We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Here's How to Interpret the Latest EIA Crude Inventory Report
Read MoreHide Full Article
U.S. oil prices fell on Wednesday after the Energy Department's inventory release showed a surprise addition to crude stockpiles and a pullback in fuel demand, reflecting a hit from the second wave of the coronavirus. The commodity was also pressured by renewed U.S.-China tensions, whereby Washington ordered the closure of Chinese consulate in the city of Houston only to be retaliated by Beijing’s warning to shut down the U.S. office in Wuhan.
On the New York Mercantile Exchange, WTI crude futures lost 2 cents to settle at $41.90 a barrel yesterday after reaching a four-month high on Tuesday.
Analyzing the Latest EIA Report
Below we review the EIA's Weekly Petroleum Status Report for the week ending Jul 17.
Crude Oil: The federal government’s EIA report revealed that crude inventories rose by 4.9 million barrels, compared to expectations for a 1.9 million barrels decrease. A hefty increase in imports and slight production uptick accounted for the surprise stockpile surge with the world's biggest oil consumer. This puts total domestic stocks at 536.6 million barrels – 20.6% above the year-ago figure and 19% over the five-year average.
The latest report also showed that supplies at the Cushing terminal in Oklahoma (the key delivery hub for U.S. crude futures traded on the New York Mercantile Exchange) was up 1.4 million barrels to 50.1 million barrels.
The crude supply cover was edged up from 37.6 days in the previous week to 37.7 days. In the year-ago period, the supply cover was 25.8 days.
Let’s turn to products now.
Gasoline: Gasoline supplies tallied a decrease for the fifth time in six weeks. The fuel’s 1.8 million barrels decline is attributable to lower production. Analysts had forecast 2 million barrels fall. At 246.7 million barrels, the current stock of the most widely used petroleum product is 6.1% higher than the year-earlier level and is 7% above the five-year average range.
Distillate: Distillate fuel supplies (including diesel and heating oil) increased for the 13th time in 16 weeks. The 1.1 million barrels build reflected a drop-off in consumption, signaling weak activity levels at a time when demand usually remains strong with the onset of the summer driving season. Meanwhile, the market had been looking for a supply climb of 280,000 barrels. Current inventories — at 177.9 million barrels — are 30% over the year-ago level and 27% above the five-year average.
Refinery Rates: Refinery utilization ticked down 0.2% from the prior week to 77.9%.
Conclusion
The crude inventory rise surprised the market, which was expecting a decline. Supplies are now close to their highest level on record. Another potential headwind to come out of the report was an increase in storage at the Cushing hub, which rose for the third successive week.
On a positive note, gasoline inventories dropped. Meanwhile, though domestic output increased slightly week over week, the fact remains that U.S. producers have scaled back operations significantly. Weekly figures show current output at 11.1 million barrels per day, down from 13.1 million in the second week of March.
In particular, volumes from United States’ number one basin – Permian - is set to fall by 13,000 bbl/d month over month to 4.2 MMbbl/d in August – the fourth month of decline, as the likes of Diamondback Energy (FANG - Free Report) , Cimarex Energy, Concho Resources, Pioneer Natural Resources and others invest a lot less money into the unconventional play in 2020.
The pockets of bullish data in the report notwithstanding, investors still remain worried of the supply glut. U.S. commercial stockpiles are up by nearly 19% since March, while domestic fuel demand remains weak. The U.S. data also showed a fall in gasoline and distillate demand, underscoring worries about the nascent rebound.
Again, despite another rise in refinery runs, utilization in the United States remains far below the usual capacity usage at this time of the year. Downstream operators including Valero Energy (VLO - Free Report) , Marathon Petroleum (MPC - Free Report) , Phillips 66 (PSX - Free Report) – all carrying a Zacks Rank #3 (Hold) - have drastically reduced processing capacity to cope with the demand erosion caused by efforts to stem the spread of the coronavirus. The demand has still not picked up to a level where the operators think of restarting/increasing their refinery work.
Crude is also being pressured by the second wave of coronavirus infections. As several U.S. states experience a spike in new coronavirus infections and hospitalization, there are apprehensions about another set of containment measures — already in place in certain regions — which might force many businesses to close again just after reopening. Moreover, this would create doubts around the trajectory of oil’s demand recovery.
Further complicating things, crude’s rise from the bottom could also encourage the shale patch to ramp up or resume drilling activities. In fact, the sharp gains in the price have already prompted the likes of EOG Resources (EOG - Free Report) and Parsley Energy to plan for potential revival of production.
Therefore, it appears that the oil market is at a crossroads with serious questions remain about the future direction of the commodity.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
Image: Shutterstock
Here's How to Interpret the Latest EIA Crude Inventory Report
U.S. oil prices fell on Wednesday after the Energy Department's inventory release showed a surprise addition to crude stockpiles and a pullback in fuel demand, reflecting a hit from the second wave of the coronavirus. The commodity was also pressured by renewed U.S.-China tensions, whereby Washington ordered the closure of Chinese consulate in the city of Houston only to be retaliated by Beijing’s warning to shut down the U.S. office in Wuhan.
On the New York Mercantile Exchange, WTI crude futures lost 2 cents to settle at $41.90 a barrel yesterday after reaching a four-month high on Tuesday.
Analyzing the Latest EIA Report
Below we review the EIA's Weekly Petroleum Status Report for the week ending Jul 17.
Crude Oil: The federal government’s EIA report revealed that crude inventories rose by 4.9 million barrels, compared to expectations for a 1.9 million barrels decrease. A hefty increase in imports and slight production uptick accounted for the surprise stockpile surge with the world's biggest oil consumer. This puts total domestic stocks at 536.6 million barrels – 20.6% above the year-ago figure and 19% over the five-year average.
The latest report also showed that supplies at the Cushing terminal in Oklahoma (the key delivery hub for U.S. crude futures traded on the New York Mercantile Exchange) was up 1.4 million barrels to 50.1 million barrels.
The crude supply cover was edged up from 37.6 days in the previous week to 37.7 days. In the year-ago period, the supply cover was 25.8 days.
Let’s turn to products now.
Gasoline: Gasoline supplies tallied a decrease for the fifth time in six weeks. The fuel’s 1.8 million barrels decline is attributable to lower production. Analysts had forecast 2 million barrels fall. At 246.7 million barrels, the current stock of the most widely used petroleum product is 6.1% higher than the year-earlier level and is 7% above the five-year average range.
Distillate: Distillate fuel supplies (including diesel and heating oil) increased for the 13th time in 16 weeks. The 1.1 million barrels build reflected a drop-off in consumption, signaling weak activity levels at a time when demand usually remains strong with the onset of the summer driving season. Meanwhile, the market had been looking for a supply climb of 280,000 barrels. Current inventories — at 177.9 million barrels — are 30% over the year-ago level and 27% above the five-year average.
Refinery Rates: Refinery utilization ticked down 0.2% from the prior week to 77.9%.
Conclusion
The crude inventory rise surprised the market, which was expecting a decline. Supplies are now close to their highest level on record. Another potential headwind to come out of the report was an increase in storage at the Cushing hub, which rose for the third successive week.
On a positive note, gasoline inventories dropped. Meanwhile, though domestic output increased slightly week over week, the fact remains that U.S. producers have scaled back operations significantly. Weekly figures show current output at 11.1 million barrels per day, down from 13.1 million in the second week of March.
In particular, volumes from United States’ number one basin – Permian - is set to fall by 13,000 bbl/d month over month to 4.2 MMbbl/d in August – the fourth month of decline, as the likes of Diamondback Energy (FANG - Free Report) , Cimarex Energy, Concho Resources, Pioneer Natural Resources and others invest a lot less money into the unconventional play in 2020.
The pockets of bullish data in the report notwithstanding, investors still remain worried of the supply glut. U.S. commercial stockpiles are up by nearly 19% since March, while domestic fuel demand remains weak. The U.S. data also showed a fall in gasoline and distillate demand, underscoring worries about the nascent rebound.
Again, despite another rise in refinery runs, utilization in the United States remains far below the usual capacity usage at this time of the year. Downstream operators including Valero Energy (VLO - Free Report) , Marathon Petroleum (MPC - Free Report) , Phillips 66 (PSX - Free Report) – all carrying a Zacks Rank #3 (Hold) - have drastically reduced processing capacity to cope with the demand erosion caused by efforts to stem the spread of the coronavirus. The demand has still not picked up to a level where the operators think of restarting/increasing their refinery work.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Crude is also being pressured by the second wave of coronavirus infections. As several U.S. states experience a spike in new coronavirus infections and hospitalization, there are apprehensions about another set of containment measures — already in place in certain regions — which might force many businesses to close again just after reopening. Moreover, this would create doubts around the trajectory of oil’s demand recovery.
Further complicating things, crude’s rise from the bottom could also encourage the shale patch to ramp up or resume drilling activities. In fact, the sharp gains in the price have already prompted the likes of EOG Resources (EOG - Free Report) and Parsley Energy to plan for potential revival of production.
Therefore, it appears that the oil market is at a crossroads with serious questions remain about the future direction of the commodity.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>