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The U.S. Energy Department's weekly inventory release showed that gasoline stockpiles increased unexpectedly, as domestic production and imports jumped. The report further revealed that crude and distillate supplies were down from the week-ago levels. Meanwhile, refiners scaled down their utilization rates by 0.7%.

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.

Analysis of the Data

Crude Oil: The federal government’s EIA report revealed that crude inventories fell by 338,000 barrels for the week ending May 17, 2013, following a decrease of 624,000 barrels in the previous week.

The analysts surveyed by Platts – the energy information arm of McGraw-Hill Financial Inc. (MHFI - Analyst Report) – had expected crude stocks to go down some 1.2 million barrels. A slide in domestic production led to the stockpile drawdown with the world's biggest oil consumer even as refiners reduced their utilization rates and imports spiked.

However, 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 449,000 barrels from the previous week’s level to 50.17 million barrels. Stocks are currently just under the all-time high of 51.86 million barrels reached in January.

Despite the weekly inventory decrease, at 394.55 million barrels, current crude supplies are 3.2% above the year-earlier level, and exceeds the upper limit of the average for this time of the year. The crude supply cover was down from 26.5 days in the previous week to 26.1 days. In the year-ago period, the supply cover was 25.7 days.

Gasoline: Supplies of gasoline were up for the second time in as many weeks despite an improvement in domestic consumption. The rise in gasoline inventories could be attributed to spiraling production and imports.

The 3.01 million barrels gain – contrary to analysts’ projections for a 200,000 barrels decrease in supply level – took gasoline stockpiles up to 220.68 million barrels. Following this build, the existing inventory level of the most widely used petroleum product is 9.8% higher than the year-earlier level and is close to the top half of the average range.

Distillate: Distillate fuel supplies (including diesel and heating oil) were down 1.05 million barrels last week, as against analysts’ expectations for a 1.1 million barrels gain in inventory level. The decrease in distillate fuel stocks – the first in 6 weeks – could be attributed to stronger demand, partially offset by higher imports and production.

At 118.81 million barrels, distillate supplies are essentially flat with the year-ago level but are in the lower limit of the average range for this time of the year.

Refinery Rates: Refinery utilization was down 0.7% from the prior week to 87.3%. The analysts were expecting the refinery run rate to increase 0.7% to 88.7%.

Zacks Rank

A bullish data from the EIA generally acts as a positive catalyst for crude prices and buoy producers, such as Exxon Mobil Corp. (XOM - Analyst Report), Chevron Corp. (CVX - Analyst Report) and ConocoPhillips (COP - Analyst Report). With an improvement in the companies’ ability to generate positive earnings surprises, they can then move higher from their current Zacks Rank #3 (Hold).
 

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