DTN Oil

WASHINGTON (DTN) -- Following choppy trading for most of the session, crude and refined products futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange pushed higher in market-on-close trade Wednesday, finding support from a bullish drop in U.S. petroleum stockpiles last week and a softening dollar index as traders positioned ahead of the release of U.S. inflation data for January that could reveal the fastest rise in the consumer price index in 40 years.

The weekly inventory report from the Energy Information Administration was surprisingly bullish for the oil complex, showing across-the-board draws from U.S. petroleum stockpiles and stronger fuel demand for the week ended Feb. 4 despite winter weather, including icy conditions in some states from Texas to Maine, that made driving hazardous.

Total crude and oil products stockpiles fell by 8.1 million barrels (bbl) to 1.171 billion bbl -- the lowest inventory level since mid-2014, and nearly 8% below the five-year average. Commercial crude oil inventories declined 4.8 million bbl from the previous week to about 10% below the five-year average at 410.4 million bbl compared with expectations for a 500,000 bbl build.

Globally, industry stocks held by countries that are part of the Organization for Economic Cooperation and Development also stand at their lowest since mid-2014, according to EIA estimates released Tuesday. What's more, even as a destocking pattern is seen reversing around March-April, OECD stockpiles are unlikely to return to five-year average levels until roughly mid-2023, leaving the market vulnerable to supply disruptions and domestic and geopolitical tensions.

Wednesday's inventory report was also supportive for the gasoline complex, showing domestic inventories unexpectedly fell by 1.6 million bbl to 248.4 million bbl compared with analyst expectations for inventories to have increased by 1.4 million bbl last week. Demand for motor gasoline shot up 900,000 barrels per day (bpd) to 9.126 million bbl -- the highest implied demand rate since the week of Dec. 24.

Distillate stocks fell 930,000 bbl to 121.8 million bbl, and remain about 19% below the five-year average, the EIA said. Analysts estimated distillate inventories would fall by 2.1 million bbl from the previous week. Demand for distillates climbed 373,000 bpd from the previous week to 4.296 million bpd.

In outside markets, U.S. Dollar Index weakened against a basket of global currencies to finish the session at 95.494, while also lending limited support to front-month West Texas Intermediate. Dollar weakness comes ahead of the release of U.S. consumer price index for January scheduled for 8:30 a.m. EST Thursday. Economists expect CPI to have gained 0.5% last month, bringing the annualized inflation rate to 7.3% -- the fastest increase in consumer prices since at least 1981.

Several factors drove inflation higher in 2021, including strong economic growth along with global supply chain issues that allowed for the passthrough of higher costs for raw materials, transportation, and wages to consumers. However, the energy index likely was the major driver behind last month's price increase. In breaking down the components in the U.S. CPI index, gasoline prices surged 49.6% over the course of 2021 -- the largest year-on-year gain in the all-items index. The energy commodity index at 48.9% and fuel oil prices at 41.9% were the second and third largest drivers of inflation, with the used cars and trucks component up 37.3% in 2021. The overall energy index rose 29.3% the last year.

At settlement, March WTI futures gained $0.30 to $89.66 bbl, and Brent crude for April delivery advanced to $91.55 bbl, adding $0.77 on the session. NYMEX March RBOB futures moved 2.83 cents higher to $2.6534 gallon, and the front-month ULSD contract rallied 3.23 cents to $2.8249 gallon.

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