U.S. commercial crude oil stocks jumped 10.1 million barrels during the week ended January 16, U.S. Energy Administration (EIA) data showed.Analysts surveyed Tuesday expected crude oil stocks to have increased 2.5 million barrels. Both EIA data and the Platts survey were delayed a day due to Monday's federal holiday.

At 397.9 million barrels, the U.S. crude oil inventory was 16% above the EIA five-year average (2010-2014) for the same reporting week. The record high stands at 399.4 million barrels set in April 2014. EIA data goes back to 1982.

A combination of strong crude oil production and refinery slowdown drove stocks higher. The preliminary estimate of weekly crude oil production was 9.19 million barrels per day (b/d), down 6,000 b/d, but over 1 million b/d more than one year ago.

Refineries processed less crude oil the week ended January 16, which was typical for this time of year as a maintenance period begins, lasting through the end of April.

Crude oil runs fell 984,000 b/d to 14.9 million b/d. The refinery utilization rate decreased 5.5 percentage points to 85.5% of operable capacity. Analysts had expected a more modest decline of less than 1 percentage point.

The biggest build occurred in the U.S. Midwest (USMW), where stocks were up 7.3 million barrels to 118.9 million barrels.

Within the USMW region, stocks at Cushing, Oklahoma, increased 2.9 million barrels to 36.8 million barrels.

Cushing -- the delivery point for the New York Mercantile Exchange (NYMEX) crude oil futures contract -- has seen stocks rise seven weeks in a row.

A contango* time spread is seen as responsible for the greater interest in Cushing storage, as traders take advantage of prompt futures being less expensive than later-dated contracts.

Storage plays can be profitable as long as inter-month spreads are enough to cover the costs involved.

Some analysts have pegged Cushing monthly storage costs at 50 cents per barrel (/b). The front-month NYMEX contract would therefore need to settle at least $3/b less than the sixth-month contract for the cash-and-carry trade to be profitable, and that has been the case since January 2.

On the U.S. Gulf Coast (USGC), stocks rose 1.3 million barrels to 196.8 million barrels.

The region's refinery utilization rate fell 4.5 percent to 87.7% of operable capacity, while crude oil imports rose 161,000 b/d to 3.1 million barrels.

Total crude oil imports fell 274,000 b/d to 7.2 million b/d. Mexican imports decreased 384,000 b/d to 577,000 b/d.

Imports from Saudi Arabia increased 343,000 b/d to 1 million b/d. Venezuelan imports were 224,000 b/d higher at 726,000 b/d.

Brent's narrowing premium over NYMEX crude oil has led to speculation that imports will soon rise as Brent-based crude oils appear more attractive. Last Tuesday, NYMEX crude oil even traded briefly above IntercontinentalExchange (ICE) Brent for the first time since July 2013.

GASOLINE STOCKS BUILD

U.S. gasoline stocks increased 588,000 barrels to 240.9 million barrels, versus analysts' expectations of a 1.05 million-barrel increase.

Implied** gasoline demand dipped 24,000 b/d, but still appears strong. At 8.9 million b/d, implied demand was 5.5% above the EIA five-year average.

By region, U.S. Atlantic Coast (USAC) stocks rose 1.9 million barrels to 66 million barrels, which was 1.9% above the five-year average.

USMW gasoline stocks fell 1.6 million barrels to 52.5 million barrels, flipping from a surplus to a 1.8% deficit compared with the five-year average. USGC stocks were 81.3 million barrels, up 754,000 barrels, which was 5.6% above the five-year average.

Distillate stocks fell 3.3 million barrels to 136.6 million barrels. Analysts had expected an increase of 167,000 barrels.

Combined stocks of low- and ultra-low-sulfur diesel in the USAC, USMW and USGC remained above their five-year averages.

USAC combined stocks were down 1.4 million barrels to 30.7 million barrels. USMW stocks fell 1.540 million barrels to 32.200 million barrels. USAC stocks rose 432,000 barrels to 40.072 million barrels, mitigating the weekly decline.

* Contango is the industry vernacular for the condition whereby prices for nearby delivery are lower than prices for future-month delivery.

** Implied demand is the amount of product that moves through the U.S. distribution system, not actual end consumption.
Source: Platts