RBOB Rallies Despite Stock Build, Omicron-Led Demand Hit

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- Oil futures traded on the New York Mercantile Exchange added to gains late morning Wednesday following the release of the weekly inventory report from the U.S. Energy Information Administration, showing total U.S. petroleum stockpiles increased for the first time in four weeks during the period ended Dec. 31 amid sharp contraction in fuel demand that has come under pressure from a resurgent pandemic.

Midmorning inventory report was mixed to bearish for oil prices, but some supportive elements could be found in the crude complex. Commercial crude oil inventories declined by 2.1 million barrels (bbl) from the previous week to 417.9 million bbl, and are now about 8% below the five-year average, the EIA said. The draw missed expectations for a 3 million bbl decline from analysts and estimates of 6.432 million bbl drawdown from the American Petroleum Institute.

Oil stored at Cushing, Oklahoma, the delivery point for West Texas Intermediate futures, also declined by 2.1 million bbl from the previous week to 34.7 million bbl. Refiners, meanwhile, increased run rates by 0.1% last week to 89.8% of capacity compared with estimates for a 0.2% gain. Domestic production remained unchanged from the previous week at a 19-month-high 11.8 million barrels per day (bpd), according to EIA data.

The report was overwhelmingly bearish for refined fuels complex, heightening concerns over omicron-led demand destruction. Gasoline consumption slumped 1.5 million bpd or 9.8% from the previous week to 8.172 million bpd -- the lowest since the final week of February 2021.

EIA figures were in line with DTN Refined Fuels Demand data that found an 18.4% decline in gasoline use during the final week of 2021. The fresh data might suggest some Americans have begun to pullback on driving amid a fourth wave of the pandemic that is being led by a highly contagious omicron variant of coronavirus.

Gasoline stockpiles climbed by a massive 10.1 million bbl to 232.8 million bbl compared with analyst expectations for inventories to have increased by just 1.1 million bbl.

Demand for middle distillates also contracted by a sharp 373,000 bpd to 3.739 million bpd, according to the EIA report. Distillate stocks rose by 4.4 million bbl to 126.8 million bbl and are now about 16% below the five-year average. Analysts were expecting distillates inventories would rise by 400,000 bbl from the previous week.

Total commercial petroleum inventories increased by 10.2 million bbl last week.

Total products supplied over the last four-week period averaged 21.4 million bpd, up by 14.4% from the same period last year. Over the past four weeks, motor gasoline product supplied to the U.S. averaged 9.1 million bpd, up 15.2% from the same period last year. Distillate fuel product supplies averaged 4.1 million bpd over the past four weeks, up 12.2% from the same period last year.

Late morning New York time, February WTI futures gained $1.25 to $78.24 bbl. NYMEX February RBOB futures surged nearly 3 cents to $2.3014 gallon, with the front-month ULSD futures rallying 4.24 cents or 1.7% to $2.4505 gallon.

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

Liubov Georges