Crude inventories climb by 4.6 million barrels while gasoline and distillate stocks dip as refinery maintenance and extreme cold weather impact supply
U.S. crude oil inventories saw an unexpected rise last week, while gasoline and distillate stockpiles fell, according to the latest report from the Energy Information Administration (EIA). The data, released on Thursday, revealed that crude stockpiles increased by 4.6 million barrels to 432.5 million barrels during the week ending February 14. This marked a significant deviation from analysts’ expectations, which had forecast a smaller build of 3.1 million barrels.
At the same time, fuel inventories dropped due to lower refinery throughput amid seasonal maintenance, causing disruptions in gasoline and distillate supply. Gasoline stocks fell by 151,000 barrels, reaching 247.9 million barrels, while distillate inventories—which include diesel and heating oil—declined by 2.1 million barrels to 116.6 million barrels.
Cushing Hub Sees Inventory Buildup
Crude stocks at the crucial Cushing, Oklahoma, delivery hub also rose last week, climbing by 1.5 million barrels to 23.3 million barrels. The build-up at Cushing, a key indicator of supply levels in the U.S., reflects the broader trend of rising crude inventories across the country. However, the increase in crude supplies at the hub is partially a result of lower refinery runs, as refineries operate at reduced capacity during this time of year due to scheduled maintenance.
John Kilduff, a partner at Again Capital in New York, noted that the low refinery run rate was contributing to a backup in crude oil supplies. He pointed out that the reduced utilization was also affecting gasoline inventories, which are not being processed as efficiently as expected. “Refineries are just not cranking out as much gasoline as we would have hoped,” Kilduff remarked.
Refinery Maintenance and Cold Weather Impacting Supply
U.S. refineries processed 15,000 fewer barrels per day last week, with utilization rates falling slightly to 84.9% of total capacity. This decline has persisted for the past month due to maintenance turnarounds at refineries. Kilduff emphasized that this ongoing slowdown in refinery operations is having a knock-on effect on the supply of gasoline and other refined products.
Meanwhile, the weather has also played a significant role in the dynamics of U.S. energy markets. A spike in natural gas prices, driven by extreme cold conditions across parts of the country, has placed additional strain on the energy sector. Kilduff noted that this could result in strong demand for distillate products, such as diesel and heating oil, in the coming weeks. “I would expect strong distillate demand and drawdowns in coming reports,” he said, pointing to the rising demand for heating fuels as the U.S. endures frigid temperatures.
Distillate Demand on the Rise
The demand for distillate fuel oil, which includes diesel and heating oil, has been notably strong. The U.S. four-week average product supplied of distillate fuel oil reached 4.3 million barrels per day (bpd) last week, the highest level since March 2022. This surge in demand for distillates is largely driven by the cold snap, which has heightened the need for heating oil in many parts of the country.
With the continued cold weather, analysts anticipate that distillate inventories could continue to dwindle in the weeks ahead, further tightening supply. As extreme temperatures persist, the market could see more significant drawdowns in distillate supplies, adding pressure to an already strained market.
Crude Imports, Exports, and Domestic Production
On the trade front, U.S. crude imports fell by 961,000 barrels per day (bpd) last week, while exports rose by 472,000 bpd, signaling a slight shift in the balance of supply and demand. Domestic crude production also saw a minor decline, dropping to 13.5 million bpd, as cold weather impacted output and caused some oil and gas wells to freeze.
Phil Flynn, senior analyst with Price Futures Group, indicated that the cold weather could continue to disrupt domestic production in the near term. “Cold weather is already impacting and may impact again as we are hearing about more production freeze-offs,” Flynn said.
Market Reaction
The market responded to the latest EIA report with modest gains in crude oil prices. West Texas Intermediate (WTI) crude rose by $1 to $73.25 per barrel, while Brent crude gained 75 cents, trading at $76.79. The uptick in prices reflects the tightening supply of refined products, as well as the ongoing challenges facing refineries during maintenance season and the impact of extreme weather on production.
While U.S. crude inventories have increased, the broader picture remains complex, with refinery maintenance, cold weather, and shifting import-export dynamics all influencing the market. With distillate and gasoline supplies tightening and crude storage levels rising, energy markets will likely remain volatile in the coming weeks.
Looking Ahead
As the weather continues to impact production and refinery operations, and with the ongoing shift in supply-demand dynamics, energy markets are poised for continued fluctuations. While crude inventories have risen, the overall reduction in refined product stocks suggests that the tightness in the U.S. energy market may persist.
For now, the industry will be watching closely as refineries work to return to full capacity, and as demand for distillates and other refined products increases with the lingering cold temperatures. Whether crude inventories will continue to climb, or if gasoline and distillate stocks will begin to recover, remains to be seen, but the energy sector is certainly entering a period of uncertainty that could shape market conditions in the months ahead.
