Introduction:
The U.S. crude inventories have finally fallen after 10 consecutive weeks of builds, according to the Weekly Petroleum Status Report released by the Energy Information Administration (EIA) on March 3, 2023. This is the first crude stockpile draw since December 2022, and it has come as a relief for the industry, which was grappling with a glut of oil due to seasonal maintenance and other disruptions at U.S. refineries leading to less processing of oil. In this article, we will delve deeper into the report to understand the current state of the U.S. petroleum industry.
U.S. crude inventories fall by 1.694M barrels after 10 consecutive weeks of builds
According to the EIA report, U.S. crude inventories fell by 1.694M barrels during the week ended March 3, 2023. This is a significant drop after 10 weeks of builds that added some 60 million barrels to inventories. Industry analysts had forecast a build of 0.395M barrels on average for the week ended March 3, so the actual draw has come as a surprise.
Refineries operate at 86% of their operable capacity
The EIA report also reveals that refineries operated at 86% of their operable capacity last week, which is below the typical inventory runs of 90% or more at this time of the year. This indicates that there is still some room for refineries to ramp up production, which could help reduce the inventory glut further.
Gasoline production and inventories
Gasoline production decreased last week, averaging 9.6M barrels per day, while gasoline inventories fell by 1.134M barrels. Automotive fuel gasoline is the No. 1 U.S. fuel product, so the drop in production and inventories could have a significant impact on the industry.
Distillate fuel production and inventories
Distillate fuel production also fell last week, averaging 4.5M barrels daily, while distillate stockpiles rose for a third week in a row. Until last month, distillates were the strongest component of the U.S. petroleum complex in terms of demand. However, the rise in distillate inventories could be a cause for concern, as it could indicate weak demand for heating oil, diesel for trucks, buses, trains, and ships, and fuel for jets.
Conclusion:
The U.S. petroleum industry has been grappling with an inventory glut for the past few months, but the latest EIA report indicates that the situation is slowly improving. The fall in U.S. crude inventories after 10 weeks of builds is a positive sign, and the fact that refineries still have room to ramp up production could further reduce the glut. However, the rise in distillate inventories could indicate weak demand, which could be a cause for concern for the industry. Overall, the U.S. petroleum industry is in a state of flux, and it remains to be seen how it will evolve in the coming weeks and months.
