The U.S. Energy Department's weekly inventory release showed that crude stockpiles rose unexpectedly, snapping an eight-week streak of decline. The report further revealed that within the ‘refined products’ category, gasoline stocks fell, while distillate supplies were up from the week-ago level.
Following the bearish data from the U.S. government, West Texas Intermediate (WTI) crude futures tumbled 4.2% to settle at $56.96 per barrel Wednesday, the lowest since Apr 22.
This also prompted investors to reduce their exposure to oil and related support plays. As a result, market heavyweights like Range Resources Corp. RRC, Marathon Oil Corp. MRO, Transocean Ltd. RIG, Exxon Mobil Corp. XOM, Royal Dutch plc RDS.A, Chevron Corp. CVX and ConocoPhillips COP all experienced losses in yesterday’s trading.
Analysis of the Data
Crude Oil: The federal government’s EIA report revealed that crude inventories increased by 2.39 million barrels for the week ending June 26, 2015, following a tumble of 4.93 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 down some 1.3 million barrels. A sharp uptick in the level of imports led to the surprise stockpile build with the world's biggest oil consumer even as refinery utilization rates strengthened and domestic production moderated from their near-record levels.
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 – edged up 123,000 barrels from the previous week’s level to 56.37 million barrels.
Following the first weekly inventory rise in 9 weeks, at 465.38 million barrels, current crude supplies are up 20.9% 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 up slightly, from 28.1 days in the previous week to 28.2 days. In the year-ago period, the supply cover was 24.5 days.
Gasoline: Supplies of gasoline were down after two weeks of increase, as imports fell and demand strengthened. The 1.76 million barrels drop – contrary to analysts’ projections for a 300,000 barrels increase in supply level – took gasoline stockpiles down to 216.74 million barrels. Notwithstanding the latest decrease, the existing inventory level of the most widely used petroleum product is 1.4% higher than the year-earlier level and is in the upper limit of the average range.
Distillate: Distillate fuel supplies (including diesel and heating oil) were up 392,000 barrels last week, much lower than analysts’ expectations for a 1.1 million barrels rise in inventory level. The increase in distillate fuel stocks – sixth in as many weeks – could be attributed to higher imports and production. At 135.82 million barrels, distillate supplies are 11.8% 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% from the prior week to 95.0%.
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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