U.S. crude inventories slumped last week, the biggest weekly drop in seven weeks, as imports dropped and refiners cut output, while gasoline stocks soared ahead of the start of the U.S. driving season, the government said on Wednesday.

Crude inventories fell 4.2 million barrels in the week to May 20, compared with analyst expectations for an decrease of 2.5 million barrels, according to the Energy Information Administration.

U.S. crude imports fell last week by 362,000 barrels per day.

The report showed a surprising rebound in supplies from Canada, as weekly imports rose to 3.09 million bpd, from the previous week’s 2.59 million bpd, despite Canadian oil sands shutdowns at the start of the month amid a massive wildfire.

However, traders said they expect further declines in Canadian imports in the coming weeks, as it takes about a month to move crude from Canada to the U.S. Midwest.

Crude stocks at the Cushing, Oklahoma, delivery hub for futures fell 649,000 barrels, EIA said.

The report at face value was bullish, but the upside had already been priced in, traders said, after the industry group the American Petroleum Institute Tuesday reported a 5.1 million-barrel drawdown. [API/S]

“We wouldn’t be surprised to see more profit taking from the longs, especially since there was no immediate follow-through in buying after the data,” said Tariq Zahir, trader and managing partner at Tyche Capital Advisors in Laurel Hollow, New York.

After the data, U.S. crude futures hit a high of $49.62 a barrel and by 10:51 a.m. Eastern (1451 GMT), was trading up 38 cents at $49. Brent crude was 65 cents higher at $49.26 after touching $49.69 after the report.

Refinery crude runs fell 92,000 bpd as utilization rates fell by 0.8 percentage point to 89.7 percent of total capacity.

The EIA said gasoline stocks rose 2.0 million barrels, versus forecasts for a 1.1 million-barrel drop and the API’s report of a 3.6 million-barrel build.

“Gasoline looks to be the weakest horse right now and the momentum of the recent rally that started on May 10 now looks to be breaking down,” said David Thompson, executive vice-president at commodities broker Powerhouse in Washington.

Refiners usually build up supplies of gasoline ahead of summer driving season.

Distillate stockpiles, which include diesel and heating oil, fell 1.3 million barrels, versus expectations for a 1.1 million barrels drop. East Coast distillate stocks reached their highest, seasonally, since 2010, according to the EIA.

Source: www.offshoreenergytoday.com