Oil Prices Tread Water on US Products Build

Oil futures were in a holding pattern Wednesday as official data from the US showed a large build in refined product inventories, making an anticipated banner Memorial Day holiday a letdown for the market. Pressure from gasoline and diesel futures helped pave the way lower for crude prices. Nymex gasoline dropped 1.65¢ to close at $2.2025 per gallon, while the diesel contract dipped 0.55¢, settling at $2.1295/gallon. In London, Brent crude for August delivery was flat at $72.22 per barrel. In New York, July West Texas Intermediate (WTI) on Nymex dipped 9¢ to close at $69.96/bbl while the August contract ended the session 8¢ lower at $69.79/bbl. The US Energy Information Administration's (EIA) weekly report showed that crude inventories in the world’s largest economy dropped 5.2 million barrels to 474 million bbl the week ended Jun. 4. Higher refinery throughputs and crude exports helped inform the draw. US refiners opened the throttle and processed an incremental 327,000 barrels per day of crude, boosting product supplies and putting throughputs at their highest since early January 2020. Meanwhile, US exports of crude oil rose 387,000 b/d to 2.9 million b/d, a development Alex Hodes of StoneX said was unexpected. But that same report showed implied oil demand down 1.4 million b/d at 17.7 million b/d, which means a jump in downstream utilization went unmatched by consumption patterns. In total, US product inventories rose almost 20 million bbl for the week. Gasoline stocks were up 7 million bbl, while inventories of distillate fuel oils such as diesel and heating oil rose 4.4 million bbl for the week. One trader said the rise was in part a result of a surge in imports of refined products following the brief outage of the Colonial Pipeline last month. In addition, the outage spurred a flurry of gasoline purchases as consumers panicked, possibly pre-empting some consumption over the Memorial Day Holiday, which traditionally marks the beginning of the summer driving season. The weather over Memorial Day was also not conducive to travel, with unseasonably cool and rainy conditions blanketing much of the Northeast. “Refiners were running at accelerated levels heading into the beginning of summer driving season, but rain pummeled a large part of the area from the Midwest to East Coast. … Nobody was driving, and the big storage build reflects that fact,” noted Robert Yawger, director of energy futures at Mizuho Americas. To wit, stocks of gasoline along the US East Coast rose by 3.4 million bbl to 65.8 million b/d, even as refinery throughputs there only rose 1,000 b/d and outright gasoline yield in the region fell. Frans Koster, New York