U.S. crude oil inventories experienced an unexpected surge of nearly 4 million barrels in the week ending September 8, marking the first increase in five weeks, according to the Weekly Petroleum Status Report released by the U.S. Energy Information Administration (EIA). Analysts had anticipated a drawdown of 2.481 million barrels for the week, following a deficit of 6.307 million barrels in the previous week ending September 1.
Fuel inventories also saw substantial increases during the same period. Gasoline stocks rose by 5.561 million barrels, contrary to expectations of a drawdown of 0.85 million barrels. Distillate stockpiles, which include heating oil, diesel, and jet fuel, increased by 3.931 million barrels, surpassing the forecasted gain of 1.4 million barrels.
This surge in crude and fuel supplies coincided with the official end of the summer driving season in the United States, marked by the Labor Day holiday on September 4. Leading up to this period, refineries had drawn nearly 20 million barrels of crude from inventory over a four-week period as they maximized fuel processing to meet summer demand. Refineries had operated at an unusually high run rate of over 93% of their capacity during this period.
Despite continued high refinery activity, the amount of crude processed into fuel decreased compared to the previous week. The EIA noted that refineries operated at 93.7% of their capacity, with gasoline production averaging 9.2 million barrels per day and distillate fuel production averaging 5.0 million barrels per day during the week.
The decline in fuel demand, as summer driving season concluded, contributed to lower consumption. Total gasoline supplied to the market, an essential indicator of consumption, dropped to a daily average of 8.307 million barrels from the previous week’s 9.321 million barrels. Such a decrease in gasoline consumption is typical during off-peak demand periods.
Apart from decreased domestic demand for fuels, the EIA report also indicated a decline in U.S. crude oil exports, which fell to 3.090 million barrels per day from the previous week’s 4.932 million barrels per day.
Despite these bearish elements in the report, the EIA raised its estimate of U.S. oil production for the week to a new three-year high of 12.9 million barrels per day, which is just 400,000 barrels short of the record high of 13.1 million barrels per day in March 2020, before the onset of the COVID-19 pandemic.
Additionally, crude oil imports increased as refiners appeared to import more oil in anticipation of demand. U.S. crude imports averaged 7.6 million barrels per day for the week, an increase of 0.812 million barrels from the previous week.
It’s worth noting that these data points come amid aggressive supply cuts by Saudi Arabia and Russia, which have had a significant impact on pushing oil prices to 10-month highs for both global benchmark Brent and U.S. West Texas Intermediate crude.