Oil Rallies as Product Draws Offset Large Crude Build

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange extended gains into late morning trade Wednesday after the U.S. Energy Information Administration reported a 4.4-million-barrel (bbl) combined drawdown from gasoline and distillate supplies, pressing fuel inventories well below the seasonal five-year average, while offsetting a larger-than-expected build in domestic crude oil stockpiles.

U.S. commercial oil stockpiles spiked 5.9 million bbl during the week ended Aug. 4, exceeding expectations for a 1.3-million-bbl build and well above a 4.067-million-bbl build reported by the American Petroleum Institute. At 445.6 million bbl, commercial crude oil supplies currently stand roughly in line with the five-year average.

The outsized build was partly realized on the back of a 1-million-bbl transfer from Strategic Petroleum Reserve to the commercial side. Furthermore, domestic oil production jumped 400,000 barrels per day (bpd) from the previous week to the highest level since March 2020 at 12.6 million bpd. Domestic refiners raised run rates by 1.1% in the reviewed week to 93.8% of capacity, processing 62,000 bpd more crude for an average of 16.6 million bpd.

Oil stored at Cushing, Oklahoma, hub -- the delivery point for West Texas Intermediate -- rose by 159,000 bbl from the previous week to 34.6 million barrels, EIA said.

In the gasoline complex, commercial stockpiles declined 2.7 million bbl from the previous week to 216.4 million bpd, and now sit about 7% below the five-year average. Earlier this week, analysts expected gasoline inventories to have declined by a modest 300,000 bbl. Demand for gasoline jumped 464,000 bpd to 9.302 million bpd, bringing the four-week average to 1.4% above last year's consumption rate.

Distillate stocks declined by 1.7 million bbl to 115.4 million bbl and now stand 17% below the five-year average. The drawdown came despite demand for middle distillates declining to 3.762 million bpd, about 1.2% below the five-year average.

Total products supplied over the last four-week period averaged 20.7 million bpd, up 2.9% from the same period last year.

Near 11:30 a.m. EDT, NYMEX WTI futures for September delivery added $0.74 to trade near nine-month high $83.55 bbl. NYMEX RBOB September futures advanced $0.0517 to $2.8971 gallon and nearby-month ULSD contract rallied $0.0726 to $3.1605 gallon.

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

Liubov Georges