DTN Oil

CRANBURY, N.J. (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange faded early gains to trade mixed late morning Wednesday following the midmorning release of weekly statistics on U.S. oil supply that showed a sharp ramp up in refinery runs that led to a big jump in distillate fuel production while U.S. crude exports soared to a 26-month high.

Ahead of the noon hour in New York, NYMEX July West Texas Intermediate futures were down slightly at $109.60 per barrel (bbl), with Brent crude futures for July delivery on the Intercontinental Exchange also modestly lower, trading at $113.20 bbl. NYMEX June ULSD futures were flat near $3.7825 per gallon, trading at a more than 11 cents premium to the July contract, while June RBOB futures were nearly 1cts higher near $3.8205 gallon, about 12 cents above the July contract.

Energy Information Administration reported a 1 million bbl draw in commercial crude oil inventory during the week-ended May 20 that was more than expectations for a 600,000 bbl decline and countered a 567,000 bbl build reported late Tuesday by the American Petroleum Institute. Distillate inventory increased 1.7 million bbl that was more than expectations for a 1.2 million bbl build while bearish versus and API report of a 200,000 bbl gain. Also bearish was a 500,000 bbl draw in gasoline stocks against expectations for a 1.2 million bbl decline and a 4.223 million bbl drawdown reported by API.

Missed expectations on product stock levels coincided with the highest refinery run rate since the end of 2019 at 93.2%, up 1.4% from the previous week, with crude inputs topping 16 million barrels per day (bpd) at 16.269 million bpd for the first time since mid-August 2021. Crude inputs increased 334,000 bpd or 2.1% during the week reviewed, with the weekly input rate the third highest over the past 12 months.

Refiners targeted distillate fuel production last week, which surged 267,000 bpd or 5.5% to 5.147 million bpd -- the highest weekly output rate since the first two weeks of 2020 before the pandemic. Gasoline production eased 151,000 bpd or 1.6% to a seven-week low of 9.423 million bpd.

The drop back in gasoline output was more than offset by a sharp 229,000 bpd or 2.5% decline in gasoline supplied to the U.S. market during the week-ended May 20 to 8.798 million bpd. Implied gasoline demand over the most recent four-week period is down 246,000 bpd or 2.7% against the comparable period in 2021 at 8.846 million bpd, suggesting record high retail prices are prompting consumers to throttle back their driving activity.

Distillate fuel supplied to the U.S. market edged up 51,000 bpd to 3.867 million bpd last week, although the four-week average through May 20 at 3.854 million bpd was down 299,000 bpd or 7.2% against the four weeks in 2021, with reduced demand corresponding with a slowdown in U.S. economic activity. Bureau of Economic Analysis Thursday morning will release its second estimate of first quarter U.S. gross domestic product which is expected to show a 1.3% contraction on an annualized basis that would be slightly better than an advanced estimate showing the U.S. economy shrunk at a 1.4% annualized rate.

Total U.S. exports topped 10 million bpd for the second time in 2022 and for the third time on record, up 1.012 million bpd or 10.6% to 10.576 million bpd during the week-ended May 20, with crude exports at 4.341 million bpd and propane/propylene exports at 1.641 million bpd driving the sharp pick up. U.S. crude exports surged by 821,000 bpd or 23.3% last week, as crude oil released from the U.S. Strategic Petroleum Reserve continues to head to U.S. ports for export. EIA reported crude oil from the SPR was drawn down 6 million bbl last week to 532 million bbl.

Brian Milne can be reached at brian.milne@dtn.com