U.S. Crude Stocks Up, Fuels Drop

The U.S. Energy Department's weekly inventory release showed that crude stockpiles logged another increase to hit their highest level since June last year, as refiner demand weakened. The report further revealed that refined product inventories – gasoline and distillate – fell from their previous week levels.

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 rose by 3.83 million barrels for the week ending Mar 01, 2013, following a climb of 1.13 million barrels in the previous week.

The analysts surveyed by Platts – the energy information arm of McGraw-Hill Companies Inc. (MHP), had expected oil stocks to go up some 1.1 million barrels. A sharp drop in refinery utilization rates led to the seventh straight weekly 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 – was up 257,000 barrels from the previous week’s level to 50.84 million barrels. Stocks are currently just under the all-time high of 51.86 million barrels reached in January.

At 381.35 million barrels, current crude supplies are 10.3% above the year-earlier level, and comfortably exceed the upper limit of the average for this time of the year. The crude supply cover was up from 26.3 days in the previous week to 26.7 days. In the year-ago period, the supply cover was 23.5 days.

Gasoline: Supplies of gasoline were down for the fourth time in as many weeks despite a decline in domestic consumption and higher imports. The fall in gasoline inventories could be attributed to lower production.

The 616,000 barrels withdrawal – much below analysts’ projections for a 1.6 million barrels decrease in supply level – took gasoline stockpiles down to 227.88 million barrels. Following this drawdown, the existing inventory level of the most widely used petroleum product is 0.7% lower than the year-earlier level despite being in the upper half of the average range.

Distillate: Distillate fuel supplies (including diesel and heating oil) were down 3.83 million barrels last week, significantly higher than the analysts’ expectations for a 1.3 million barrels drop in inventory level. The decrease in distillate fuel stocks – the fifth in 6 weeks – could be attributed to stronger demand, as well as lower production and imports.

At 120.35 million barrels, distillate supplies are 13.7% below the year-ago level and are close to the lower limit of the average range for this time of the year.

Refinery Rates: Refinery utilization decreased 2.9% from the prior week to 82.2%. The analysts were expecting the refinery run rate to remain unchanged.

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).