(Reuters) – U.S. crude oil stockpiles fell modestly last week, while gasoline and distillate inventories surged as refiners slowed production amid weakening demand, the Energy Information Administration said on Wednesday.
Crude inventories fell by 679,000 barrels in the week to Nov. 27, much less than analysts’ expectations in a Reuters poll for a 2.4 million-barrel drop.
However, fuel inventories rose sharply, with gasoline stocks jumping by 3.5 million barrels, and distillate inventories rising by 3.2 million barrels.
“This trend is likely to continue over the next couple of months as refiners increase diesel production and gasoline demand goes into its seasonally slow period,” said Andrew Lipow, president of Lipow Oil Associates in Houston.
Refinery crude runs fell by 251,000 barrels per day last week, while the utilization rate fell by 0.5 percentage points to 78.2% of total capacity, the EIA said.
The build in distillates, which include diesel and heating oil, surprised some traders, who noted that those stocks have been steadily declining in recent weeks.
“A significant drop in implied demand over the holiday week has resulted in solid builds to both gasoline and distillate inventories, tilting the report bearish on the whole,” said Matt Smith, director of commodity research at ClipperData, said referring to the Thanksgiving holiday on Nov. 26.
Fuel demand declined once again last week as rising COVID-19 infections have spurred local governments to re-impose lockdowns to halt the spread of the virus.
Product supplied over the last four weeks, a proxy for fuel demand, was down 9% from the year-ago period, while gasoline demand fell 10%.
Oil prices extended gains after the data. By 1:44 p.m. ET (1844 GMT), U.S. crude futures were up 90 cents, or 2%, at $45.45 a barrel, while Brent rose 94 cents to $48.36 a barrel.
Crude production, meanwhile, rose 100,000 bpd to 11.1 million bpd. U.S. output remains below 2019’s peak of nearly 13 million bpd but has been steadily rising as rig counts increase. [RIG/U]
“OPEC is looking at that – it has outsized importance,” said Robert Yawger, director of energy futures at Mizuho.
The Organization of the Petroleum Exporting Countries and its allies are weighing whether to taper their supply cuts, which have been used to prop up prices during the coronavirus pandemic. The group has to strike a delicate balance of pushing up prices enough to help their budgets but not so much that rival U.S. output surges.