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The U.S. Energy Department's weekly inventory release showed that crude stockpiles logged an unexpected decrease to halt an eight-week rising trend, as refiner demand strengthened and imports fell. The report further revealed that refined product inventories – gasoline and distillate – also declined 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 fell by 1.31 million barrels for the week ending Mar 08, 2013, following a climb of 2.62 million barrels in the previous week.

The analysts surveyed by Platts – the energy information arm of McGraw-Hill Companies Inc. , had expected crude stocks to go up some 2 million barrels. An uptick in refinery utilization rates, together with lower level of imports led to the surprise 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 – was down 286,000 barrels from the previous week’s level to 49.03 million barrels. Stocks are currently just under the all-time high of 51.86 million barrels reached in January.

Notwithstanding the weekly inventory decline, at 382.66 million barrels, current crude supplies are 10.5% 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 down from 27.1 days in the previous week to 26.8 days. In the year-ago period, the supply cover was 23.9 days.

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

The 1.48 million-barrel withdrawal – below analysts’ projections for a 2.5 million-barrel decrease in supply level – took gasoline stockpiles down to 222.83 million barrels. Following this drawdown, the existing inventory level of the most widely used petroleum product is 1.8% lower than the year-earlier level despite being in the middle of the average range.

Distillate: Distillate fuel supplies (including diesel and heating oil) were down 672,000 barrels last week, failing to match analysts’ expectations for a 1.5 million barrels drop in inventory level. The decrease in distillate fuel stocks – the second in 3 weeks – could be attributed to stronger demand, as well as lower imports, partially offset by higher production.

At 119.77 million barrels, distillate supplies are 12.3% below the year-ago level and are in the lower limit of the average range for this time of the year.

Refinery Rates: Refinery utilization was up 2.5% from the prior week to 83.5%. The analysts were expecting the refinery run rate to increase 0.5% to 81.5%.

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).

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