The drawdown in crude inventories came at a time when refinery utilization remained low due to scheduled maintenance shutdowns.
Inventories for this time of the year remain astoundingly above average.
The recent cold snap seems more like a last hurrah for Old Man Winter, and with barely a few weeks left in the winter season, inventories for natural gas remain in near record territory. This will ensure that any price gains for natural gas in the aftermath of today's report will be limited.
Since these data are preliminary, it is quite possible that the Energy Information Administration data will also show gasoline demand fell in March and April when the revised monthly data are released.
Inventories are extraordinarily sturdy, and OPEC's commitment, at least in the near term, to not cut production should only serve to reinforce the ample supply of oil in the market.
After a relatively swift recovering following the devastating hurricanes late last year, refinery utilization moderated sharply since the beginning of this year, and is yet to meaningfully recover.
We are entering spring with near-record levels of inventory. A recent cold spell notwithstanding, few people now care about surprises in this release, seeing as how total inventories are nearly 70 above average.
There is a real risk that U.S. refineries will be unable to sufficiently bring back capacity in time for the summer driving season. This will force increased reliance on gasoline imports, and higher prices for consumers.
Despite the moderation in refinery utilization by almost 1.2 last week, gasoline inventories rose a whopping 4.3 million barrels.
Refinery utilization still remains very weak, with refineries still lagging in their recovery from an aggressive March maintenance schedule.
This report marks a healthy start to the gasoline buildup for the summer driving season. A few more weeks of this kind of healthy build will help further assure the market that gasoline prices this summer will head south.
There are some fears now in the natural-gas market of a return to colder than average weather for the next few weeks.
Traders are now starting to worry more about demand destruction than about supply disruptions.
Inventories for this time of the year remain well above average, and in the upper end of the average range for this time of the year.
This week essentially marks the death knell for winter.
Sturdy product inventories should help to temper market fears of energy shortages, and should help cajole broader energy prices lower in the next few weeks.
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