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Oil Slips After EIA Reports Large Crude, Distillate Builds

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The U.S. Energy Department's weekly inventory release showed that crude stockpiles recorded a much larger-than-anticipated build, thus remaining at record high levels for this time of year. On a further bearish note, the report revealed that distillate inventories surged too. The negative sentiment dragged down West Texas Intermediate (WTI) crude futures by 3.6% (or $1.65) to $44.70 per barrel Wednesday – the lowest settlement since Aug 12.

Analysis of the EIA Data

Crude Oil: The federal government’s EIA report revealed that crude inventories increased by 2.28 million barrels for the week ending Aug 26, 2016, following a rise of 2.50 million barrels in the previous week.

The analysts surveyed by S&P Global Platts – the leading independent commodities and energy data provider – had expected crude stocks to go up some 600,000 barrels. An uptick in imports and fall in refinery demand led to the big stockpile build with the world's biggest oil consumer.

Following the fifth inventory rise in six weeks, U.S. remains awash with excess oil. At 525.87 million barrels, current crude supplies are up 15% from the year-ago period and are at the highest level during this time of the year.

However, on a positive note, crude inventories at the Cushing terminal in Oklahoma – the key delivery hub for U.S. crude futures traded on the New York Mercantile Exchange – was down 1.04 million barrels from previous week’s level to 63.87 million barrels.

The crude supply cover was up marginally - from 31.3 days in the previous week to 31.5 days. In the year-ago period, the supply cover was 27.3 days.

Gasoline: Supplies of gasoline were down for the fourth time in 5 weeks as imports fell on the U.S. Atlantic Coast (‘USAC’). The 691,000 barrels draw – under the analysts’ polled number of 1.1 million barrels decrease in supply level – took gasoline stockpiles down to 232.20 million barrels. Despite last week’s increase, the existing stock of the most widely used petroleum product is 8% higher than the year-earlier level and is comfortably above the upper half of the average range.

Distillate: Distillate fuel supplies (including diesel and heating oil) went up by 1.50 million barrels last week, compared to analysts’ expectations for an unchanged inventory level. The increase in distillate fuel stocks – for the fourth time in 5 weeks – could be attributed to a rise in production, partly offset by higher demand. At 154.75 million barrels, distillate supplies are 3% higher than the year-ago level and are near the upper half of the average range for this time of the year.

Refinery Rates: Refinery utilization was up by 0.3% from the prior week to 92.8%.

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 Exxon Mobil Corp. (XOM - Free Report) , Chevron Corp. (CVX - Free Report) and ConocoPhillips (COP - Free Report) , and refiners such as Valero Energy Corp. (VLO - Free Report) , Phillips 66 (PSX - Free Report) and HollyFrontier Corp. .

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