DTN Oil

WASHINGTON, D.C. (DTN) -- West Texas Intermediate futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange powered higher in afternoon trading Wednesday in reaction to weekly inventory report from the U.S. Energy Information Administration showing domestic crude oil production dropped 1 million bpd from the deep freeze that swept through most of the United States last week, while an outsized draw from commercial oil inventories rallied U.S. benchmark above $75 bbl.

Subfreezing temperatures and heavy snowfall disrupted oil production from North Dakota to West Texas oil fields last week, pressing nationwide oil production to the lowest level since late 2022 at 12.3 million bpd. In North Dakota, some 650,000 bpd of oil production is still shut-in following wellhead freeze-offs, bringing operations in Bakken basin oil fields to a standstill. According to the North Dakota Pipeline Authority, it might take a full month for the state's oil output to return to normal levels. Before the disruption, North Dakota oil production averaged about 1.25 million bpd, with output reaching an all-time high of 1.52 million bpd before the pandemic in November 2019. On Friday (1/19), Baker Hughes reported the number of active rigs drilling for oil in the United States fell to a 10-week low 497.

The deep freeze also disrupted operations in the Midwest and Gulf Coast refineries, with nationwide refinery throughput down by nearly 1.4 million bpd or 8.2% from the previous week to 15.2 million bpd. In the PADD 3 Gulf Coast, refinery crude throughout plummeted by 1.1 million bpd and Midwest runs fell 300,000 bpd. While market participants are yet to hear of any damage to refineries in these regions, some refiners in the Gulf Coast moved units into planned maintenance earlier than normal.

Further lending support to WTI futures, commercial crude oil supplies declined by a larger-than-expected 9.2 million bbl in the reviewed week to 420.7 million bbl, about 5% below the five-year average. The supersized draw was much larger than a 1.4 million bbl decline expected by markets and a 6.678 million bbl drop reported by the American Petroleum Institute on Tuesday. Oil stored at the Cushing, Oklahoma, hub, the delivery point for the WTI contract, fell 2 million bbl to 30.1 million bbl.

In the refined fuel complex, gasoline stockpiles increased 4.9 million bbl in the reviewed week to 253 million bbl compared with expectations for a 1.5 million bbl build. Demand for gasoline slumped 389,000 bpd to 7.88 million bpd, as poor weather kept motorists off the road.

Distillate stocks, mostly diesel, dropped back 1.4 million bbl to 133.3 million bbl and were 4% below the five-year average. Distillate supplied to the U.S. market increased 139,000 bpd from the previous week to 3.784 million bpd.

At settlement, March WTI futures advanced $0.72 to $75.06 bbl -- the highest settlement since Dec. 27, 2023, and the international crude benchmark gained $0.49 to finish the session at $80.04 bbl. February ULSD futures eased $0.0095 to $2.6818 gallon, while front-month RBOB futures settled little changed at $2.2095 gallon.

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