U.S. crude stocks rose unexpectedly last week on a bigger-than-expected build in distillate and gasoline inventories and higher imports, data from the Energy Information Administration showed on Wednesday.
Oil futures slid after the report that crude inventories rose by 2.6 million barrels in the last week, surprising analysts who had expected a decrease of 2.5 million barrels.
Crude stocks at the Cushing, Okla., delivery hub rose by 892,000 barrels to a record, EIA said.
The data painted a bearish picture across the board, underscoring concerns about falling distillate demand during the warm holiday week while imports and domestic stocks grew.
“It is a tough data set for the bulls to deal with as we end 2015, “said John Kilduff, partner at New York energy hedge fund Again Capital.
“Imports rebounded by over 500,000 barrels to nearly 8 million barrels per day, domestic production actually rose slightly, and the year-end destocking phenomenon has apparently run its course.”
In the immediate aftermath of the data, U.S. crude futures extended losses, falling to an intraday low of $36.40 per barrel before recovering to earlier levels.
Refinery crude runs rose by 214,000 barrels per day, EIA data showed. Refinery utilization rates rose by 1.3 percentage points.
Gasoline stocks rose by 925,000 barrels, compared with analysts’ expectations in a Reuters poll for a 896,000-barrel gain.
Traders were particularly alarmed by the 1.8-million-barrel rise in distillate stockpiles, which include diesel and heating oil, vs. expectations for a 1.0 million-barrel increase, the EIA data showed.
Demand over the past four weeks has fallen by 11.3% to 3.6 million barrels per day from a year ago.
“Distillate demand is flashing its own warning sign about the economy with a double-digit percentage decline for the period,” said Kilduff.
Diesel inventories typically begin to fall in winter as consumers burn the fuel to heat their homes or businesses, but the start of the winter season has been one the warmest on record, resulting in weak demand.
Refiners are hesitating to throttle back production of diesel and other distillate fuels because they are still chasing healthy margins and strong demand in gasoline. One byproduct of producing gasoline is distillates, a factor lifting inventories.
U.S. crude imports rose last week by 566,000 barrels per day.