DTN Oil

WASHINGTON (DTN) -- New York Mercantile Exchange oil futures strengthened in late morning trade Wednesday, boosting front-month West Texas Intermediate above $108 barrel (bbl) after government data from the U.S. Energy Information Administration revealed a larger-than-expected decline in commercial crude oil inventories in the week ended March 25, offsetting surprise builds in refined fuel stockpiles and sharp drop-off in demand for gasoline and distillate fuels.

Near 11:15 a.m. EDT, NYMEX WTI May futures rallied $3.90 to $108.80 bbl, and the international crude benchmark Brent May contract advanced $3.85 to $114.80 bbl. NYMEX April RBOB futures spiked 10.24 cents to $3.3057 gallon, with front-month ULSD futures gained 8.36 cents to $3.7997 gallon.

EIA data released midmorning Wednesday show commercial crude stockpiles tumbled 3.4 million bbl from the previous week to 409.9 bbl and are now about 14% below the five-year average. The draw was bullish against market expectations for a 1 million bbl decline and estimates of a 3 million bbl drawdown reported by the American Petroleum Institute late Tuesday. Domestic refiners once again increased run rates, up 1% to 92.1% of operational capacity, processing nearly 16 million barrels per day (bpd) of crude oil in the reviewed week. Oil producers lifted output by 100,000 bpd from the previous week to 11.7 million bpd.

Oil stored at the Cushing, Oklahoma, hub, the delivery point for WTI futures, fell 1 million bbl from the previous week to 24.2 million bbl, EIA said in its weekly report.

In the gasoline complex, commercial inventories unexpectedly rose by 785,000 bbl to 238.8 million bbl compared with analyst expectations for inventories to have decreased by 1.3 million bbl from the previous week. Demand for motor gasoline fell for the second consecutive week through March 25, down 138,000 bpd to 8.499 million bpd -- the lowest weekly rate since mid-January.

Distillate stocks also rose, up 1.4 bbl to 113.5 million bbl, and are now about 16% below the five-year average, EIA said. Analysts expected distillates inventories had declined by 1.2 million bbl from the previous week. Demand for distillate fuels plummeted 712,000 bpd last week to 3.804 million bpd. Demand figures were directionally in line with findings in DTN Refined Fuels Demand data that showed distillate demand in the United States declined 5.3% in the week ended March 25 after eroding 4.5% in the prior week. Total U.S. diesel demand was down 1%, year-on-year, for the week and 1.1% lower from the same week in 2019. The data could be an early sign of developing weakness in U.S. diesel demand that closely correlates with economic activity, consumer purchases and international trade. It is also possible that supply chain issues related to Russia's invasion of Ukraine and COVID-related lockdowns in China could already be impacting domestic freight activity and concomitantly diesel demand.

Total products supplied to the U.S. market over the last four-week period averaged 20.7 million bpd, up by 8.1% from the same period last year. Over the past four weeks, motor gasoline product supplied averaged 8.8 million bpd, up 1.1% from the same period last year. Distillate fuel product supplied averaged 4.2 million bpd over the past four weeks, up by 2.4% from the same period last year. Jet fuel product supplied to the U.S. market was up 39.1% compared with the same four-week period last year.

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