DTN Oil

WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange reversed higher in post-inventory trade Wednesday, with the March West Texas Intermediate contact again trading above $53 per barrel (bbl) after data from Energy Information Administration showed a much larger-than-expected drawdown from U.S. commercial crude oil stocks and a surprise decline in distillate stockpiles during the week-ended Jan. 22 even as refiners reduced run rates for the first time in four weeks.

Near 11:45 a.m. ET, U.S. crude benchmark erased earlier losses to trade at $53.15, with the prompt-month Brent contract advancing 32 cents to near $56 bbl before expiration Friday afternoon. NYMEX February ULSD futures added 1.74 cents to $1.6158 gallon, with the next-month delivery March contract trading near parity. NYMEX February RBOB futures moved 0.51 cents higher to $1.5858 gallon, while the March futures narrowed its discount to the expiring contact. Both contracts expire Friday afternoon.

EIA inventory data released midmorning showed U.S. commercial crude oil inventories declined 9.910 million bbl during the week ended Jan. 22 to 476.653 million bbl -- the lowest level since the final week of March 2020. The market mostly projected a modest drop of 100,000 bbl in the reviewed week, while data from the American Petroleum Institute showed late Tuesday a 5.4 million bbl drawdown. The EIA data also showed crude stocks at the Cushing, Oklahoma, storage hub fell by 2.3 million bbl from the previous week. Supersized crude draw was realized even as refiners slightly decreased their run rates to 81.7%, processing 39,000 barrels per day (bpd) less crude compared to the previous week.

Domestic producers reduced output by 100,00 bpd from the previous week to below 11 million bpd, according to the EIA data.

Gasoline stocks, climbed by 2.5 million bbl last week, far exceeding expectations for a 1 million bbl build. At 247.7 million bbl, domestic gasoline supplies are about 3% below the five-year average. Gasoline supplied to the U.S. market, a measure for demand, declined 279,000 bpd from the previous week to average 7.833 million bpd. Over the past four weeks, motor gasoline product supplied averaged 7.7 million bpd, down 9.5% from the same period last year.

Distillate stocks climbed 814,992 bbl from the previous week to 162.8 million bbl, about 8% above the five-year average. Implied demand for distillates continued higher for the third week in a row, up 479,000 bpd to 4.3 million bpd -- the highest weekly rate since the beginning of March. Distillate fuel product supplied averaged 3.7 million bpd over the past four weeks, down 1.2% from the same period last year.

Liubov Georges can be reached at liubov.georges@dtn.com