The U.S. Energy Department's weekly inventory release showed that crude stockpiles recorded a surprise build on higher imports. The report further revealed that refined product inventories – gasoline and distillate – both increased from their previous week levels.
Analysis of the Data
Crude Oil: The federal government’s EIA report revealed that crude inventories climbed by 7.27 million barrels for the week ending Dec 19, 2014, following a decrease of 847,000 barrels in the previous week.
The analysts surveyed by Platts – the energy information arm of McGraw-Hill Financial Inc. – had expected crude stocks to go down some 2.4 million barrels. A sharp uptick in the level of imports led to the unexpected stockpile build with the world's biggest oil consumer even as domestic production eased somewhat form its all-time highest level.
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 973,000 barrels from the previous week’s level to 28.8 million barrels. Nevertheless, stocks are currently 44% under the all-time high of 51.86 million barrels reached in Jan 2013.
Following the second inventory increase in 3 weeks, at 387.21 million barrels, current crude supplies are up 5.3% from the year-ago period and is well above the upper limit of the average for this time of the year. The crude supply cover was up from 23.3 days in the previous week to 23.6 days. In the year-ago period, the supply cover was 22.8 days.
Gasoline: Supplies of gasoline were up for the seventh successive week, as production and imports jumped. This was partially offset by strength in domestic consumption.
The 4.08 million barrels gain took gasoline stockpiles up to 226.1 million barrels. After the latest build, the existing inventory level of the most widely used petroleum product is 2.8% higher than the year-earlier level and is well over the upper limit of the average range.
Distillate: Distillate fuel supplies (including diesel and heating oil) were up 2.3 million barrels last week. The increase in distillate fuel stocks – the third time in 4 weeks – could be attributed to higher production and imports, partially offset by strong demand. At 123.85 million barrels, distillate supplies are 8.5% above the year-ago level but are in the lower half of the average range for this time of the year.
Refinery Rates: Refinery utilization stayed put at 93.5%.
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. (XOM), Chevron Corp. (CVX) and Devon Energy Corp. (DVN), and refiners, such as Valero Energy Corp. (VLO), Phillips 66 (PSX) and HollyFrontier Corp. (HFC). With an improvement/deterioration in the companies’ ability to generate positive earnings surprises, they can then move higher/lower from their current Zacks Rank.
As of now, all the above-mentioned companies retain a Zacks Rank #3 (Hold), implying that they are expected to perform in line with the broader U.S. equity market over the next one to three months.