Oil Futures Deepen Losses on Crude Build, Soft Fuel Demand

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- Crude and refined products futures on the New York Mercantile Exchange accelerated losses in late morning trade Wednesday after government data showed U.S. commercial crude oil inventories increased more than expected during the week-ended Oct. 22nd, offsetting a hefty drawdown from crude stockpiles held at the Cushing hub, Oklahoma, and demand for refined fuels reversed lower.

U.S. Energy Information Administration reported midmorning oil stored at the Cushing depot -- the delivery point for the West Texas Intermediate contract, fell 3.9 million barrels (bbl) last week to 27.3 million bbl -- the lowest level since October 2018. Cushing stockpiles have maintained a destocking pattern since early October amid lower-than-usual crude deliveries from western Canada and production outages in the offshore U.S. Gulf of Mexico. Minimum operational capacity at the storage tanks in Cushing is estimated between 16 million and 22 million bbl. Analysts suggest that excess winter demand for gas-to-oil switching in power generation might have also contributed to steep drawdowns in Cushing storage.

Meanwhile, commercial crude oil inventories spiked 4.3 million bbl last week to 430.8 million bbl compared with analyst estimates for a 500,000 bbl increase. Larger-than-expected build was realized even as domestic refiners increased run rates for the first time in three weeks, processing of 15.048 million bbl of crude oil daily. The refining utilization rate rose 0.4% in the reviewed week to 85.1% of capacity compared with calls for a 0.2% increase.

EIA's inventory report was mixed-to-bearish for refined products, showing nationwide gasoline stockpiles dropped slightly above market consensus to 215.7 million bbl following s 2 million bbl draw, and are now 3% below the five-year average. Demand for motor gasoline however declined 311,000 barrels per day (bpd) from the previous week to 9.323 million bpd.

Distillate stocks fell by a modest 432,000 bbl to 125 million bbl and are now about 10% below the five-year average. Analysts expected a much larger 2.1 million bbl decline. Demand for distillates also reversed lower by 409,000 bpd to 3.869 million bpd.

Total commercial petroleum inventories increased by 4.4 million bbl last week.

Total products supplied over the last four-week period averaged 20.8 million bpd, up 9.9% from the same period last year. Over the past four weeks, motor gasoline product supplied averaged 9.4 million bpd, up by 9.5% from the same period last year. Distillate fuel product supplied averaged 4.1 million bpd over the past four weeks, up 3.6% from the same period last year.

In late morning trade, NYMEX December WTI futures slumped $2 to $82.65 bbl, and NYMEX November RBOB futures declined 7.75 to near $2.4395 gallon. The NYMEX November ULSD contract accelerated losses to $2.5045 gallon, down about 7.25 cents on the session so far.

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

Liubov Georges