Oil Jumps As EIA Reports Big Inventory Draw

The U.S. Energy Department's weekly inventory release showed that crude stockpiles recorded a large drop, while supplies at the Cushing, OK storage hub also decreased. The report further revealed that distillate inventories fell from its previous week level. The only disappointment came in the form of gasoline supplies that recorded a surprise build.

Following EIA’s bullish data sets, West Texas Intermediate (WTI) crude futures jumped 4.2% (or $2.03) to settle at $49.88 per barrel Wednesday.

Analysis of the EIA Data

Crude Oil: The federal government’s EIA report revealed that crude inventories decreased by 4.05 million barrels for the week ending June 24, 2016, following a decline of 917,000 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 2.4 million barrels. Lower imports and increased refinery usage led to the larger-than-expected stockpile drawdown 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 down 951,000 barrels from previous week’s level to 64.23 million barrels.

Despite the seventh inventory decline in 8 weeks, at 526.57 million barrels, current crude supplies are up 13% from the year-ago period and are at the highest level during this time of the year.

The crude supply cover was down from 32.4 days in the previous week to 31.9 days. In the year-ago period, the supply cover was 28.2 days.

Gasoline: Supplies of gasoline were up for the second successive week on rising imports and weakening demand. The 1.37 million barrels build – contrary to the analysts’ polled number of 600,000 barrels decrease in supply level – took gasoline stockpiles up to 239 million barrels. Following last week’s increase, the existing stock of the most widely used petroleum product is 10% higher than the year-earlier level and is comfortably above the upper half of the average range.

Distillate: Distillate fuel supplies (including diesel and heating oil) fell 1.8 million barrels last week, easily outpacing analysts’ expectations for a 1 million barrel drop in inventory level. The decrease in distillate fuel stocks – the first in 4 weeks – could be attributed to lower imports and improvement in demand. At 150.51 million barrels, distillate supplies are 11% higher than the year-ago level and are well above the upper half of the average range for this time of the year.

Refinery Rates: Refinery utilization was up by 1.7% from the prior week to 93%.

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. (NYSE:XOM) , Chevron Corp. (NYSE:CVX) and ConocoPhillips (NYSE:COP) , and refiners such as Valero Energy Corp. (NYSE:VLO) , Phillips 66 (NYSE:PSX) and HollyFrontier Corp. (NYSE:HFC) .