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U.S. crude and fuel stocks soar as demand craters due to pandemic -EIA

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 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.

Crude stocks, meanwhile, rose by 15.2 million barrels in the week to April 3, their biggest-one week rise. Much of those inventories were sent to the key Cushing, Oklahoma, storage hub, where stocks rose by 6.4 million barrels last week, EIA said, also the most in one week ever.

Both of those estimates far exceeded expectations, and U.S. physical crude prices have plunged dramatically as pipelines expect storage to fill rapidly, forcing production to be shut in.

Crude output has already started to drop as well, with U.S. daily production plunging 600,000 barrels per day to 12.4 million bpd, in its biggest decline since July 2019, the EIA said.

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 John Kilduff, partner at Again Capital LLC in New York.

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.

U.S. gasoline stocks rose by 10.5 million barrels in the week, also exceeding expectations and falling just shy of an all-time record. Gasoline product supplied in the most recent week slumped by 24% to 5.1 million bpd.

Refineries severely pulled in the reins this most recent week, with crude runs falling 1.3 million bpd. Refinery utilization rates tumbled 6.7 percentage points to drop to just 75.6% capacity use, their lowest since September 2008.

“Given the 25% drop in gasoline demand last week and this week’s 24% drop, refiners may not be throttling back fast enough to prevent further significant inventory builds,” said David Thompson, executive vice-president at Powerhouse, an energy-specialized commodities broker in Washington.

Distillate stockpiles, which include diesel and heating oil, rose by 476,000 barrels in the week, versus expectations for a 1.4 million-barrel rise, the EIA data showed.

Net U.S. crude imports rose last week by 149,000 bpd last week, the EIA said.
Source: Reuters (Reporting By David Gaffen, Devika Krishna Kumar and Laila Kearney Editing by Marguerita Choy)

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