The U.S. Energy Department’s inventory release showed that crude stockpiles recorded an unexpected build. This weighed on oil prices , sending West Texas Intermediate (WTI) crude futures down 1.5% (or 81 cents) to $41.71 per barrel Wednesday.
On a bullish note, the report revealed that refined product inventories – gasoline and distillate – both decreased handsomely from their previous week levels.
Analysis of the EIA Data
Crude Oil: The federal government’s EIA report revealed that crude inventories increased by 2.26 million barrels for the week ending Dec 16, 2016, following a decline of 2.56 million barrels in the previous week.
The analysts and traders surveyed by The Wall Street Journal had expected crude stocks to go down some 2.3 million barrels. A jump in imports led to the surprise stockpile build with the world’s biggest oil consumer.
The latest inventory increase adds to the supply of excess oil in the U.S., though the year-over-year storage surplus has narrowed down considerably in recent months after a run of drawdowns.
At 485.45 million barrels, current crude supplies are up 7% from the year-ago period and are at upper limit of the average range for this time of year.
However, 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 245,000 barrels from previous week’s level to 66.26 million barrels.
The crude supply cover – at 29.5 days – remained flat from previous week. In the year-ago period, the supply cover was 29.1 days.
Sector 5YR % Return
Gasoline: Supplies of gasoline were down for the first time in 6 weeks on falling imports and strengthening demand. The 1.31 million barrels draw – contrary to the analysts’ polled number of 1.1 million barrels increase in supply level – took gasoline stockpiles down to 228.74 million barrels. Despite last week’s decrease, the existing stock of the most widely used petroleum product is 4% higher than the year-earlier level and is well above the upper half of the average range.
Distillate: Distillate fuel supplies (including diesel and heating oil) went down by 2.42 million barrels last week, dwarfing analysts’ expectations for a 900,000-barrels fall. The second successive weekly decrease in distillate fuel stocks could be attributed to higher demand and lower imports. At 153.52 million barrels, distillate supplies are 1.5% higher than the year-ago level and are sitting over the upper half of the average range for this time of the year.
Refinery Rates: Refinery utilization was 91.5% for the week.
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 ExxonMobil Corp. XOM , Chevron Corp. CVX and ConocoPhillips COP , and refiners such as Tesoro Corp. TSO , Phillips 66 PSX and HollyFrontier Corp. HFC .
However, each of these firms has a Zacks Rank #3 (Hold), which does not make them screaming buys. In case you are looking for energy names for your portfolio, one could opt for Newfield Exploration Co. NFX . It has a Zacks Rank #1 (Strong Buy).