U.S. Crude Supplies Drop Further

The U.S. Energy Department's weekly inventory release showed that crude stockpiles fell sharply, as imports declined and refinery activity rose. The agency’s report further revealed that refined product inventories – gasoline and distillate – increased from their previous week levels on weaker demand.

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 4.70 million barrels for the week ending July 06, 2012, following a decline of 4.27 million barrels the week before.

Analysts surveyed by Platts, the energy information arm of McGraw-Hill Companies Inc. ( ) , had expected oil stocks to go down some 1.5 million barrels. A decline in the level of imports and higher refinery activity led to the stockpile drawdown with the world's biggest oil consumer.

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 – decreased by 859,000 barrels from previous week’s level to 46.78 million barrels. Stocks are just under the all-time high of 47.78 million barrels reached earlier in June.

At 378.20 million barrels, current crude supplies are 6.4% above the year-earlier level, and are over the upper limit of the average for this time of the year. The crude supply cover was down from 24.5 days in the previous week to 24.1 days. In the year-ago period, the supply cover was 23.3 days.

Gasoline: Supplies of gasoline increased for the fourth time in as many weeks as domestic consumption edged down and imports rose.

The 2.75 million barrels gain – way beyond analyst projections for a 600,000 barrels increase in supply level – took gasoline stockpiles up to 207.73 million barrels. Notwithstanding this increase, existing inventory level of the most widely used petroleum product is still 1.9% off the year-earlier levels and is in the lower limit of the average range.

Distillate: Distillate fuel supplies (including diesel and heating oil) jumped by 3.11 million barrels last week, exceeding analyst expectations for a 1 million barrels build. The rise in distillate fuel stocks – the first in 3 weeks – could be attributed to weaker demand and higher imports.

At 120.91 million barrels, distillate supplies are 16.6% below the year-ago level and are under the lower limit of the average range for this time of the year.

Refinery Rates: Refinery utilization was up 0.7% from the prior week at 92.7%.