U.S. crude oil stockpiles soared while fuel demand slumped last week, each by their most in one week ever, government data showed on Wednesday, as the U.S. oil industry felt the full brunt of efforts to stem the spread of the coronavirus pandemic.
The oil markets have crashed as the pandemic has sapped fuel demand, virtually shutting down commercial aviation worldwide and cutting off gasoline demand as people stay home and businesses remain shuttered.
U.S. fuel demand has dropped by about one-third in the last three weeks, according to the U.S. Energy Information Administration, with last week's fall of 3.4 million barrels per day (bpd) the most ever. The declines have been particularly sharp in gasoline demand, which has been cut nearly in half in the last three weeks alone.
"It's really stunning if you look at the gasoline demand. That's almost half of where we were at the peak of gasoline demand," said Phil Flynn, an analyst at Price Futures Group in Chicago.
The weekly figures on refining activity and oil production show the industry making the painful adjustments to throttle back activities as worldwide demand is expected to drop by roughly 30%. U.S. refiners are now operating at just 75.6% of their capacity, the lowest rate since September 2008, while production was cut by 600,000 bpd to 12.4 million bpd in the week to April 3.
"The industry response is apparent and rapid and there's only more of these cutbacks coming," said John Kilduff, partner at Again Capital LLC in New York.
Crude stocks rose by 15.2 million barrels, their biggest-one week rise, and inventories at the key Cushing, Oklahoma storage hub rose by 6.4 million barrels last week, EIA said, most in one week ever.
U.S. physical crude prices have plunged dramatically as pipelines expect storage to fill rapidly.
U.S. gasoline stocks rose by 10.5 million barrels in the week, just shy of an all-time record. Gasoline product supplied in the most recent week slumped by 24% to 5.1 million bpd. U.S. Gulf Coast refining output fell to 82% of capacity, lowest since September 2017, when Hurricane Harvey hit.
"We do think refiners need to go lower," said Tom Kloza, founder of the Oil Price Information Service. "We're seeing the first step which is cutting across systems. But we need to see more."
Major world oil producers including Saudi Arabia and Russia are trying to wrangle a deal to cut production, but they want the United States to participate through mandated cuts, which the country usually does not do; U.S. officials have pointed out that cuts are happening organically as the price crash hits producers.
"Somebody should send the report to the Saudis and Russia to show that we have, in fact, cut 600,000 barrels per day already," said Kilduff.
Analysts said U.S. crude prices were higher in anticipation of an OPEC-led deal to cut output. U.S. crude futures were up $1.11, or 4.6%, to $24.76 a barrel as of 11:19 a.m. ET (1519 GMT). Brent rose 28 cents to $32.15 a barrel.
Distillate stockpiles, which include diesel and heating oil, rose by 476,000 barrels in the week, after dipping the previous week. Distillate stocks have not moved as much because trucking and farming industries are operating more normally.
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