US crude stockpiles drop unexpectedly, demand hits record high

© Reuters. FILE PHOTO: Crude oil storage tanks are seen from above at the Cushing oil hub, appearing to run out of space to contain a historic supply glut that has hammered prices, in Cushing, Oklahoma, March 24, 2016. Picture taken March 24, 2016 REUTERS / Nick Oxf

By David Gaffen

(Reuters) -US crude oil stockpiles fell unexpectedly last week as overall refined product demand reached an all-time record, according to government data on Wednesday, showing how the US economic pace is cutting into the market’s already tight supply.

Crude inventories fell 4.8 million barrels in the week to Feb. 4 to 410.4 million barrels, their lowest for commercial inventories since October 2018, the Energy Information Administration said. Analysts had forecast in a Reuters poll a 369,000-barrel rise.

Overall, the mild softness in oil demand was observed in early January due to the Omicron coronavirus variant seems to have passed.

US product supplied – the best proxy for demand – peaked at 21.9 million barrels per day (bpd) over the past four weeks due to strong economic activity nationwide. Both US demand for distillates like diesel, along with propane and propylene, surged.

Weekly gasoline product supplied jumped to 9.1 million bpd, though the broader four-week average is slightly below seasonal levels.

“This is a stark rebound of gasoline demand; we’re past Omicron and we have renewed travel demand. Refineries are clearly running more which contributed to the crude drawdown,” said John Kilduff, partner at Again Capital in New York.

Refiners have had a hard time keeping up with demand, as crude runs rose by 329,000 bpd in the last week, EIA said, boosting refinery utilization rates by 1.5 percent points to 88.2% of their overall capacity.

US gasoline stocks fell by 1.6 million barrels to 248.4 million barrels, the EIA said. Distillate stockpiles, which include diesel and, fell by 929,000 barrels in the week.

Net imports fell by 1.42 million bpd and crude stocks at the Cushing, Oklahoma, delivery hub fell by 2.8 million barrels, the EIA said.

Oil prices spiked on the data. futures gained 94 cents to $ 91.72 a barrel by 10:55 am EST (1555 GMT) while US crude gained 66 cents to $ 90.02 a barrel.

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