U.S. crude oil inventories recorded a sharp increase in the week ending January 31, according to the U.S. Energy Information Administration (EIA). While analysts expected a rise of 1.9 million barrels, commercial reserves grew by 8.7 million barrels, a significant deviation that reflects several market dynamics.
Production Increase and Refinery Slowdown
Alongside the rise in inventories, U.S. oil production continued its upward trend, reaching 13.48 million barrels per day compared to 13.24 million the previous week. This production increase coincided with limited refinery capacity utilization, which stood at 84.5%, slightly higher than the previous week but still below usual levels.
According to John Kilduff, an analyst at Again Capital, the low refinery activity is due to seasonal maintenance operations and disruptions caused by adverse weather conditions. This slowdown contributed to the accumulation of crude oil stocks, as refineries processed less oil.
Import Growth and Export Trends
In addition to lower refinery consumption, the surge in crude oil stocks was driven by a 7.24% increase in oil imports over the week. At the same time, U.S. crude exports rose even more sharply, jumping by 17.50%.
Demand for distillate products, particularly heating fuel, remained strong due to harsh winter conditions. While this factor helped stabilize demand for some oil derivatives, it was not enough to counterbalance the overall stock buildup.
Impact on Oil Prices
The EIA’s stock report added further downward pressure on crude prices. Shortly after the announcement of the stock increase, the price of West Texas Intermediate (WTI) crude for March delivery fell by 1.62%, settling at $71.08 per barrel. This downward trend reflects market expectations of a short-term crude oil surplus, with demand remaining under scrutiny.
As investors closely monitor refinery activity and export trends, U.S. stock movements will remain a key factor influencing oil price developments in the coming weeks.
