U.S. crude-oil stockpiles have been on a downward trajectory for the past seven weeks, according to data released by the U.S. Energy Information Administration (EIA). This trend, driven by a combination of factors, has significant implications for the global oil market and the U.S. refining industry.



The primary factors contributing to the consecutive decline in U.S. crude-oil stockpiles are a drop in imports, higher domestic production, and increased refinery capacity use. In the week ended Nov. 22, 2024, crude imports fell by 1.6 million barrels a day to 6.1 million barrels a day, while production rose by 292,000 barrels a day to 13.5 million barrels a day (Harrup, 2024). Refinery capacity use also increased to 90.5% from 90.2% the week before, indicating higher refining activity. This trend has led to a drawdown in crude oil inventories, as refineries process more crude oil, and less crude oil is entering the country.

The decline in U.S. crude-oil stockpiles has significant implications for the global oil market, particularly in relation to OPEC+ production cuts and geopolitical risks. In 2024, U.S. crude oil inventories fell by 6.9 million barrels, exceeding expectations, which initially boosted oil prices (Harrup, 2024). However, this decline was offset by OPEC+ announcing a gradual unwinding of 2.2 million barrels per day (b/d) of voluntary production cuts, starting in the fourth quarter of 2024 (Cochintu, 2024). This decision, combined with geopolitical risks like potential tightening of sanctions on Iran and uncertainty in Venezuela's oil exports, contributed to a rangebound oil price environment. The U.S. Energy Information Administration (EIA) lowered its 2025 WTI price forecast to $69.12 per barrel, reflecting anticipated demand weakness and rising supply from non-OPEC+ countries (Cochintu, 2024). Thus, changes in U.S. crude-oil inventories, OPEC+ production cuts, and geopolitical risks collectively shape the global oil market dynamics.

The U.S. Strategic Petroleum Reserve (SPR) plays a crucial role in managing domestic crude-oil stockpiles and influencing global oil prices. According to a study published in Resources Policy, SPR releases can decrease inflation, except in hyper-backwardation markets. In 2022, a hyper-backwardation market was observed, which may have contributed to gasoline price increases despite unprecedentedly large SPR drawdowns. The U.S. SPR is an ineffective price control mechanism during crises, as it may not have the strategic value previously thought in an extremely tight oil market.

Refinery capacity use and crude oil imports/exports significantly impact U.S. crude-oil stockpiles and have implications for the refining industry. In the week ended Nov. 22, 2024, refinery capacity use rose to 90.5% from 90.2% the week before, indicating increased refining activity (Harrup, 2024). This increase led to a drawdown in crude oil inventories, as refineries processed more crude oil. Conversely, a decrease in refinery capacity use would likely result in a build in crude oil stockpiles, as less crude oil is being processed. Crude oil imports and exports also play a crucial role in stockpile dynamics. In the same week, crude imports fell by 1.6 million barrels a day to 6.1 million barrels a day, while exports rose by 285,000 barrels a day to 4.7 million barrels a day (Harrup, 2024). The decrease in imports and increase in exports contributed to the drawdown in crude oil stockpiles, as less crude oil was entering the country, and more was leaving.

The implications for the refining industry are twofold. First, increased refinery capacity use and higher exports indicate a strong refining sector, as more crude oil is being processed and exported. This can lead to increased profits for refiners and a more competitive global market position. Second, the dynamics of crude oil stockpiles can impact refinery operations. A drawdown in stockpiles, as seen in this case, can lead to increased competition for crude oil feedstock, potentially driving up input costs for refiners. Conversely, a build in stockpiles can provide refiners with more flexibility in their operations and potentially lower input costs.

In conclusion, the consecutive decline in U.S. crude-oil stockpiles is driven by a combination of factors, including a drop in imports, higher domestic production, and increased refinery capacity use. This trend has significant implications for the global oil market, particularly in relation to OPEC+ production cuts and geopolitical risks. The U.S. Strategic Petroleum Reserve (SPR) plays a crucial role in managing domestic crude-oil stockpiles and influencing global oil prices. Refinery capacity use and crude oil imports/exports significantly impact U.S. crude-oil stockpiles and have implications for the refining industry. As the U.S. crude-oil stockpiles continue to decline, investors should monitor the global oil market dynamics, OPEC+ production cuts, geopolitical risks, and the refining industry's performance to make informed investment decisions.