MOSCW (MRC) -- U.S. crude oil inventories rose unexpectedly last week, hitting their highest levels since July 2017, due to weak refinery output, particularly in the Midwest, the Energy Information Administration said, as per Hydrocarbonprocessing.
Crude inventories rose 4.7 million barrels in the week ended May 17, compared with analysts’ expectations for a decrease of 599,000 barrels. That boosted overall crude inventories, not including the U.S. government’s Strategic Petroleum Reserve, to 476.8 million barrels, their highest since July 2017.
Some of the increase in inventories came as a result of sales out of the SPR, which this week dropped 1.1 million barrels, the fourth consecutive week of sales.
Analysts attributed the inventory build to more sluggish refinery runs than normal for this time of year. In particular, refining usage in the Midwest fell to its lowest levels in May since 2013.
"Refinery utilization just can’t get it together,” said Bob Yawger, director of futures at Mizuho in New York. “It’s at the extreme end of the range of possibilities for a bearish report. It’s about as bad as it could have been considering the fact that driving season is so close."
Refinery utilization rates have dropped since January for seasonal maintenance but have barely managed to break above 90% of total capacity, even ahead of the peak gasoline demand season in summer. Last week, refinery crude runs fell by 98,000 barrels per day and rates fell 0.6 percentage point to 89.9% of total capacity. Rates in the Midwest fell to 82.7% of capacity, their lowest for the month of May since 2013.
As a result, Midwest crude inventories rose last week to 142.4 million barrels, their highest since November 2017, while gasoline stocks in the region fell to 47.4 million barrels, the lowest weekly levels for the month of May since 2014, EIA data showed.
Last week, BP Plc’s Whiting, Indiana refinery was forced to shut two units amid an overall of its crude distillation unit; it returned to normal at the beginning of this week.
In addition, flooding in the Farm Belt has cut planting of crops, which reduces the demand for diesel.
As MRC informed earlier, U.S. commercial crude oil inventories have been rising in recent weeks, which some observers have interpreted as evidence the global oil market is adequately supplied and blame for a sudden decline in oil prices.
MRC