. EST (1504 GMT).
Oil prices also slumped as the weekly figures included notable jumps in gasoline and distillate inventories at a time when summer driving demand generally causes refiners to run down crude stocks and produce more fuels.
However, fuel demand is off by 0.6% over the past four weeks from the year-ago period, with gasoline demand down 1.3% in that same time frame.
Gasoline stocks rose 3.2 million barrels, compared with analysts’ expectations in a Reuters poll for a 630,000-barrel gain, and were about 2% above the five year average for this time of year.
Distillate stockpiles, which include diesel and heating oil, rose by 4.6 million barrels, versus expectations for a 499,000-barrel increase, the EIA data showed.
Refinery utilization rates rose by 0.6 percentage point to 91.8% of their operating capacity, lower than the 94% it was at this point last year.
“It is surprising that refinery utilization is still significantly below this time last year. As refineries increase their crude rates, products will continue to be well supplied,” said Andrew Lipow of Lipow Oil Associates in Houston.