Oil Futures Backpedal Gains as Refiners Ramp Up Production


   
   CRANBURY, N.J. (DTN) -- Oil futures nearest delivery on the New York 
Mercantile Exchange faded early gains to trade mixed late morning Wednesday 
following the midmorning release of weekly statistics on U.S. oil supply that 
showed a sharp ramp up in refinery runs that led to a big jump in distillate 
fuel production while U.S. crude exports soared to a 26-month high.

   Ahead of the noon hour in New York, NYMEX July West Texas Intermediate 
futures were down slightly at $109.60 bbl, with Brent crude futures for July 
delivery on the Intercontinental Exchange also modestly lower, trading at 
$113.20 bbl. NYMEX June ULSD futures were flat near $3.7825 gallon, trading at 
a more than 11cts premium to the July contract, while June RBOB futures were 
nearly 1cts higher near $3.8205 gallon, about 12cts above the July contract.

   Energy Information Administration reported a 1 million bbl draw in 
commercial crude oil inventory during the week-ended May 20 that was more than 
expectations for a 600,000 bbl decline and countered a 567,000 bbl build 
reported late Tuesday by the American Petroleum Institute. Distillate inventory 
increased 1.7 million bbl that was more than expectations for a 1.2 million bbl 
build while bearish versus and API report of a 200,000 bbl gain. Also bearish 
was a 500,000 bbl draw in gasoline stocks against expectations for a 1.2 
million bbl decline and a 4.223 million bbl drawdown reported by API.

   Missed expectations on product stock levels coincided with the highest 
refinery run rate since the end of 2019 at 93.2%, up 1.4% from the previous 
week, with crude inputs topping 16 million bpd at 16.269 million bpd for the 
first time since mid-August 2021. Crude inputs increased 334,000 bpd or 2.1% 
during the week reviewed, with the weekly input rate the third highest over the 
past 12 months.

   Refiners targeted distillate fuel production last week, which surged 267,000 
bpd or 5.5% to 5.147 million bpd -- the highest weekly output rate since the 
first two weeks of 2020 before the pandemic. Gasoline production eased 151,000 
bpd or 1.6% to a seven-week low of 9.423 million bpd.

   The drop back in gasoline output was more than offset by a sharp 229,000 bpd 
or 2.5% decline in gasoline supplied to the U.S. market during the week-ended 
May 20 to 8.798 million bpd. Implied gasoline demand over the most recent 
four-week period is down 246,000 bpd or 2.7% against the comparable period in 
2021 at 8.846 million bpd, suggesting record high retail prices are prompting 
consumers to throttle back their driving activity.

   Distillate fuel supplied to the U.S. market edged up 51,000 bpd to 3.867 
million bpd last week, although the four-week average through May 20 at 3.854 
million bpd was down 299,000 bpd or 7.2% against the four weeks in 2021, with 
reduced demand corresponding with a slowdown in U.S. economic activity. Bureau 
of Economic Analysis Thursday morning will release its second estimate of first 
quarter U.S. gross domestic product which is expected to show a 1.3% 
contraction on an annualized basis that would be slightly better than an 
advanced estimate showing the U.S. economy shrunk at a 1.4% annualized rate.

   Total U.S. exports topped 10 million bpd for the second time in 2022 and for 
the third time on record, up 1.012 million bpd or 10.6% to 10.576 million bpd 
during the week-ended May 20, with crude exports at 4.341 million bpd and 
propane/propylene exports at 1.641 million bpd driving the sharp pick up. U.S. 
crude exports surged by 821,000 bpd or 23.3% last week, as crude oil released 
from the U.S. Strategic Petroleum Reserve continues to head to U.S. ports for 
export. EIA reported crude oil from the SPR was drawn down 6 million bbl last 
week to 532 million bbl.

    

    

   Brian L. Milne, 1.402.255.8020, brian.milne@dtn.com, www.dtn.com.




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