The U.S. Energy Department's inventory release showed that crude stockpiles recorded a surprise fall last week. But at 482.3 million barrels, it’s still near levels not seen since the 1930s. The report further revealed that refined product inventories – gasoline and distillate – both increased significantly from their previous week levels, defying analyst predictions.
What’s more, supplies at the Cushing, Oklahoma storage hub jumped to its all-time high. The bearish data set, coupled with the misfiring Chinese economy, pushed oil futures to a fresh 11-year low.
This also prompted investors to decrease 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 have all experienced heavy losses in recent trading.
Analysis of the Data
Crude Oil: The federal government’s EIA report revealed that crude inventories fell by 5.1 million barrels for the week ending Jan 1, 2016, following a rise of 2.63 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 2.75 million 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 917,000 barrels from the previous week’s level to a record 63.91 million barrels.
Despite the third weekly inventory decline in 5 weeks, at 482.32 million barrels, current crude supplies are up 26% 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 29.4 days in the previous week to 29.1 days. In the year-ago period, the supply cover was 23.4 days.
Gasoline: Supplies of gasoline were up for the eighth time in as many weeks, as imports rose and demand weakened. The 10.58 million barrels surge – contrary to analysts’ projections for a 1 million barrels decrease in supply level – took gasoline stockpiles up to 232.0 million barrels, the highest since March. Notwithstanding last week’s build, the existing stock of the most widely used petroleum product is still 2.2% lower than the year-earlier level though it is in the upper half of the average range.
Distillate: Distillate fuel supplies (including diesel and heating oil) were up 6.31 million barrels last week, as opposed to analysts’ expectations for a 2.1 million barrels fall in inventory level. The increase in distillate fuel stocks – the sixth in 7 weeks – could be attributed to weaker demand – the lowest in 10 years. At 159.42 million barrels, distillate supplies are 16% above the year-ago level and are near the upper half of the average range for this time of the year.
Refinery Rates: Refinery utilization edged down 0.1% from the prior week to 92.5%.
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.
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