The U.S. Energy Department's inventory release showed that crude stockpiles recorded a surprise fall last week. The data spurred oil futures with the West Texas Intermediate (WTI) crude jumping 3.8% to settle at $37.50 per barrel on Wednesday.
This also prompted investors to increase their exposure to oil and related support plays. As a result, market heavyweights like Occidental Petroleum Corp. OXY, Marathon Oil Corp. MRO, Transocean Ltd. RIG, Anadarko Petroleum Corp. APC, Halliburton Co. HAL, Chevron Corp. CVX and ConocoPhillips COP all experienced gains in yesterday’s trading.
Despite this week’s bullish crude report, stocks remain at levels not seen since the 1930s in the face of weak global consumption. As a result, oil – which was hovering around $110 per barrel just 18 months ago – is now struggling to breach $40. Recently, it sunk to a 7-year low of $34.29 a barrel.
The report further revealed that within the ‘refined products’ category, gasoline stocks rose as forecast, while distillate supplies were unexpectedly down from the week-ago level. Meanwhile, refiners scaled down their utilization rates.
Analysis of the Data
Crude Oil: The federal government’s EIA report revealed that crude inventories fell by 5.88 million barrels for the week ending Dec 18, 2015, following a rise of 4.80 million barrels in the previous week.
The analysts surveyed by Platts – the energy information arm of McGraw-Hill Financial Inc. – had expected crude stocks to go up by 600,000 barrels. A pullback in the level of imports led to the unexpected stockpile drawdown with the world's biggest oil consumer.
However, crude inventories at the Cushing terminal in Oklahoma – the key delivery hub for U.S. crude futures traded on the New York Mercantile Exchange – were up 2.05 million barrels from the previous week’s level to 62.10 million barrels.
Despite the second weekly inventory decline in 3 weeks, at 484.78 million barrels, current crude supplies are up 25% from the year-ago period and are near the highest level during this time of the year in 80 years at least.
The crude supply cover was down from 29.5 days in the previous week to 29.1 days. In the year-ago period, the supply cover was 23.6 days.
Gasoline: Supplies of gasoline were up for the sixth time in as many weeks, as demand weakened. The 1.11 million barrels rise – in line with analysts’ projections – took gasoline stockpiles up to 220.50 million barrels. Notwithstanding last week’s build, the existing stock of the most widely used petroleum product is 2.5% lower than the year-earlier level and sits in the lower half of the average range.
Distillate: Distillate fuel supplies (including diesel and heating oil) were down 661,000 barrels last week, contrary to analysts’ expectations for a 2.1 million barrels rise in inventory level. The decrease in distillate fuel stocks – the first in 5 weeks – could be attributed to lower production and stronger demand. At 151.32 million barrels, distillate supplies are 22% above the year-ago level and are in the upper half of the average range for this time of the year.
Refinery Rates: Refinery utilization was down 0.6% from the prior week to 91.3%.
About the Weekly Petroleum Status Report
The Energy Information Administration (EIA) Petroleum Status Report, containing data of the previous week ending Friday, outlines information regarding the weekly change in petroleum inventories held and produced by the U.S., both locally and abroad.
The report provides an overview of the level of reserves and their movements, thereby helping investors understand the demand/supply dynamics of petroleum products. It is an indicator of current oil prices and volatility that affect the businesses of the companies engaged in the oil and refining industry.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment