Oil Prices Fall On Surprise U.S. Crude Inventory Build

The U.S. Energy Department's inventory release showed that crude stockpiles recorded an unexpected weekly build. The report further revealed that gasoline inventories increased slightly from previous week, while distillate stocks recorded a fall.

Meanwhile, refinery activity improved. However, the talking point from the data sets was the steady trend of rising domestic oil production that continues to be the biggest headwind for the market.

As a result, West Texas Intermediate (WTI) crude futures shed 0.7% (or 37 cents) to $55.33 per barrel Wednesday – the lowest settlement since Nov 2. The commodity fell further yesterday, finishing at $55.14 (down 19 cents or 0.3%).

Analysis of the EIA Data

Crude Oil: The federal government’s EIA report revealed that crude inventories increased by 1.9 million barrels for the week ending Nov 10, following a rise of 2.2 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 some one million barrels.

Record high domestic production and higher imports led to the surprise stockpile build with the world's biggest oil consumer. In particular, U.S. output rose by 25,000 barrels per day last week to more than 9.6 million barrels per day – the most since the EIA started maintaining weekly data in 1983.

While oil inventories rose for a second successive week, stockpiles have shrunk in 24 of the last 32 weeks and are down more than 75 million barrels since April. The gradual fall has helped the U.S. crude market shift from year-over-year storage surplus to a deficit. At 459 million barrels, current crude supplies are 6.4% below the year-ago period though they are in the upper half of the average range during this time of the year.

Meanwhile, 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 by 1.5 million barrels to 63.1 million barrels.

The crude supply cover was down from 28.7 days in the previous week to 28.3 days. In the year-ago period, the supply cover was 31.2 days.

Gasoline: Supplies of gasoline were up for the first time in four weeks as demand weakened. The 894,000 barrels addition – contrary to the polled number of 1 million barrels fall in supply level – took gasoline stockpiles up to 210.4 million barrels. Despite last week’s increase, the existing stock of the most widely used petroleum product remains 5.1% below the year-earlier level but is in the middle of the average range.

Distillate: Distillate fuel supplies (including diesel and heating oil) went down by 799,000 barrels last week, compared with analysts’ expectations for 2 million barrels decrease in supply level. The marginal weekly fall could be attributed to weakening demand. At 124.8 million barrels, current supplies are 16.2% below the year-ago level and are in the bottom 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 91%.

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

Want to Own an Energy Stock Now?

If you are looking for a near-term energy play, PBF Energy Inc. (NYSE:PBF) may be a good selection. This company has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

PBF Energy is a leading independent refiner, transporter and marketer of petroleum products with a combined crude processing capacity of roughly 900 thousand barrels per day. Over 30 days, the Parsippany, NJ-based firm has seen the Zacks Consensus Estimate for 2017 and 2018 increase 35.9% and 20.5%, to $1.59 and $2.88 per share, respectively.

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