U.S. crude stocks rose less than expected last week, but the storage hub of Cushing, Oklahoma, saw yet another drawdown that has halved stocks in the last three months, a trend that may continue until more refiners shut for maintenance.
Crude inventories rose by 1.8 million barrels in the week to Feb. 9, short of analysts' expectations for an increase of 2.8 million barrels, the Energy Information Administration said on Wednesday.
However, the most notable action took place in Cushing, where stocks fell by 3.6 million barrels, EIA said.
The combination of a new pipeline running from the hub to Memphis, along with reduced flows from TransCanada's Keystone pipeline, has dropped stocks to 32.7 million barrels, the lowest since January 2015, and down 49 percent from early November's 64.6 million barrels.
The Diamond Pipeline only started in December, but it can run 190,000 barrels a day across Arkansas to Memphis, and it has had a ripple effect across other markets. Gulf Coast cash prices have declined as fewer barrels are making their way north.
"The Diamond Pipeline is increasing takeaway capacity out of Cushing directly, but there's also 600,000 to 700,000 barrels a day of new capacity commissioned and in the process of ramping up from (Texas's) Permian directly to the Gulf Coast," said Michael Wittner, managing director and global head of oil research at Societe Generale (SGE.SG)
Flows from Keystone into Cushing were restricted after a November leak in South Dakota
; that line had been operating under reduced pressure, and it is a primary feeder route to Cushing. The sharp decline in flows comes even as Gulf Coast inventories have risen by 1.7 percent since early November.
Some of this is a seasonal effect, Wittner said. As more refiners in the Midwest start to go into seasonal maintenance periods, inventories in Cushing should rise. However, the increased focus in the United States on exports has had some analysts saying the markets need to shift their benchmark to a Houston-based WTI figure, reflecting global trade.
Gasoline stocks rose by 3.6 million barrels, more than double the 1.2 million-barrel gain forecast by analysts polled by Reuters.
Refinery crude runs fell by 635,000 barrels per day, EIA data showed. Refinery utilization rates fell 2.7 percentage points to 89.8 percent, the lowest since November, as refiners went into seasonal maintenance periods.
Crude production rose again, hitting 10.27 million bpd on a weekly basis, which would be a record if confirmed by monthly figures. November's monthly data showed production in the United States rose
to 10.04 million bpd, and the country now ranks second in overall production, trailing only Russia.
Distillate stockpiles, which include diesel and heating oil, fell by 459,000 barrels, versus expectations for a 1.1 million-barrel drop, the EIA data showed.
U.S. crude futures rose on the news, with West Texas Intermediate up $1.25 to $60.44 a barrel as of 2:17 p.m. EST (1917 GMT). Brent gained $1.49 to $64.21 a barrel.
Reporting by David Gaffen