DTN Oil

WASHINGTON (DTN) -- Crude and refined product futures on the New York Mercantile Exchange pared a portion of overnight gains late morning Wednesday after an inventory report from the Energy Information Administration showed domestic crude oil production jumped to an 18-month high at 11.6 million barrels per day (bpd) last week and, despite refinery runs rising by a smaller-than-expected margin, nationwide gasoline and distillate fuels supplies registered large builds.

Offsetting bearish parts of the reports, U.S. crude oil inventories decreased by 909,000 barrels (bbl) from the previous week to 433.1 million bbl compared with expectations for stocks to have added 800,000 bbl. The draw was realized even as domestic refiners raised run rates by a modest 0.2% to 88.8%, missing market expectations for a 0.6% increase. U.S. producers, meanwhile, raised production by 100,000 bpd to 11.6 million bbl -- the highest weekly output rate since April 2020 when the coronavirus pandemic reigned havoc on the domestic oil industry. U.S. oil production still stands 1.4 million bpd below its pre-pandemic peak of 13 million bpd.

Oil stored at Cushing in Oklahoma, the delivery point for West Texas Intermediate futures, rose 1.2 million bbl from the previous week to 28.5 million bbl.

The bearish parts of the report were found in in the fuels complex, showing demand for gasoline and distillates weakened during the Thanksgiving holiday week and stockpiles unexpectedly increased. Gasoline inventories jumped 4 million bbl to 215.4 million bbl compared with analyst expectations for inventories to have decreased 500,000 bbl. Gasoline supplied to the U.S. market, a measure of demand, declined 538,000 bpd last week to 8.796 million bpd, likely reflecting demand pulled forward during the previous week as suppliers staged product near retail centers.

EIA figures were directionally in line with findings in DTN's Refined Fuels Demand data that revealed gasoline liftings at wholesale terminals declined 1% in the reviewed week. A final seasonal surge in gasoline demand during the second half of December typically marks the strongest period of winter consumption and the strongest period of gasoline demand since the Labor Day holiday.

Distillate stocks, meanwhile, rose 2.2 million bbl to 123.9 million bbl last week, and are now about 9% below the five-year average, EIA said. Analysts expected distillate inventories would remain unchanged from the previous week. Distillate supplied to the U.S. market decreased by 182,000 bpd from the previous week to 4.209 million bpd. Distillate demand looks to have peaked for the fourth quarter, albeit at a far higher level than was seen both last year and in 2019.

Total products supplied over the last four-week period averaged 20.7 million bpd, up 7.1% from the same period last year. Over the past four weeks, motor gasoline product supplied averaged 9.2 million bpd, up 10.6% from the same period last year. Distillate fuel product supplied averaged 4.3 million bpd over the past four weeks, up 6.1% from the same period last year. Jet fuel product supplied was up 34.5% compared with the same four-week period last year.

Late morning in New York, NYMEX January WTI futures were up $1.28 to trade at $67.50 bbl and NYMEX January RBOB futures gained 5.89 cents to $1.9969 gallon, and the front-month ULSD contract rallied to $2.1150 gallon, up 5.31 cents on the session.

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