The U.S. Energy Department's weekly inventory release showed that crude stockpiles recorded another massive build, the fourth in a row. The report further revealed that refined product inventories – gasoline and distillate – both increased from their previous week levels, snubbing analyst predictions.
Following the bearish supply data, in New York, West Texas crude snapped a four-day rally and was down $4.60 (8.7%) on Wednesday to close at $48.45 per barrel.
Analysis of the Data
Crude Oil: The federal government’s EIA report revealed that crude inventories jumped by 6.33 million barrels for the week ending Jan 30, 2015, following a climb of 8.87 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 2.8 million barrels. Sustained strength in domestic production led to the huge stockpile build with the world's biggest oil consumer.
In particular, 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 2.52 million barrels from the previous week’s level to 41.38 million barrels. Nevertheless, stocks are currently 20% under the all-time high of 51.86 million barrels reached in Jan 2013.
Following the fourth successive weekly inventory surge, at 413.06 million barrels, current crude supplies are up 15.4% from the year-ago period and is at the highest level during this time of the year in 80 years at least. The crude supply cover was up from 26.0 days in the previous week to 26.8 days. In the year-ago period, the supply cover was 23.3 days.
Gasoline: Supplies of gasoline were up for the twelfth time in 13 weeks, as imports jumped and domestic consumption weakened.
The 2.34 million barrels gain – contrary to analysts’ projections for an 800,000 barrels decrease in supply level – took gasoline stockpiles up to 240.67 million barrels. After the latest build, the existing inventory level of the most widely used petroleum product is 2.4% higher than the year-earlier level and is well over the upper limit of the average range.
Distillate: Distillate fuel supplies (including diesel and heating oil) were up 1.79 million barrels last week, again counter to analysts’ expectations for a 2.1 million barrels fall in inventory level. The increase in distillate fuel stocks – the first time in 3 weeks – could be attributed to weak demand, partially offset by lower imports and production. At 134.48 million barrels, distillate supplies are 18.2% above 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 1.9% from the prior week to 89.9%.
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 Devon Energy Corp. (DVN), and refiners such as Valero Energy Corp. (VLO), Phillips 66 (PSX) and HollyFrontier Corp. (HFC).
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