DTN Oil

WASHINGTON(DTN) -- Crude and refined products futures on the New York Mercantile Exchange accelerated losses in late morning trade Wednesday after government data reported U.S. commercial crude, gasoline and distillates inventories unexpectedly increased last week despite a pickup in refinery run rates following Hurricane-related outages in the U.S. Gulf Coast, while bourgeoning demand for middle of the barrel fuels offered limited support.

U.S. Energy Information Administration reported midmorning nationwide crude oil inventories increased for the second consecutive week through Oct. 1, building by 2.3 million barrels (bbl) compared with expectations for stocks to have remained unchanged.

At 420.9 million bbl, commercial crude oil inventories currently stand about 7% below the five-year average after sustaining destocking pattern since the week ended July 30. Oil stored at Cushing, the delivery point for West Texas Intermediate futures, rose by 1.5 million bbl from the previous week to 35.5 million bbl.

Unexpected build was realized even as domestic refiners hiked run rates by 1.5% from the previous week to 89.6% -- the highest utilization rate since the final week of August when Hurricane Ida shuttered a large chunk of Louisiana refinery capacity. U.S. refiners processed 329,000 barrels per day (bpd) more crude during the week ended Oct. 1 at a daily rate of 15.744 million bbl. Analysts were expecting a smaller increase of 0.3%.

Domestic production, meanwhile, rose by another 200,000 bpd to 11.3 million bpd, according to EIA, still about 200,000 bpd below the rate seen prior to Hurricane Ida, which made landfall Aug. 29.

In refined fuels, gasoline inventories posted an unexpected build of 3.3 million bbl versus calls for stocks to have declined by 200,000 bbl. At 225.1 million bbl, domestic gasoline inventories currently stand about 1% below the five-year average. Demand for motor gasoline remained little changed last week at 9.427 million bpd, edging up a modest 23,000 bpd from the previous week -- directionally in line with a 0.2% weekly increase reported by DTN Refined Fuels Demand data.

Distillate inventories, meanwhile, fell by 396,000 bbl from the previous week to 129.3 million bbl, and are now about 11% below the five-year average. Analysts were expecting a larger 1.1 million bbl draw. Distillate consumption, often seen as proxy for economic activity, jumped by 392,000 bpd in the reviewed week to 4.365 million bpd. U.S. diesel demand, often seen as a proxy for economic activity, increased 2% in the week ended Oct. 1, according to DTN's Refined Fuels Demand data, while gaining 5.9% relative to the same week in 2019. The case for robust diesel demand in the fourth quarter is also supported by better-than-expected U.S. economic data, showing U.S. business activity in manufacturing and services industries grew in September despite shortages of labor and raw materials.

Total products supplied over the last four-week period averaged 20.7 million bpd, up 16.4% from the same period last year. Over the past four weeks, motor gasoline product supplied averaged 9.2 million bpd, up 6.4% from the same period last year. Distillate fuel product supplied averaged 4.1 million bpd over the past four weeks, up by 15.9% from the same period last year.

Near 11:30 a.m. ET, NYMEX November WTI futures declined $1.45 to $77.48 bbl, and NYMEX November RBOB futures plunged 5.75 cents to near $2.30 gallon. The NYMEX November ULSD contract slumped 4.25 cents to $2.4511 gallon.

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