DTN Oil

WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange spiked in late morning trade Wednesday in reaction to weekly inventory data showing total U.S. crude and petroleum product supplies declined during the third week of January amid lower oil production and recovering demand for motor gasoline, while a large drawdown from Cushing stockpiles -- the delivery point for West Texas Intermediate futures -- rallied WTI futures towards $88 barrel (bbl).

Around noon New York time, March WTI futures spiked $2.20 bbl to $87.80 bbl, February RBOB futures surged 6.5 cents to $2.5245 gallon, with front-month ULSD futures rallying more than 7 cents to $2.7429 gallon.

Total U.S. crude and oil products stocks decreased 4.1 million bbl from the previous week to 1.78 billion bbl, about 7% below the five-year average. Included in the drawdown was a 2.8 million bbl decline realized in distillate fuel stocks that pressed distillate inventories to 17% below the five-year average. Demand for middle of the barrel fuels surged 198,000 barrels per day (bpd) from the previous week to 4.754 million bpd -- the highest weekly demand rate since early December 2021.

In the gasoline complex, demand also recovered, gaining 281,000 bpd to 8.505 million bpd, up more than 8% against a year ago. Gasoline stockpiles increased by 1.3 million bbl from the previous week to 247.9 million bbl compared with analyst expectations for inventories to have increased by 2.3 million bbl.

U.S. commercial crude oil inventories increased for only the second time in the past nine weeks last week, rising 2.4 million bbl to 416.2 million bbl -- still about 7% below the five-year average. Markets mostly expected crude stockpiles would fall by 800,000 bbl from the prior week. Larger-than-expected crude build was realized as domestic refiners scaled back run rates by 0.4% last week to 87.7% compared with expectations for a 0.3% decrease.

Oil stored at the Cushing delivery hub in Oklahoma fell 1.8 million bbl from the previous week to 31.7 million bbl. At this level, Cushing inventories stand more than 30% below the five-year average and at the lowest since October 2018.

After holding steady at the beginning of January, U.S. crude oil production unexpectedly fell by 100,000 bpd last week to 11.6 million bpd, according to the EIA. U.S. crude production is still 1.4 million bpd below March 2020 level when COVID-19 pandemic shut-in a large chunk of domestic output.

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