U.S. crude, gasoline stockpiles surge, fuel demand slumps on growing pandemic

By David Gaffen

(Reuters) - U.S. crude oil and gasoline inventories surged last week while gasoline demand suffered its biggest weekly drop ever in response to a sharp falloff in economic activity due to the coronavirus pandemic.

Crude inventories rose by 13.8 million barrels in the week to March 27 to 469.2 million barrels, the U.S. Energy Information Administration said Wednesday. That was the biggest one-week rise since 2016, and analysts expect stocks to keep rising as refineries curb output and gasoline demand falls.

Worldwide, fuel demand is expected to fall by 20% to 30% in April and remain impaired as long as the virus is keeping motorists off the road and planes grounded. U.S. gasoline demand fell by the most ever in one week, with products supplied, a proxy for demand, dropping by 2.2 million barrels per day to 6.7 million bpd.

"Demand is a disaster," said Bob Yawger, director of energy futures at Mizuho in New York. "We have a ways to go before these numbers bottom out - this is going to be the way the next few reports are and it will drag on this way for quite some time."

That decline in demand augurs for more cutbacks in refining down the road. Numerous refiners nationwide have reduced their daily processing, with some working with skeleton staff to cut costs.

"For refiners, the rate they're producing is as low as it can go for a number of them," said Ryan Kaup, commodities broker at CHS Hedging.

Refinery crude runs fell by 940,000 bpd last week, the EIA said. Refinery utilization rates fell by 5 percentage points on the week to 82.3% of operable capacity, the lowest rate since September 2017, and on the East Coast, refinery capacity is at just over 50%.

"Larger cuts in the 50-65% range are required to structurally balance the domestic product market as COVID continues to punish refiners for producing gasoline and jet fuel," wrote Michael Tran, commodity strategist at RBC Capital Markets.

Oil prices were lower after the EIA report. U.S. crude futures dropped 31 cents to $20.17 a barrel as of 10:49 a.m. ET (1449 GMT) while Brent was down $1.35, or 5%, to $24.99 a barrel.

U.S. gasoline stocks rose by 7.5 million barrels to 246.8 million barrels, the EIA said, compared with analysts' expectations for a 1.9 million-barrel rise.​

Distillate stockpiles, which include diesel and heating oil, fell by 2.2 million barrels in the week. Diesel demand has held up better than motor gasoline because many Americans are having products delivered to homes.

Crude stocks at the Cushing, Oklahoma, delivery hub rose by 3.5 million barrels in the last week, EIA said.

(Reporting By David Gaffen, Laura Sanicola, and Jessica Resnick Ault; Editing by Marguerita Choy)