The U.S. Energy Department's inventory release showed that crude stockpiles recorded a higher-than-expected weekly draw to the lowest level since 2015. On a further bullish note, domestic oil production snapped its steadily rising trend and fell for the first time since October.
But the positive effect from the hefty crude inventory draw was partly offset by another build in gasoline and distillate supplies.
As a result, the front month West Texas Intermediate (WTI) crude futures edged up 0.3% (or 20 cents) to end at $59.84 per barrel yesterday – within touching distance of the more-than-two-year highs reached earlier in the week.
Energy Stocks on a Roll
With the federal data showing the sixth consecutive week of U.S. stockpiles decline, energy stocks have been in a strong uptrend lately.
The two energy representatives in the 30-stock Dow Jones industrial average, ExxonMobil XOM and Chevron CVX added 2.9% and 7%, respectively, in the past month. Meanwhile, some of the biggest gainers of the S&P 500 during the period were oil and oil-related stocks like Halliburton HAL, Diamond Offshore Drilling, Inc. DO, Marathon Oil Corp. MRO and Helmerich & Payne, Inc. HP.
Analysis of the EIA Data
Crude Oil: The federal government’s EIA report revealed that crude inventories fell by 4.6 million barrels for the week ending Dec 22, following a decrease of 6.5 million barrels in the previous week. The analysts surveyed by S&P Global Platts – the leading independent commodities and energy data provider – had expected crude stocks to go down some 3.5 million barrels.
An uptick in refinery demand and decline in U.S. output for the first time in more than two months led to the larger-than-expected stockpile draw with the world's biggest oil consumer.
Oil stockpiles have shrunk in 30 of the last 38 weeks and are down more than 100 million barrels since April. The gradual fall has helped the U.S. crude market shift from year-over-year storage surplus to a deficit. At 431.9 million barrels, current crude supplies are 11.1% below the year-ago period and the lowest since 2015 though they are in the middle of the average range during this time of the year.
Meanwhile, stocks at the Cushing terminal in Oklahoma – the key delivery hub for U.S. crude futures traded on the New York Mercantile Exchange – was down by 1.6 million barrels to 51.4 million barrels.
The crude supply cover was down from 25.6 days in the previous week to 25.2 days. In the year-ago period, the supply cover was 29.4 days.
Gasoline: Supplies of gasoline were up for the seventh straight week on strong production. The 591,000 barrels addition – less than the polled number of 1.3 million barrels rise in supply level – took gasoline stockpiles up to 228.8 million barrels. Following last week’s increase, the stock of the most widely used petroleum product is now up 0.6% year over year and is also above the upper limit of the average range.
Distillate: Distillate fuel supplies (including diesel and heating oil) was up 1.1 million barrels last week, as opposed to analysts’ expectations for 780,000 barrels decrease in supply level. The surprise weekly rise could be attributed to higher output. At 129.9 million barrels, current supplies are 14.3% below the year-ago level and are in the middle of the average range for this time of the year.
Refinery Rates: Refinery utilization was up by 1.6% from the prior week to 95.7%.
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 to Own an Energy Stock Now?
If you are looking for a near-term energy play, HollyFrontier Corp. HFC may be a good selection. This company has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Based in Dallas, TX, HollyFrontier is one of the largest independent refiners and marketers of petroleum products in the U.S. Over 30 days, the Dallas, TX-based company has seen the Zacks Consensus Estimate for 2017 and 2018 increase 15% and 18%, to $2.38 and $3.01 per share, respectively.
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