WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange added to gains late morning Wednesday following the release of weekly inventory data from the U.S. Energy Information Administration showing U.S. commercial crude oil inventories declined by a larger-than-expected margin last week, offsetting the second consecutive large weekly build in gasoline stockpiles and lackluster demand for refined fuels.
More evidence of omicron-led demand destruction could be found in the midmorning U.S. inventory report that showed gasoline supplied to the U.S. market -- a measure of demand -- slumped to an 11-month low 7.9 million barrels per day (bpd), down 266,000 bpd from the previous week. Fueled by a record number of COVID-19 hospitalizations and bad weather in parts of the country, worker absenteeism has been widespread across service industries as schools close and some in-person businesses are unable to reopen. As a result, gasoline inventories rose by 8 million barrels (bbl) last week to 240.7 million bbl, nearly seven times above an expected 1.2 million bbl increase. Distillate demand remained largely unchanged near 3.749 million bpd after slumping more than 300,000 bpd in the previous week. Distillate stockpiles increased 2.5 million bbl from the previous week to 129.4 million bbl compared with analyst expectations for stockpiles to have gained 1.2 million bbl.
Bullish parts of the report could be found in the crude oil complex, with commercial inventories falling for the sixth consecutive week and domestic oil production slipping 100,000 bpd from a 21-month high 11.8 million bpd. In its Short-term Energy Outlook released a day earlier, the agency forecasted U.S. oil production would average 11.8 million bpd this year before climbing to 12.4 million bpd in 2023.
Commercial crude oil stockpiles declined 4.6 million bbl to 413.3 million bbl and remain about 8% below the five-year average. Analysts estimated crude stockpiles would fall by a smaller 2.1 million bbl. Oil stored at Cushing, the delivery point for West Texas Intermediate, fell by 2.5 million bbl from the previous week to 34.8 million bbl. The refining capacity utilization rate slid 1.4% from the previous week to 88.4% compared with analyst expectations for a 0.1% decrease.
Late morning New York time, February West Texas Intermediate futures advanced $1.66 to $82.87 bbl. NYMEX February RBOB futures surged to $2.3961 gallon, with front-month ULSD futures rallied 3.61 cents or 1.4% to $2.5996 gallon.
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