US DATA: API crude inventory decline offset by large gasoline build

Quantum Commodity Intelligence – US crude oil stocks posted a larger-than-expected decline for the week ending 19 January, although a steep build in gasoline stocks offset the drop in crude, according to data released late Tuesday by the American Petroleum Institute.

The latest API numbers revealed a 6.674 million barrel decline in crude inventories, beating analyst expectations for a 3 million barrel decline, while Cushing dropped another 2 million barrels.

The key Cushing storage hub, the delivery point for the NYMEX WTI futures contract, posted a drop of 2.031 million barrels, as the recent run of steady increases reversed for a second week.

Cushing inventories had been steadily building since early November, reaching around 35 million barrels in early January versus a nine-year low of 21 million barrels registered in October before heading back towards the 30-million-barrel mark.

A steep fall in Cushing stocks is typically bullish for WTI futures, but the impact was countered by further large gains in gasoline inventories, which were up 7.183 million barrels. Distillates decline by 235,000 barrels for an overall net oil build of 250,000 barrels.

The Strategic Petroleum Reserve added 900,000 barrels as the low-scale buyback program continued after the Department of Energy released 180 million barrels from the SPR in 2022. The pace of US restocking is expected to remain slow after the DOE said logistics will limit SPR rebuilding to 3 million barrels per month.

US oil production and refining capacity have both been hit by winter storms, which will likely distort data during January, as the Arctic conditions boosted demand for heating fuels but reduced driving miles.

Meanwhile, the 3-2-1 crack spread, a measure of US refining profitability against gasoline and heating oil margins, was around $25/b based on Mar24 futures contracts early Wednesday, up around $1/b on the week.

The weekly API report serves as a forerunner to the closely watched Energy Information Administration Weekly Petroleum Status Report, which will be published later Wednesday.