US Faces Major Crude Draw and Soaring Product Inventory

In the week concluding on December 29, crude oil inventories in the United States experienced a significant decline, dropping by 7.418 million barrels. Analysts had anticipated a more modest draw of 2.967 million barrels, making this reduction more substantial than expected. Notably, the preceding week had seen a build of 1.837 million barrels in crude inventories.

API data further highlights a cumulative net build in crude oil inventories in the United States, totalling just over 13 million barrels throughout the entirety of 2023. Additionally, the Department of Energy (DoE) released data on Tuesday, revealing a 1.1 million-barrel increase in crude oil inventories in the Strategic Petroleum Reserve (SPR). The current SPR inventory stands at 354.4 million barrels, reflecting a total purchase of more than 7 million barrels since the inception of the Biden Administration's buyback program.

Leading up to the release of API data, oil prices were on an upward trajectory. At 3:37 pm ET, Brent crude exhibited a 3.53% increase, reaching $78.57 per barrel—a decrease of just over $2 compared to the previous week. The U.S. benchmark West Texas Intermediate (WTI) also demonstrated a positive trend, trading up by 3.82% at $73.07 per barrel, marking a decrease of just under $2 compared to the same time the previous week.

In parallel with the dynamics in crude oil, gasoline inventories saw a notable rise of 6.913 million barrels during the reported week. This followed a slight decrease of 480,000 barrels in the preceding week. As of the latest data, gasoline inventories are positioned 2% below the five-year average for this particular period in the year.

Distillate inventories also experienced an uptick during the week, registering a gain of 6.686 million barrels. The previous week had witnessed a more modest increase of 270,000 million barrels. Despite this rise, distillate inventories currently stand approximately 9% below the five-year average.

Within the key storage hub of Cushing, inventories observed an increase of 765,000 barrels during the reported week. This followed a larger surge of 1.57 million barrels in the week preceding the latest data release.

The intricate interplay of inventory dynamics, as reflected in the API and DoE reports, contributes to the broader narrative shaping oil markets. The unexpected draw in crude oil inventories, coupled with fluctuations in gasoline and distillate inventories, influences market sentiments and underscores the ongoing challenges and uncertainties in the global energy landscape. As oil prices respond to these nuanced shifts in supply and demand, market participants continue to closely monitor inventory trends and their broader implications for the energy sector.