U.S. Crude & Fuel Stockpiles Slump, Oil Exports Increase

The U.S. Energy Department's inventory release showed that crude stockpiles recorded a large weekly decline on surging exports. Further to this, hefty draws in product inventories (gasoline and distillate) boosted bullish sentiment in the energy market.

As it is, crude is being supported by the so-called OPEC+ deal that is cutting production by around 1.2 million barrels per day until the end of June. U.S. sanctions against Venezuela and Iran also continue to tighten the commodity’s fundamentals.

The positive sentiments helped push oil prices to their highest level in four months on Wednesday, with WTI moving past $60 per barrel during intraday trading. While, crude futures eased back slightly from their multi-month highs yesterday, it continues to remain within touching distance of the $60-a-barrel mark.

Analysis of the EIA Data

Crude Oil: The federal government’s EIA report revealed that crude inventories fell by 9.6 million barrels for the week ending Mar 15, following a decrease of 3.9 million barrels in the previous week. The analysts surveyed by S&P Global (NYSE:SPGI) Platts – the leading independent commodities and energy data provider – had expected crude stocks to go up some 1 million barrels.

A sharp rise in exports and strong refiner demand led to the surprise stockpile plunge with the world's biggest oil consumer even as domestic production rebounded to the highest level on record. Moreover, the latest report shows that 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 468,000 barrels to 46.4 million barrels.

At 439.5 million barrels, current crude supplies are 2.6% above the year-ago figure but 2% under the five-year average. The crude supply cover was down from 28.2 days in the previous week to 27.4 days. In the year-ago period, the supply cover was 26.4 days.

Gasoline: Gasoline supplies tallied a fifth straight week of drops as demand strengthened. The 4.6 million barrels decline – significantly above the polled number of 2.1 million barrels fall – took gasoline stockpiles down to 241.5 million barrels. Following last week’s hefty draw, the current stock of the most widely used petroleum product is now 0.7% below the year-earlier level but are 2% over the five-year range.

Distillate: Distillate fuel supplies (including diesel and heating oil) fell 4.1 million barrels last week, while analysts were looking for an inventory draw of just 2.1 million barrels. The large decrease could be attributed to red-hot demand. Despite the decline, current supplies – at 132.2 million barrels – are around 1% higher than the year-ago level though stocks remain 4% below than the five-year average.

Refinery Rates: Refinery utilization was up by 1.3% from the prior week to 88.9%.

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

Want to Own an Energy Stock Now?

While easing oversupply concerns and hopes of U.S.-China trade deal helped oil to bounce back above $60, it remains to be seen if it can maintain the recent gains. One factor that could undermine the efforts to tighten the market is the seemingly relentless increase in crude oil production across the U.S. shale patch.

Meaning, there remains a lot of uncertainty around the commodity right now, which can lead to volatility and price fluctuations. At this time, it might be prudent for investors to maintain caution and look for fundamentally sound stocks.

If you are looking for a near-term energy play, ProPetro Holding Corp. (NYSE:PUMP) might be a good selection. ProPetro has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The 2019 Zacks Consensus Estimate for the provider of pressure pumping services in the Permian Basin is $2.39, representing 19.5% earnings per share growth over 2018. Next year’s average forecast is $2.62 pointing to another 9.7% growth.

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