U.S. crude oil inventories fell sharply as higher refining runs prompted a surge in gasoline and distillate stocks in the last week of 2016, the Energy Information Administration (EIA) said on Jan. 5.
Crude inventories fell 7.1 million barrels (MMbbl) in the week to Dec. 30, much more than analysts' expectations for a decrease of 2.2 MMbbl.
Some of the drawdown, analysts said, is attributable to year-end tax considerations, as refiners use up crude that is on hand to avoid facing higher taxes for larger inventories.
"The large crude draw can entirely be explained away by the 7.1 MMbbl draw to Gulf coast inventories, as tax mitigation strategies meant crude cargoes remained offshore, rather than being brought onshore, where they would be taxed," said Matt Smith, director of commodity research at ClipperData in Louisville, Ky.
U.S. crude imports fell last week by 1 MMbbl/d.
Refinery crude runs rose 132,000 bbl/d as utilization rates gained 1 percentage point at 92% of total capacity.
The increase in refinery output was concentrated in the U.S. Gulf Coast region, resulting in the largest weekly build in U.S. distillate inventories on record, according to the EIA.
Overall, distillate stockpiles, which include diesel and heating oil, soared 10.1 MMbbl, vs. expectations for a 1.1 MMbbl increase, the EIA data showed. That included a build of 5.8 MMbbl in PADD 3, the Gulf Coast region.
"To have this kind of swing in one-week inventory ... has to do with the calendar. Yes, there was warm weather and yes, production is up, but a lot of it has to do with the calendar year consideration, tax considerations," said Donald Morton, who runs an energy trading desk at Herbert J. Sims & Co, an investment banking firm in Fairfield, Conn.
Gasoline stocks rose 8.3 MMbbl, compared with analyst expectations in a Reuters poll for a 1.8 MMbbl gain.
Oil futures turned negative after the data release. West Texas Intermediate crude was down 27 cents, or 0.6%, at $52.95/bbl, down from an earlier high of $54.12 while Brent was off by 31 cents at $56.15.
Crude stocks at the Cushing, Okla., delivery hub for futures rose by 1.1 MMbbl, the EIA said.
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