Surprise Build In Domestic Crude Supplies, Fuel Stocks Drop

The U.S. Energy Department's weekly inventory release showed that crude stockpiles recorded a surprise build. What’s more, supplies at the Cushing, OK storage hub jumped to its highest level on record. On a bullish note though, the report revealed that refined product inventories – gasoline and distillate – both decreased from their previous week levels.

Analysis of the EIA Data

Crude Oil: The federal government’s EIA report revealed that crude inventories increased by 1.31 million barrels for the week ending May 13, 2016, following a decline of 3.41 million 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 by 3 million barrels. The Midwest refiners’ decision to replace Canadian imports (affected by the raging wildfire) with crude from the U.S. Gulf Coast led to the surprise 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 461,000 barrels from the previous week’s level to a new all-time high of 68.27 million barrels.

Following the twelfth inventory rise in 14 weeks, at 541.29 million barrels, current crude supplies are up 12% from the year-ago period and are at the highest level during this time of the year.

The crude supply cover was down marginally from 33.7 days in the previous week to 33.6 days. In the year-ago period, the supply cover was 29.8 days.

Gasoline: Supplies of gasoline were down for the second successive week as demand strengthened, while imports and production both fell. The 2.50 million barrels draw – almost twice the analysts’ polled number of 1.3 million barrels decrease in supply level – took gasoline stockpiles down to 238.07 million barrels. Despite last week’s decline, the existing stock of the most widely used petroleum product is 6% 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 3.17 million barrels last week, again easily outpacing analysts’ expectations for a 1.4 million barrels drop in inventory level. The decrease in distillate fuel stocks – the fifth in as many weeks – could be attributed to stronger demand and lower imports. But at 152.16 million barrels, distillate supplies are still 19% 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 1.4% from the prior week to 90.5%.

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) .