DTN Oil

WASHINGTON (DTN) -- New York Mercantile Exchange oil futures continued lower in late morning trade Wednesday, with West Texas Intermediate sliding below $68 barrel (bbl) in reaction to government data showing U.S. commercial crude oil inventories increased by a larger-than-expected margin during the week ended March 10, offering further evidence of demand weakness in the economy under pressure from rising interest rates.

U.S. commercial crude oil supplies increased for the 11th week out of the past 12, rising 1.5 million bbl to 480.1 million bbl -- about 7% above the five-year average. Analysts mostly expected a marginal 100,000-bbl build for the week. Larger-than-expected increase in crude stocks was realized even as domestic refiners raised run rates 2.2% to 88.2% of capacity, processing 430,000 barrels per day (bpd) more crude compared to the previous week's average. U.S. crude oil production remained unchanged at 12.2 million bpd.

For the refined fuel complex, data from the U.S. Energy Information Administration was somewhat supportive, showing the total stocks of distillates fuel and motor gasoline declined by a combined 4.6 million bbl last week as demand showed signs of improving.

Gasoline stockpiles declined 2.1 million bbl to 236 million bbl compared with analyst expectations for a 1.2-million-bbl decrease. Demand for gasoline edged up a marginal 32,000 bpd to average 8.59 million bpd last week.

Distillate stocks, which are mostly diesel fuel, fell by a steeper 2.5 million bbl to 119.7 million bbl, and are now about 8% below the five-year average. Analysts had estimated distillates inventories would fall 600,000 bbl from the previous week. Distillate fuel consumption improved 222,000 bbl last week but remained well below 4 million bpd at 3.736 million bpd.

Total fuel consumption over the last four-week period averaged 19.7 million bpd, down 6.4% from the same period last year. Over the past four weeks, gasoline demand averaged 8.8 million bpd, almost on par with the same period last year. Distillate fuel supplied to the U.S. market averaged 3.7 million bpd over the past four weeks, down 12.5% from the same period last year. Jet fuel supplied to the domestic market was up 6.7% compared with the same four-week period last year.

Near 11:45 a.m. EDT, West Texas Intermediate for April delivery fell to $67.44 bbl, down by $3.89, the NYMEX RBOB April contract declined by $0.1202 to $2.4328 gallon, and front-month ULSD futures lost $0.1093 to $2.6051 gallon.

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