US Taps Strategic Oil Reserve As Gas Hits 3-Year Low

Energy Information Administration Reports Mixed Inventory Data

by Victor Adetimilehin

The US Energy Information Administration (EIA) released its weekly petroleum report on Wednesday, revealing a surprising decline in crude oil and gasoline stockpiles. This news comes amidst increased refinery activity and rising exports.

Unexpected Draw in Crude Oil Inventories

Contrary to analyst expectations, US crude oil inventories fell for the second consecutive week. The EIA reported a decrease of 2 million barrels, bringing total stockpiles to 445 million barrels for the week ending March 15th. Analysts polled by Reuters had predicted a modest increase of 13,000 barrels.

Gasoline inventories continued their downward trend, dropping for the seventh week in a row. The EIA reported a steeper-than-anticipated decline of 3.3 million barrels, leaving total gasoline stocks at 230.8 million barrels. This represents the lowest level in three years, according to EIA data. Notably, gasoline stockpiles on the Gulf Coast witnessed a significant drop of 1.82 million barrels.

Oil Prices Take a Hit

The news of declining inventories did little to buoy oil prices. Instead, oil futures extended their losses after the EIA report. Brent crude fell by $1.45 per barrel, translating to a 1.7% decline, while US crude dropped $1.77 per barrel, representing a 2.1% decrease. Analysts attributed this to weaker-than-expected gasoline demand.

Despite the decline in gasoline stocks, finished motor gasoline supplied, an indicator of demand, fell below 9 million barrels per day for the first time in three weeks. This suggests a potential softening in gasoline demand, which could explain the drop in oil prices.

The EIA report also highlighted an increase in refinery activity. After facing challenges due to winter weather and outages, refineries have ramped up operations in recent weeks. Crude oil runs rose by 127,000 barrels per day, and refinery utilization rates climbed by 1 percentage point to 87.8% of total capacity.

Distillate Stocks Buck the Trend

Distillate stockpiles, which include diesel and heating oil, defied the downward trend observed in other petroleum products. The EIA reported an increase of 624,000 barrels, bringing total distillate inventories to 118.5 million barrels. This rise surpassed analyst expectations of an 87,000-barrel decline.

The EIA’s report presents a mixed picture of the US petroleum market. While declining crude oil and gasoline inventories suggest tightening supply, the drop in gasoline demand and rising distillate stocks indicate potential adjustments needed to maintain market equilibrium. The coming weeks will be crucial in understanding how these factors play out and their impact on energy prices.

Source: Reuters

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