A handful of U.S. refineries were hobbled by inclement weather in late December and late January, leading to an increase in oil inventories in the domestic economy. File photo by Jim Ruymen/UPI | License Photo
Feb. 1 (UPI) -- Normally seen as something of an indicator of economic health, U.S. federal data on Wednesday showed an increase in commercial crude oil inventories, which may reflect something of a slowdown at the refinery level.
The U.S. Energy Information Administration, the statistical arm of the Energy Department, reported that domestic crude oil inventories increased by around 4.1 million barrels from last week and are about 4% above the five-year average for this time of year. An increase in inventories could reflect a decline in economic activity, while the opposite holds for major builds.
Production of both gasoline and distillate, a product category that includes diesel, increased, though refinery processing capacity is still below peaks from late last year, suggesting the build is more of an indication of the lack of refinery activity than U.S. economic health.
Analysts at S&P Global Commodity Insights had expected a smaller build, to the tune of 300,000 barrels, but said any gains were the likely result of refiners.
The late December cold snap that gripped much of the continental United States is still having some lingering impacts on Texas-area refineries.
"Meanwhile, severe weather in the Houston area Jan. 24 spawned tornadoes that knocked out power to ExxonMobil's 560,500 barrel-per-day Baytown, Texas, refinery and Pemex's 312,500 barrel-per-day Deer Park facilities," S&P analysts wrote in a report emailed to UPI. "Both facilities resumed normal operations by Jan. 25."
Another indicator in the EIA data could reflect a slump in demand, however. The total amount of refined petroleum product supplied to the market during the four-week period ending Jan. 27, a metric many analysts use as a proxy for demand, averaged 19.4 million bpd, down by 10.5% from year-ago levels.
That could be an indication of consumer-level strains from inflation and the steady uptick in retail gasoline prices since the beginning of the year. Travel club AAA listed a national average retail price of $3.50 for a gallon of regular unleaded, up nearly 4% from year-ago levels.
Refineries are already anticipating a busier-than-usual period of seasonal maintenance, which could put a lid on future production gains for refined petroleum products.
Crude oil prices were in the red on Wednesday, though that was more of a reflection of the uncertainty about momentum in the global economy than EIA data.