ANALYSIS: US crude stocks climb as Texas freeze pushes refinery demand to 12-year lows

US crude oil inventories climbed during the week ended Feb. 19 as severe winter weather across the Southern states pushed refinery demand to 12-year lows, US Energy Information Administration data showed Feb. 24.

US commercial crude stocks climbed 1.28 million barrels to 463.04 million barrels last week, EIA data showed, leaving them 0.3% above the five-year average for this time of year.

The build was concentrated in the Midwest, where stocks climbed 4.49 million barrels to 133.99 million barrels. The bulk of this increase was seen at the NYMEX delivery point of Cushing, Oklahoma, which saw inventories rise 2.81 million barrels to 47.82 million barrels. It was the largest one-week build at Cushing since October.

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Front-month NYMEX April WTI settled up $1.55 at $63.22/b, the highest front month settle since Jan. 6, 2020.

The inventory build was predicated on a massive slowdown in refinery demand caused by severe weather across the Southern US. Power outages and extreme low temperatures impacted all of Texas' 5.9 million b/d of refinery capacity last week, according to filings made with state environmental regulators, with as much as 4.4 million b/d of capacity fully offline Feb. 18.

Total refinery net crude inputs plunged 2.59 million b/d to 12.23 million b/d - the lowest since the week ended Sept. 19, 2008 - as refinery utilization plunged 14.5 percentage points to 68.6% of capacity.

Gulf Coast refineries bore the brunt of the slowdown, with regional utilization rates falling to 62.8% of capacity, down 23.7 percentage points from the week prior, however Midwest refinery runs were also down 9.4 points at 76% of capacity. USGC refinery utilization was the weakest since Sept. 2017, when Hurricane Harvey inundated the Texas and Louisiana coasts.

Operators had begun restarting more than 2.9 million b/d of refining capacity this week, but a return to pre-storm capacity is likely to take several weeks, according to state filing data. Nearly 1.5 million b/d of capacity remained fully offline as of Feb. 24, according to company filings.

Total US crude production averaged 9.7 million b/d last week, down 1.1 million b/d from the week prior and the lowest since late August. Most of this slowdown was likely realized on the USGC, where severe weather shut in nearly 4 million b/d of production last week. While some upstream outages are likely to linger for several weeks, around 90% of shut in production had been returned to service as of Feb. 23, according to S&P Global Platts Analytics.

The sharp decline in regional production helped push USGC crude stocks 2.51 million barrels lower to 246.88 million barrels, even as exports plunged 1.55 million b/d to an 11-week low 2.31 million b/d.

Gasoline stocks climb as storm batters demand

US gasoline stocks edged 10,000 barrels higher to 257.1 million barrels, an eight-month high, as storm-blunted driving demand offset a sharp reduction in refinery production. The counter-seasonal build put inventories 0.7% above average, up from 0.2% the week prior.

NYMEX March RBOB settled up 3.70 cents at $1.8956/gal and March ULSD climbed 4.03 cents to $1.9083/gal.

Implied gasoline demand saw the biggest one-week declined since early April, falling 1.2 million b/d to 7.21 million b/d. This tracks with a slowdown in end-user demand. US driving activity was down nearly 7 percentage points last week, Apple Mobility data shows, putting it at the lowest since the week ended May 15 and nearly 16% behind year-ago levels.

Distillate stocks in contrast extended their slide for a fifth week, falling 4.97 million barrels to 152.72 million barrels. The draw left stocks just 3% above their five-year average, the narrowest surplus since mid-April.