US Crude Oil Stockpiles Drop Unexpectedly

Stockpiles Remain at Highest Seasonal Level in More Than 20 Years
Patrick T. Fallon/Bloomberg News

Nationwide crude stockpiles fell 553,000 barrels in mid-October, according to the Energy Information Administration.

Analysts surveyed by Bloomberg News projected a gain, and the American Petroleum Institute data showed an increase.

Supplies along the West Coast decreased by 2.26 million barrels to 47.1 million, the lowest since January 2015. But the region is sometimes ignored by traders because its distribution system is isolated from the rest of the country.

"This is a sloppy market," said Adam Wise, who helps run a $7 billion oil and natural-gas bond and private equity portfolio at John Hancock in Boston. "News and changes of sentiment can easily send it moving into the opposite direction. We have mixed signals from today’s data."

Oil has fluctuated near $50 a barrel amid uncertainty about whether the Organization of Petroleum Exporting Countries can implement the first output cuts in eight years and get producers outside the group to join in, notably Russia. An OPEC committee planned to meet during the week of Oct. 24 to try to resolve differences over how much individual members should pump, with Iraq saying it should be exempt because of conflict with Islamic militants.

The nationwide gain left U.S. crude supplies at 468.2 million in the week ended Oct. 21, according to EIA data.

Stockpiles remain at the highest seasonal level in more than 20 years.

Investors discounted the decline on the West Coast, known as PADD 5, because the report showed builds along the East and Gulf coasts.

"PADD 5 might as well be Mars," said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. "There’s no way of getting West Coast barrels east of the Rocky Mountains. Take those out of the equation, and you are almost looking at a build of 2 million barrels."

Supplies at Cushing, Oklahoma, the delivery point for WTI futures and the nation’s biggest storage hub, dropped by 1.34 million barrels to 58.4 million, the lowest level this year.

Refinery inputs of crude and other feedstocks rose 0.7% to 15.8 million barrels a day, advancing from the lowest level since February. Refineries usually cut back on operations in September and October after the peak-demand driving season comes to an end and before consumption rebounds as temperatures fall.

Stockpiles of distillate fuel, a category that includes diesel and heating oil, dropped 3.35 million barrels, the fifth straight decline. Gasoline supplies fell 1.96 million barrels to 226 million.

"The 2 million-barrel gasoline draw and the 3 million-barrel drop in distillate supplies are headline bullish," said Matt Sallee, who helps manage $15 billion in oil-related assets at Tortoise Capital Advisors in Leawood, Kansas. "The draws are a result of the low refinery utilization rate."

With assistance from Jessica Summers.