U.S. Crude Slips On Supply Buildup, Fuel Stocks Rise Too

The U.S. Energy Department's weekly inventory release showed that crude stockpiles recorded a large build. Worryingly, supplies at the Cushing, OK storage hub rose, too. On a further bearish note, the report revealed that refined product inventories – gasoline and distillate – both increased from their previous week levels.

The downbeat sentiment on the back of increase in stocks across the board dragged down oil to around $47 a barrel.

Analysis of the EIA Data

Crude Oil: The federal government’s EIA report revealed that crude inventories increased by 2.50 million barrels for the week ending Aug 19, 2016, following a decline of 2.51 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 up some 200,000 barrels. A fall in refinery demand and higher imports led to the big 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 – was up 375,000 barrels from previous week’s level to 64.91 million barrels.

Following the fourth inventory rise in five weeks, U.S. remains awash with excess oil. At 523.59 million barrels, current crude supplies are up 16% from the year-ago period and are at the highest level during this time of the year.

The crude supply cover was up marginally - from 31.2 days in the previous week to 31.3 days. In the year-ago period, the supply cover was 26.7 days.

Gasoline: Following three successive weekly declines, supplies of gasoline went up slightly – the culprit being a combination of higher imports and weaker demand. The small, 36,000 barrels build – contrary to the analysts’ polled number of 1.6 million barrels decrease in supply level – took gasoline stockpiles up to 232.70 million barrels. Following last week’s increase, the existing stock of the most widely used petroleum product is 9% 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) went up by a meagre 122,000 barrels last week, lower than analysts’ expectations for a 350,000 barrels increase in inventory level. The increase in distillate fuel stocks – for the third time in 4 weeks – could be attributed to a jump in imports that more than offset strengthening demand. At 153.26 million barrels, distillate supplies are 2% higher than the year-ago level and are near the upper half of the average range for this time of the year.

Refinery Rates: Refinery utilization was down by 1% from the prior week to 92.5%.

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) .