Crude oil prices inched lower today, after the U.S. Energy Information Administration reported a crude oil inventory build of 4.1 million barrels for the week to January 27.
This compared with a modest inventory increase of half a million barrels for the previous week, which in turn followed two weeks of substantial inventory builds.
In gasoline, the EIA estimated an inventory increase of 2.6 million barrels for the reporting period. It compared with a build of 1.8 million barrels for the previous week. Gasoline inventories are currently at a ten-year low.
Gasoline production averaged 9.4 million bpd last week, compared with 8.8 million bpd for the previous week.
Bloomberg reported earlier this week that the East Coast and New York specifically face a risk of a gasoline shortage this summer because of the EU embargo on Russian oil and fuels. This, according to the report, will tighten European fuel exports to the U.S., on which the East Coast relies during peak driving season.
In middle distillates, the EIA estimated an inventory build of 2.3 million barrels for the week to January 27. This compared with an inventory draw of 500,000 barrels for the previous week.
Distillate stocks in the United States are also lower than usual but have been ramping up recently after dropping to close to critical levels late last year. A decline in consumption driven by lower industrial activity also helped.
Middle distillate production last week averaged 4.7 million bpd, which compared with 4.6 million bpd during the previous week.
Right now, both Europe and the United States are bracing for the upcoming EU embargo on Russian fuels, which comes into effect on February 5th. The embargo will probably feature a set of price caps for fuels that sell at a premium to crude and for those that normally trade at a discount to crude.
Expectations are that the embargo will tighten the sully of fuels even though European buyers stocked up n as much Russian diesel as they could get their hands on in the past few months.
Replacement supply could come from the Middle East, India, and China, but it will take a while for it to reach its destinations.