U.S. crude oil stockpiles fell last week while gasoline inventories surged by more than 10 million barrels, the biggest weekly build since April 2020, as supplies backed up at refineries due to reduced fuel demand at the end of the year.

U.S. gasoline stocks jumped by 10.1 million barrels in the week to Dec. 31 to 232.8 million barrels, the Energy Information Administration (EIA) said on Jan. 5, compared with expectations in a Reuters poll for a 1.8 million-barrel rise.

Analysts attributed the surprising gasoline build to steady refining production, combined with a fall-off in demand due to the coronavirus Omicron variant.

“Gasoline and distillate demand disappeared. This is an Omicron demand destruction event,” said Robert Yawger, director of energy futures at Mizuho.

Crude inventories fell by 2.1 million barrels to 417.9 million barrels, compared with analysts’ expectations for a 3.3 million-barrel drop.

The drawdown was related in part to year-end tax considerations that prompt companies to reduce inventories, especially in the Gulf Coast, to reduce tax burdens.

Distillate stockpiles, which include diesel and heating oil, rose by 4.4 million barrels in the week versus expectations for a 1.5 million-barrel rise.

Overall product supplied by refiners—a proxy for demand—dropped by 2.6 million bbl/d on the week to 19.7 million bbl/d. However, the four-week average, which is more widely followed, shows demand at 21.4 million bbl/d, more than the 20.4 million bbl/d demand level from two years ago.

Refinery crude runs rose by 164,000 bbl/d last week, and refinery utilization rates rose by 0.1 percentage point in the week to 89.8% of overall capacity, the EIA said.

Crude stocks at the Cushing, Oklahoma, delivery hub for U.S. crude futures rose by 2.6 million barrels in the last week, EIA said.

Oil prices initially dipped on the news, but later recovered their losses. U.S. crude was trading $1.35, or 1.8%, higher on the day to $78.34/bbl as of 10:58 a.m. EST (1558 GMT) while Brent gained $1.32, or 1.6%, to $81.32/bbl.

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