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The U.S. Energy Department's weekly inventory release showed that crude stockpiles notched up another all-time high, as refiners scaled down their utilization rates. The report further revealed that within the ‘refined products’ category, gasoline stocks fell, while distillate supplies were up from the week-ago level.

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 jumped by 3.0 million barrels for the week ending May 24, 2013, following a decrease of 338,000 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 1.5 million barrels. An uptick in domestic production and drop in refinery utilization rates led to the surprise stockpile build-up with the world's biggest oil consumer even as imports declined.

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 335,000 barrels from the previous week’s level to 50.51 million barrels. Stocks are currently just under the all-time high of 51.86 million barrels reached in January.

Following the weekly inventory increase, at 397.55 million barrels – the highest since EIA started gathering data in 1978 – current crude supplies are 3.4% above the year-earlier level, and exceeds the upper limit of the average for this time of the year. The crude supply cover was up marginally, from 26.1 days in the previous week to 26.2 days. In the year-ago period, the supply cover was 25.7 days.

Gasoline: Supplies of gasoline were down for the first time in 3 weeks, as domestic consumption strengthened amid falling production and imports.  

The 1.511 million barrels withdrawal – almost double the analysts’ projections for a 800,000 barrels decrease in supply level – took gasoline stockpiles down to 219.16 million barrels. Notwithstanding this drawdown, the existing inventory level of the most widely used petroleum product is 9.5% higher than the year-earlier level and is within the top half of the average range.

Distillate: Distillate fuel supplies (including diesel and heating oil) were up 1.85 million barrels last week, as against analysts’ expectations for a 600,000 barrels drop in inventory level. The increase in distillate fuel stocks – the sixth in 7 weeks – could be attributed to weaker demand and higher imports, partially offset by lower production.

At 120.66 million barrels, distillate supplies are 2.5% above 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 0.9% from the prior week to 86.4%. The analysts were expecting the refinery run rate to increase 0.6% to 87.9%.

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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