The U.S. Energy Department's weekly inventory release showed that crude stockpiles recorded a surprise drop, as imports fell and refiners scaled up their utilization rates. The report further revealed that refined product inventories – gasoline and distillate – both increased from their previous week levels.
Analysis of the Data
Crude Oil: The federal government’s EIA report revealed that crude inventories fell by 3.69 million barrels for the week ending Nov 28, 2014, following an increase of 1.95 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 some 380,000 barrels. A pullback in imports and strength in refinery utilization rates led to the large stockpile drawdown with the world's biggest oil consumer even as domestic production continued to spike, now at their all-time highest level.
Importantly, 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 down 694,000 barrels from the previous week’s level to 23.89 million barrels. Stocks are currently 54% under the all-time high of 51.86 million barrels reached in Jan 2013.
Following the first inventory decrease in 3 weeks, at 379.34 million barrels, current crude supplies are down 1.7% from the year-ago period and is within the upper limit of the average for this time of the year. The crude supply cover was down from 24.3 days in the previous week to 23.7 days. In the year-ago period, the supply cover was 24.7 days.
Gasoline: Supplies of gasoline were up for the fourth successive week, as imports jumped. This was partially offset by lower production and strength in domestic consumption.
The 2.14 million barrel gain – counter to analysts’ projections for an unchanged supply level – took gasoline stockpiles up to 208.57 million barrels. Despite this build, the existing inventory level of the most widely used petroleum product is 1.8% lower than the year-earlier level and is well below the lower limit of the average range.
Distillate: Distillate fuel supplies (including diesel and heating oil) were up 3.03 million barrels last week, defying analysts’ expectations for a drop in inventory level. The increase in distillate fuel stocks – the first time in 6 weeks – could be attributed to tepid demand and strong production.
At 116.17 million barrels, distillate supplies are 2.4% above the year-ago level and are close to the lower limit of the average range for this time of the year.
Refinery Rates: Refinery utilization was up 1.9% from the prior week to 93.4%.
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.
The data from EIA generally acts as a catalyst for crude prices and affect producers, such as Exxon Mobil Corp. (XOM), Chevron Corp. (CVX) and Anadarko Petroleum Corp. (APC), and refiners, such as Valero Energy Corp. (VLO), Phillips 66 (PSX) and HollyFrontier Corp. (HFC). With an improvement/deterioration in the companies’ ability to generate positive earnings surprises, they can then move higher/lower from their current Zacks Rank.
As of now, all the above-mentioned companies retain a Zacks Rank #3 (Hold), implying that they are expected to perform in line with the broader U.S. equity market over the next one to three months.
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