DTN Oil

WASHINTON (DTN) -- After initially rallying in response to a bullish weekly report from the U.S. Energy Information Administration, oil futures nearest delivery on the New York Mercantile Exchange turned lower amid profit-taking ahead of end-year accounting and the upcoming holiday weekend.

The midmorning inventory report showed total commercial petroleum stockpiles fell by a whopping 18.9 million barrels (bbl) during the week ended Dec. 24, with 3.6 million bbl of that drop realized in commercial crude oil inventories. The draw was bullish against expectations for a 3.2 million bbl decline from analysts and estimates of a 3.09 million bbl drawdown by the American Petroleum Institute. At 420 million bbl, nationwide crude oil inventories stand about 7% below the five-year average. Oil stored at Cushing, the delivery point for West Texas Intermediate, rose by 1.1 million bbl from the previous week to 34.7 million bbl.

Refiners, meanwhile, increased run rates by 0.1% last week to 89.7% of capacity compared with estimates for a 0.2% decrease.

The bearish part of the report could be found on the production side, with domestic operators ramping up crude output by 200,000 barrels per day (bpd) from the previous week to 11.8 million bpd -- a 19 months high.

In the gasoline complex, EIA data showed supplies fell by 1.5 million bbl to 222.7 million bbl, about 6% below the five-year average. Earlier this week, analysts were expecting a 200,000 bbl build and API reported a much smaller 319,000 bbl draw from gasoline inventories. Demand for motor gasoline surged 738,000 bpd or 19.6% to 9.724 million bpd -- the highest demand rate since the final week of July. EIA figures were directionally in line with DTN Refined Fuels Demand data that found a 5.1% increase in week-on-week U.S. gasoline demand. Gasoline consumption has mostly remained on par with 2019 levels in the fourth quarter despite ongoing surge in Omicron COVID cases and higher gasoline prices. The strength in gasoline demand might also suggest that some Americans have chosen to get behind the wheel for Christmas travel instead of boarding a plane amid widespread flight cancellations.

Demand for middle distillates also surged to above 4 million bpd, up 229,000 bpd from the previous week, according to the EIA report. Distillate stocks fell by 1.7 million bbl from the previous week to 122.4 million bbl and are now about 14% below the five-year average. Analysts expected distillates inventories would rise by 200,000 bbl. Surging imports of goods, demand-driven manufacturing activity and strong retail sales have all contributed to burgeoning diesel demand this year that has consistently surpassed pre-pandemic levels.

Total products supplied over the last four-week period averaged 21.4 million bpd, up 12.4% from the same period last year. Over the past four weeks, motor gasoline product supplied averaged 9.3 million bpd, up 17.1% from the same period last year. Distillate fuel product supplied averaged 4.1 million bpd over the past four weeks, up 7.8% from the same period last year.

Near the noon hour in New York, February West Texas Intermediate futures slipped $0.25 to $75.73 bbl. NYMEX January RBOB futures was flat at $2.2471 gallon, with the next-month February contract trading near parity. January ULSD contract declined 1.24 cents to $2.3588 gallon and the February contract widened its discount to 0.11 cents. Both RBOB and ULSD January contracts expire Friday afternoon.

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