U.S. Petroleum Market Update: Rising Inventories and Shifts in Refinery Activity Shape Outlook

The latest petroleum data for the week ending January 24, 2025, reveals a mixed landscape for the U.S. energy market, with notable shifts in refinery operations, imports, and inventory levels. While crude oil inventories increased, total commercial petroleum inventories declined, indicating ongoing volatility in supply-demand dynamics. Refinery utilization remained below optimal levels, while motor gasoline and distillate inventories moved in opposite directions.

This article provides a detailed analysis of the latest petroleum data, the implications for crude oil and refined products, and the broader impact on the energy market and economic outlook.

Crude Oil Refinery Inputs and Production Trends

U.S. crude oil refinery inputs averaged 15.2 million barrels per day, reflecting a decline of 333,000 barrels per day from the previous week. This reduction pushed refinery utilization down to 83.5 percent of operable capacity, signaling a moderate pullback in refining activity.

The decline in refinery activity was accompanied by mixed output levels for petroleum products. Gasoline production decreased, averaging 9.2 million barrels per day, while distillate fuel production increased to 4.7 million barrels per day. The divergence in production trends suggests that refiners are adjusting output in response to shifting seasonal demand patterns, with a greater focus on distillates such as heating oil during the winter months.

Crude Oil Imports and Inventory Levels

U.S. crude oil imports averaged 6.4 million barrels per day, decreasing by 297,000 barrels per day from the previous week. However, on a four-week average basis, crude oil imports remain 3.6 percent higher compared to the same period last year. This indicates that while there was a temporary dip in weekly imports, the overall trend points to a steady influx of crude oil into the U.S. market.

Crude oil inventories increased by 3.5 million barrels to 415.1 million barrels, a level that remains approximately 6 percent below the five-year average for this time of year. The inventory build, despite lower refinery runs, suggests that supply remains strong relative to demand, potentially putting downward pressure on crude oil prices in the near term.

Motor gasoline inventories also rose by 3.0 million barrels, keeping them slightly below the five-year average. The increase in gasoline inventories, coupled with lower production levels, indicates that demand may not be as strong as anticipated, or refiners may be strategically managing supply ahead of the peak driving season.

Conversely, distillate fuel inventories fell sharply, declining by 5.0 million barrels and now sitting approximately 9 percent below the five-year average. This suggests heightened demand for heating oil and diesel, aligning with seasonal consumption trends during the winter months.

A notable development was the significant drawdown in propane/propylene inventories, which fell by 7.9 million barrels. Despite this decline, propane stocks remain 2 percent above the five-year average, indicating relative stability in supply despite strong winter heating demand.

Total commercial petroleum inventories saw a substantial decline of 13.9 million barrels, reflecting strong product demand and inventory drawdowns across multiple fuel categories.

Demand Trends for Petroleum Products

Total products supplied, a key indicator of petroleum demand, averaged 20.3 million barrels per day over the past four weeks, reflecting a 2.5 percent increase from the same period last year. This growth underscores the resilience of fuel consumption despite economic uncertainties and fluctuating oil prices.

Motor gasoline product supplied, a proxy for gasoline demand, averaged 8.3 million barrels per day, marking a 1.8 percent increase from the prior year. This suggests that consumer demand for gasoline remains healthy, although the inventory build could indicate some seasonal softening.

Distillate fuel demand surged, with product supplied averaging 3.9 million barrels per day over the past four weeks, up 6.9 percent year over year. This aligns with the sharp inventory drawdown in distillates and reflects strong demand for diesel and heating fuels, particularly in colder regions.

Jet fuel demand also showed strength, rising 4.5 percent compared to the same four-week period last year. The increase in jet fuel consumption is a positive signal for the airline industry, suggesting steady air travel activity despite economic headwinds.

Market Implications and Outlook

The latest petroleum data presents a complex picture for the oil market. The rise in crude oil inventories, coupled with weaker refinery utilization, suggests that supply is currently outpacing demand, at least in the short term. However, strong product demand, particularly for distillates and jet fuel, indicates that overall fuel consumption remains resilient.

Looking ahead, several factors will influence the trajectory of the oil market. The seasonal transition from winter to spring will likely lead to shifts in refinery operations, with refiners increasing gasoline production ahead of the summer driving season. The ongoing geopolitical landscape, including potential supply disruptions, will also play a critical role in shaping oil prices and inventory levels.

For now, the market appears to be balancing between steady fuel demand and fluctuating supply conditions. While crude oil inventories are below historical averages, the buildup in gasoline stocks and the sharp decline in distillate inventories highlight the divergent trends within different fuel categories.

As refiners adjust output and global oil dynamics evolve, the coming weeks will be crucial in determining whether current inventory trends continue or if demand-driven draws begin to tighten supply further. Investors, energy analysts, and policymakers will be closely monitoring these developments to gauge their impact on pricing, economic growth, and broader market stability.