U.S. Crude Stocks Rise Unexpectedly - EIA
U.S. crude oil inventories rose unexpectedly last week, hitting their highest levels since July 2017, due to weak refinery output, particularly in the Midwest, the Energy Information Administration said on Wednesday.
Crude inventories rose 4.7 million barrels in the week ended May 17, compared with analysts' expectations for a decrease of 599,000 barrels. That boosted overall crude inventories, not including the U.S. government's Strategic Petroleum Reserve, to 476.8 million barrels, their highest since July 2017.
Some of the increase in inventories came as a result of sales out of the SPR, which this week dropped 1.1 million barrels, the fourth consecutive week of sales.
Analysts attributed the inventory build to more sluggish refinery runs than normal for this time of year. In particular, refining usage in the Midwest fell to its lowest levels in May since 2013.
"Refinery utilization just can't get it together," said Bob Yawger, director of futures at Mizuho in New York. "It's at the extreme end of the range of possibilities for a bearish report. It's about as bad as it could have been considering the fact that driving season is so close."
Refinery utilization rates have dropped since January for seasonal maintenance but have barely managed to break above 90% of total capacity, even ahead of the peak gasoline demand season in summer.
Last week, refinery crude runs fell by 98,000 barrels per day and rates fell 0.6 percentage point to 89.9% of total capacity. Rates in the Midwest fell to 82.7% of capacity, their lowest for the month of May since 2013.
As a result, Midwest crude inventories rose last week to 142.4 million barrels, their highest since November 2017, while gasoline stocks in the region fell to 47.4 million barrels, the lowest weekly levels for the month of May since 2014, EIA data showed.
Last week, BP Plc's Whiting, Indiana refinery was forced to shut two units amid an overall of its crude distillation unit; it returned to normal at the beginning of this week.
In addition, flooding in the Farm Belt has cut planting of crops, which reduces the demand for diesel.
The surprising jump in crude stocks spurred selling in the oil market, with U.S. futures dropping by 2.1%, or $1.31 per barrel, to $61.81 as of 11:02 a.m. EDT (1502 GMT), continuing a recent trend of weakness. Brent crude, the international benchmark, lost 1.4%, or $1.04, to $71.15 a barrel.
Crude stocks at the Cushing, Oklahoma, delivery hub for U.S. crude futures rose by 1.3 million barrels to their highest since December 2017, at 49.1 million bpd, EIA said.
Net U.S. crude imports fell last week by 244,000 bpd, while crude production rose 100,000 bps to 12.2 million bpd, just shy of the record high.
Gasoline stocks rose by 3.7 million barrels, compared with analysts' expectations in a Reuters poll for an 816,000-barrel drop.
Distillate stockpiles, which include diesel and heating oil, rose by 768,000 barrels, versus expectations for a fall of 48,000 barrels, the EIA data showed.
(Reuters, Reporting By David Gaffen Editing by Marguerita Choy)