Back to top

Analyst Blog

The U.S. Energy Department's weekly inventory release showed an unexpected decrease in crude inventories – breaking a month-long trend of stock build – on the back of lower imports, while distillate supplies rose after five straight weeks of decline.

The agency’s bullish report further revealed that gasoline stocks posted a smaller-than-expected draw even as demand continues to be weak. Meanwhile, refinery utilization rate reflected a decrease of 0.5%.

The Energy Information Administration ("EIA") Petroleum Status Report – which contains data for 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 businesses of companies engaged in the oil and refining industry, such as ExxonMobil Corp. (XOM - Analyst Report), Chevron Corp. (CVX - Analyst Report), ConocoPhillips (COP - Analyst Report), Valero Energy Corp. (VLO - Analyst Report) and Tesoro Corp. (TSO - Analyst Report).

Analysis of the Data

Crude Oil: The federal government’s EIA report revealed that crude inventories fell by 1.16 million barrels for the week ending March 16, 2012, after climbing by 8.38 million barrels over the previous four-week period.

Analysts surveyed by Platts, the energy information arm of McGraw-Hill Companies Inc. , had expected oil stocks to go up some 2.1 million barrels. A sharp decline in imports led to the stockpile drawdown with the world's biggest oil consumer even as refiners lowered their utilization rates.

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 – came off 176,000 barrels from previous week’s 9-month high level to 38.52 million barrels. Stocks soared to an all-time record of 41.90 million barrels in April last year.

At 346.29 million barrels, current crude supplies are 1.8% below the year-earlier level, but are in the upper limit of the average for this time of the year. The crude supply cover was up from 23.7 days in the previous week to 23.9 days. In the year-ago period, the supply cover was 25.1 days.

Gasoline: Supplies of gasoline decreased for the fifth consecutive week even as domestic consumption fell slightly (by 0.4%) to 8.38 million barrels a day. The reduction in gasoline inventories could be attributed to lower production.

The 1.21 million barrels dip – lower than projections – took gasoline stockpiles down to 226.91 million barrels. The existing inventory level of the most widely used petroleum product is 3.3% above the year-earlier levels and is in the upper limit of the average range.

Distillate: Distillate fuel inventories (including diesel and heating oil) increased by 1.76 million barrels last week, contrary to analyst expectations for a 1.6 million barrels decrease. The rise in distillate fuel supplies – following five consecutive weeks of decline – could be attributed to weaker demand, partially offset by higher output and imports.

At 136.58 million barrels, distillate supplies are 10.5% below the year-ago level and are in the upper limit of the average range for this time of the year.

Refinery Rates: Refinery utilization was down 0.5% from the prior week at 82.2%.

Please login to Zacks.com or register to post a comment.