The U.S. Energy Information Administration (EIA) reported Wednesday a significant draw of U.S. crude oil inventories during last week, and both major benchmarks of crude oil increased around 1.0 percent at end of the day.
According to the Weekly Petroleum Status Report by EIA, U.S. commercial crude oil inventories, excluding those in the Strategic Petroleum Reserve (SPR), decreased by 5.3 million barrels during the week ending Sept. 7.
The market's expectation was draw of 800,000 barrels in crude oil inventories. The actual record was a much larger draw that surprised the market. EIA also reported a large draw in the inventories of the oil products.
In the previous week ending Aug. 31, EIA reported a draw of 4.3 million barrels of U.S. crude oil inventories. The commercial crude oil inventories excluding SPR is 15.4 percent below the levels of the same week last year.
U.S. crude oil refinery inputs averaged 17.86 million barrels per day during last week, which was 210,000 barrels per day higher than the previous week's average. Over the past four weeks, refinery inputs averaged 17.74 million barrels per day, 11.3 percent higher than the same four-week period of last year.
The big increase in crude oil inputs to refineries over the same period of the last year was due to the fact that Hurricane Harvey hit the Gulf coast a year ago which caused major disruptions in the refinery activities. During the same week last year, crude oil inputs to refineries averaged 14.08 million barrels per day.
High refinery utilization was a major reason behind the builds in gasoline and distillates. It also caused a larger draw in crude oil inventories.
U.S. total motor gasoline inventories increased by 1.3 million barrels last week, about 8 percent above the levels of the same week last year. Distillate fuel inventories increased by 6.2 million barrels last week, 3.6 percent below the levels of the same week last year.
Total commercial petroleum inventories increased by 10.1 million barrels last week.
According to EIA, U.S. total products supplied over the last four-week period averaged 21.48 million barrels per day, up by 5.1 percent from the same period last year. Over the past four weeks, motor gasoline supplied averaged 9.68 million barrels per day, up by 1.2 percent from the same period last year.
Distillate fuel oil supplied over the last four-week period averaged 4.02 million barrels per day, down by 0.2 percent from the same period last year. Over the past four weeks, jet fuel supplied averaged 1.80 million barrels per day, up by 5.9 percent from the same period last year.
Meanwhile, EIA reported that U.S. crude oil production went down by 100,000 to 10.9 million barrels per day.
U.S. crude oil imports averaged 7.59 million barrels per day last week, 123,000 barrels per day lower than the levels of the previous week. Over the past four weeks, crude oil imports averaged 7.58 million barrels per day, 0.2 percent lower than the same four-week period last year.
U.S. crude oil exports averaged 1.83 million barrels per day last week, up by 320,000 barrels per day from the previous week.
Oil prices moved upward on Wednesday after official data showed large draw in U.S crude oil inventories, despite the large build in distillates inventories.
EIA downgraded on Tuesday its forecast on the U.S. oil production in 2019 from 11.7 million barrels per day to 11.5 million barrels per day, supporting the bullish sentiment on oil prices.
On Wednesday, West Texas Intermediate (WTI) for October delivery price increased by 1.6 percent to settle at 70.37 dollars a barrel on the New York Mercantile Exchange, while Brent crude for November delivery increased by 0.9 percent to settle at 79.74 dollars a barrel on the London ICE Futures Exchange.
Analysts attributed part of the prices rally to the approaching tropical storms. Hurricane Florence is expected to hit the East coast on Thursday which might disrupt the fuel flows via pipelines in the areas due to power outages.
Moreover, tropical storm Isaac is expected to hit the Gulf of Mexico this weekend which might interrupt the production activities in the Gulf and the refinery infrastructure along the coastline.
U.S. Gulf coast refineries contain around 55 percent of the U.S. total refinery operating capacity, which makes oil traders pay very close attention to the updates about the tropical storms.