U.S. Petroleum Market Update: Refinery Activity Increases While Inventories See Mixed Trends

The latest data on U.S. petroleum markets for the week ending February 7, 2025, indicates a nuanced energy landscape, marked by higher refinery inputs, a modest increase in crude oil inventories, and declining gasoline and propane stockpiles. These developments come as global oil markets remain sensitive to trade policies, geopolitical risks, and evolving supply-demand dynamics.

With refineries operating at 85 percent capacity and crude oil imports declining week-over-week, market participants will be closely watching upcoming data releases to assess whether these trends signal longer-term shifts or are merely short-term fluctuations.

Refinery Throughput and Production Trends

U.S. refineries processed an average of 15.4 million barrels per day (bpd) during the past week, a modest increase of 82,000 bpd from the prior week. This uptick in processing suggests a continued recovery in refining activity following seasonal maintenance schedules and winter-related slowdowns.

Despite the increase in crude runs, refineries are still operating below full capacity at 85 percent, which may reflect economic caution and market uncertainty as demand signals remain mixed. While gasoline production increased last week, averaging 9.3 million bpd, distillate fuel production declined to 4.5 million bpd. This divergence suggests a shifting focus toward gasoline output, possibly in anticipation of spring and summer driving season demand.

Crude Oil Imports and Inventory Changes

One of the most significant data points from this week's report is the decline in U.S. crude oil imports, which averaged 6.3 million bpd, a sharp drop of 606,000 bpd from the previous week. However, over the past four weeks, crude imports have averaged 6.6 million bpd, marking a 7.6 percent increase year-over-year. This increase reflects stronger crude purchasing trends compared to early 2024, potentially in response to global supply chain adjustments and changes in trade flows driven by geopolitical factors.

Meanwhile, U.S. commercial crude oil inventories rose by 4.1 million barrels, bringing total stockpiles to 427.9 million barrels. This figure places current crude inventories 4 percent below the five-year average, suggesting that supply conditions remain tight despite the recent inventory build.

Gasoline and Distillate Fuel Inventories

While crude oil inventories increased, total motor gasoline inventories fell by 3.0 million barrels and are now 1 percent below the five-year average. The decline in gasoline stockpiles, coupled with increased gasoline production, points to a possible uptick in demand or preemptive measures ahead of the upcoming peak driving season.

Distillate fuel inventories, which include diesel and heating oil, increased slightly by 0.1 million barrels. However, these inventories remain 11 percent below the five-year average, reflecting ongoing supply constraints in the diesel market.

Propane and Commercial Petroleum Stocks

Propane and propylene inventories also saw a sharp drop of 2.6 million barrels, bringing them slightly below the five-year average. This decline is notable given that propane demand typically rises in the winter months, driven by heating needs. With inventories dipping, any prolonged cold spells could exert upward pressure on propane prices in the near term.

Total commercial petroleum inventories saw a slight net increase of 1.2 million barrels, driven largely by the crude oil stockpile build.

Supply and Demand Metrics

On the demand side, total products supplied averaged 20.3 million bpd over the past four weeks, representing a 2.8 percent increase year-over-year. This suggests stable and growing consumption trends despite macroeconomic uncertainties.

Breaking down key petroleum products:

- Motor gasoline demand averaged 8.3 million bpd, up 0.9 percent year-over-year, indicating modest but steady growth in U.S. gasoline consumption.

- Distillate fuel demand surged by 13.6 percent year-over-year, reflecting strong industrial and trucking activity.

- Jet fuel demand increased by 4.4 percent, a sign that air travel and cargo transportation remain healthy contributors to overall fuel consumption.

Market Implications and Outlook

Several factors are likely to shape the U.S. petroleum market over the coming weeks:

1. Potential Trade and Tariff Developments

The new 25 percent tariffs on steel and aluminum imports set to take effect in March could increase costs for the energy sector, particularly for pipeline infrastructure and refinery operations. Additionally, ongoing trade negotiations and potential reciprocal tariffs from key trading partners could impact fuel imports and exports.

2. Oil Price Volatility and OPEC+ Policies

Global oil markets continue to experience price volatility amid uncertainty over OPEC+ production decisions and geopolitical tensions. If crude oil supply tightens further, higher oil prices could eventually push gasoline and diesel costs higher for consumers.

3. Federal Reserve Policy and Economic Growth

The Federal Reserve's approach to interest rate cuts remains uncertain, with markets now expecting only one rate cut in 2025 following higher-than-expected inflation data. If economic growth slows, energy demand could moderate, leading to softer petroleum consumption growth later in the year.

4. Refinery Utilization and Seasonal Trends

Refinery utilization is likely to increase further in the coming weeks as refiners prepare for the seasonal transition to summer fuel blends. This could result in further drawdowns in gasoline inventories and higher refining margins.

Conclusion: A Balancing Act for Oil Markets

The latest petroleum data underscores a delicate balance between supply and demand dynamics in the U.S. oil market. Refinery activity is increasing, but inventories remain mixed, with crude oil stocks rising while gasoline and propane supplies tighten.

The market will closely watch how trade policies, economic conditions, and refinery output influence fuel prices and consumption patterns in the coming months. While demand trends remain solid, geopolitical uncertainties and potential supply chain disruptions could introduce volatility into the energy market.

Investors and industry participants should stay attuned to upcoming inventory reports, trade policy announcements, and Federal Reserve decisions, all of which could significantly impact oil prices and energy sector performance in 2025.