Oil Futures Fall on Large US Crude Build, Security Threat

Brian L Milne
By  Brian L. Milne , DTN Refined Fuels Editor

CRANBURY, N.J. (DTN) -- Nearest delivered oil futures on the New York Mercantile Exchange (NYMEX) and Brent crude on the Intercontinental Exchange (ICE) settled sharply lower Wednesday. It reversed off early session highs on a larger-than-expected build in commercial crude inventory amid low refinery runs, while the chairman of the House of Representatives Intelligence Committee requested the Biden administration declassify information regarding a "serious national security threat."

House Intelligence Committee Chairman Michael Turner, R-Ohio, requested the White House to allow for public discussion on the matter without offering details, according to several media reports. House Speaker Mike Johnson, R-La., said there was no need for "public alarm."

The news added to a bearish weekly supply disposition report from the Energy Information Administration (EIA) showing a 12.018 million barrel (bbl) build in U.S. commercial crude inventory for the week ended Feb. 9, continuing a string of stock gains since mid-January. Commercial crude inventory has increased 18.772 million bbl or 4.5% from Jan. 19 to a 439.45 million bbl eight-week high, with the stock gain realized on record high domestic oil production and low demand from U.S. refineries.

The U.S. refinery utilization rate fell 12% from the second week of January to 80.6% during the week ended Feb. 9, EIA data shows, a nearly 10-month low. The steep drop-off in national refinery activity follows harsh winter weather conditions in mid-January affecting units in PADD 3 and prompting some operators to advance previously scheduled maintenance. In early February, BP's 435,000 barrels per day (bpd) Whiting refinery in northern Indiana and Phillips 66's 208,000 bpd Ponca City refinery in Oklahoma were both shut unexpectedly, with their operating status unclear. The PADD 2 refinery run rate fell 12% to 83.1% of capacity last week and PADD 3 refinery utilization averaged 79.7%, up 2.6% from a 29-month low.

Nationally, crude inputs at U.S. refineries fell for the fourth straight week through Feb. 9, down 298,000 bpd last week and 2.111 million bpd or 12.7% since the second week of January. At 4.542 million bpd, refinery crude inputs averaged at a more than 13-month low last week.

Large inventory drawdowns for gasoline and distillate fuels because of reduced refinery production were offset by a drop back in demand. EIA reported a 3.658 million bbl increase in gasoline stocks to 247.33 million bbl during the week ended Feb. 9, while gasoline supplied to the U.S. market plunged 639,000 bpd to 8.168 million bpd.

Distillate fuel inventory was drawn down for the fourth consecutive week through Feb. 9, down 1.915 million bbl last week and 9.094 million bbl or 6.7% since Jan. 12. Distillate fuel supplied to the U.S. market declined 303,000 bpd to a 3.514 million bpd five-week low last week, while cumulatively in 2024 is down 171,000 bpd or 4.4% from the comparable period in 2022, averaging 3.675 million bpd.

At settlement, NYMEX March ULSD futures were down $0.0858 at $2.8101 gallon and March RBOB futures slid $0.0777 to $2.3169 gallon, having reversed from a $2.4134 19-week high on the spot continuous chart. Both March West Texas Intermediate (WTI) on NYMEX and ICE April Brent registered outside down day sessions, with March WTI futures settling Wednesday's session down $1.23 at $76.64 bbl and April Brent ending $1.17 lower at $81.60 bbl.

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

Brian Milne