U.S. Oil Supplies Jump But Gasoline, Distillate Stocks Fall

The U.S. Energy Department's inventory release showed that crude stockpiles recorded a massive weekly build on surging domestic oil production but product inventories (gasoline and distillate) fell sharply on higher demand.

Amid these conflicting signals, the commodity 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 oil market.

As a result, the front month West Texas Intermediate crude futures are up more than 30% from Christmas Eve lows. Yesterday, the benchmark gained 0.8% (or 44 cents) to settle at $56.66 per barrel.

Analysis of the EIA Data

Crude Oil: The federal government’s EIA report revealed that crude inventories jumped by 7.1 million barrels for the week ending Mar 1, following a decrease of 8.6 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 1.9 million barrels.

Strong domestic production and sharp rise in imports led to the big stockpile build with the world's biggest oil consumer. Output in the United States remained at a record 12.1 million barrels per day – the most since the EIA started maintaining weekly data in 1983. Meanwhile, crude imports averaged 7 million barrels per day last week, up 1.1 million barrels per day from the previous week.

At 452.9 million barrels, current crude supplies are 6.3% above the year-ago figure and 4% over the five-year average. 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 – rose 873,000 barrels to 47.5 million barrels. The crude supply cover was up from 27.9 days in the previous week to 28.6 days. In the year-ago period, the supply cover was 26.7 days.

Gasoline: Gasoline supplies tallied a third straight week of drops as demand edged up. The 4.2 million barrels decline – significantly above the polled number of 2 million barrels fall – took gasoline stockpiles down to 250.7 million barrels. Following last week’s hefty draw, the current stock of the most widely used petroleum product is essentially in line with the year-earlier level but are 3% over the five-year range.

Distillate: Distillate fuel supplies (including diesel and heating oil) fell 2.4 million barrels last week, while analysts were looking for an inventory draw of just 1.4 million barrels. The large decrease could be attributed to strengthening demand. Following the decline, current supplies – at 136 million barrels – are now 1% lower than the year-ago level and 3% below than the five-year average.

Refinery Rates: Refinery utilization was up by 0.4% from the prior week to 87.5%.

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 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 squirt past $55, 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.

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 — either withdraw for a while or 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 $2.21, representing 10.6% earnings per unit growth over 2018. Next year’s average forecast is $2.52 pointing to another 13.9% growth.

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