US crude oil inventories rise by most since January 2023

U.S. crude oil inventories increased by the largest amount since January 2023 last week, according to data released by the Energy Information Administration on Tuesday.

The EIA reported a surprise build of 3.2 million barrels in commercial crude stocks for the week ended May 17, far exceeding analyst expectations for a modest drawdown. Analysts polled by Reuters had forecast a decline of 1.3 million barrels, underscoring the unexpected nature of the increase.

The build was the most significant since a 4.1 million-barrel rise in the week to January 6, 2023, and follows two consecutive weeks of declines. Total U.S. crude inventories now stand at 456.8 million barrels, remaining above the five-year average for this time of year, a metric closely monitored by OPEC+ producers in their supply management decisions.

The unexpected rise in inventories comes amid mixed signals on demand. While gasoline demand has shown resilience, refining activity has softened slightly, with refinery utilization rates declining to 90.1% from 90.8% the prior week. Distillate inventories, which include diesel and heating oil, also rose by 1.3 million barrels, adding to the bearish sentiment.

The data adds pressure on oil prices, which have been volatile in recent sessions amid concerns over global economic growth and OPEC+'s production policy. Brent crude futures were down 0.7% at $82.45 a barrel in early European trading, while West Texas Intermediate (WTI) fell 0.8% to $78.10 a barrel.

Market participants will now focus on upcoming OPEC+ meetings and U.S. economic data for further direction. Any sustained build in inventories could reinforce expectations for a more cautious approach from the cartel in its next policy meeting, scheduled for June 2.