Oil Futures Choppy as Run Rate Rebounds, Gains in Demand

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- In post-inventory trade Wednesday, crude and refined products futures on the New York Mercantile Exchange posted mixed results, with nearby month West Texas Intermediate slipping below $64 barrel (bbl) as a larger-than-expected build in U.S. commercial crude oil supplies was offset by massive drawdowns in refined products inventories with demand for motor gasoline leaping higher during the first week of March.

Further supporting the complex, domestic refiners increased crude throughputs by 2.4 million barrels per day (bpd) from the previous week to process 12.3 million bpd, lifting operational capacity to 69%, up 13% from the previous week. Wire services indicated seven of 18 Texas refineries impacted by Winter Storm Uri last month, including those that shut all or some units, were able to resume full operational capacity. Most of the remaining refineries are expected to restore operations by the middle of the month.

Despite these efforts, refiners still operated 19% below the three-year average run rate, holding near a historical low, resulting in massive swings for crude and refined petroleum supplies for the second week in a row.

U.S. commercial crude oil supplies spiked 13.8 million bbl during the week ended March 5, far exceeding market consensus for a 700,000 bbl increase. At 498.4 million bbl, U.S. crude oil inventories stand about 6% above the five-year average.

Crude production jumped 900,000 bpd to 10.9 million bpd, indicating domestic operators are quickly restoring output shut-in by Uri last month. Earlier this week, EIA projected U.S. crude output would average 11.1 million bpd this year, up 100,000 bpd from the prior's month forecast.

Gasoline stockpiles decreased by 11.9 million bbl from the previous week to 231.6 million bbl compared with analyst expectations for inventories to fall 3.2 million bbl. Demand for motor fuel leaped 578,000 bpd to the highest weekly rate since early November 2020 at 8.726 million bpd.

Distillate stocks also fell by larger-than-expected 5.5 million bbl to 137.5 million bbl and are now 4% below the five-year average, the EIA said. Earlier in the week, analysts had forecast distillate supplies would fall by 3.4 million bbl from the previous week. Distillate supplied to the U.S. market surged 806,000 bpd to 4.487 million bpd -- the highest weekly implied demand rate since before the pandemic in November 2019.

Total products supplied over the last four-week period averaged 19.2 million bpd, down 7.1% from the same period last year.

Near midday New York time, West Texas Intermediate for April delivery were down 65 cents near $63.35 and Brent May crude declined 60 cents to near $66.90 bbl. NYMEX April ULSD futures fell 1.85 cents to trade near $1.8900 gallon and front-month RBOB futures moved on either side of unchanged at $2.0480 gallon.

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

Liubov Georges