We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Crude Hits 5-Month High: Is Oil Market Out of the Woods?
Read MoreHide Full Article
U.S. oil prices finished at their highest levels in five months after a weekly report from the Energy Information Administration ("EIA") showed a stockpile draw nearly twice above expectations. Additionally, the dollar-denominated commodity got a boost from a weaker greenback, news of progress on the next coronavirus relief package and an upbeat U.S. factory data.
On the New York Mercantile Exchange, WTI crude futures gained 49 cents, or 1.2%, to settle at $42.19 a barrel, the highest closing since Mar 6.
Analyzing the Latest EIA Report
Below we review the EIA's Weekly Petroleum Status Report for the week ending Jul 31.
Crude Oil: The federal government’s EIA report revealed that crude inventories fell by 7.4 million barrels compared to expectations of a 4.1 million barrel decline. A drop in production and slight uptick in refinery utilization accounted for the large stockpile draw with the world's biggest oil consumer. This puts total domestic stocks at 518.6 million barrels — 18.2% above the year-ago figure and 16% over the five-year average.
But on a slightly bearish note, the latest report showed that supplies at the Cushing terminal in Oklahoma (the key delivery hub for U.S. crude futures traded on the New York Mercantile Exchange) were up 532,000 barrels to 52 million barrels.
The crude supply cover was down from 36.6 days in the previous week to 35.9 days. In the year-ago period, the supply cover was 25.4 days.
Let’s turn to products now.
Gasoline: Gasoline supplies increased for the second week in a row. The fuel’s 419,000 barrel addition is attributable to weaker demand and higher production. Analysts had forecast a decline of 1.3 million barrels. At 247.8 million barrels, the current stock of the most-widely used petroleum product is 5.4% higher than the year-earlier level and is 8% above the five-year average range.
Distillate: Distillate fuel supplies (including diesel and heating oil) increased for the 15th time in 18 weeks. The 1.6 million barrels build reflected rising production. Meanwhile, the market had been looking for a supply increase of 100,000 barrels. Current inventories — at 180 million barrels — are at their highest in 38 years, 30.9% over the year-ago level and 27% above the five-year average.
Refinery Rates: Refinery utilization ticked up 0.1% from the prior week to 79.6%.
Conclusion
Oil markets found support from the massive drop in inventories, even though gasoline and distillates stockpiles rose. In fact, fuel supplies have been going up for most of the time since the coronavirus pandemic struck in early 2020, destroying consumption amid chronic oversupply. Investors remain worried over the continued rise in gasoline and distillate stocks, a signal that demand improvements have been slow.
Again, despite another rise in refinery runs, utilization in the United States remains far below the usual capacity usage at this time of the year. Downstream operators including PBF Energy (PBF - Free Report) , Valero Energy (VLO - Free Report) , and Phillips 66 (PSX - Free Report) have drastically reduced processing capacity to cope with the demand erosion caused by efforts to stem the spread of the coronavirus. Demand has still not picked up to a level where the operators think of restarting/increasing their refinery work. Meanwhile, Marathon Petroleum (MPC - Free Report) has announced plans to indefinitely stop production at its Gallup and Martinez refineries in response to collapsing product demand.
Crude is also being pressured by the fresh wave of coronavirus infections. As several U.S. states experience a spike in new coronavirus infections and hospitalization, there are apprehensions about another set of containment measures — already in place in certain regions — which might force many businesses to close again just after reopening. Moreover, this would create doubts over the trajectory of oil’s demand recovery.
Further complicating things, crude’s rise from the bottom could also encourage the shale patch to ramp up or resume drilling activities. In fact, the sharp gains in the price have already prompted the likes of Continental Resources and Parsley Energy — both carrying a Zacks Rank #3 (Hold) — to plan for a potential revival of production.
As things stand right now, it appears that the oil market is at a crossroads with serious questions remaining about the future direction of the commodity.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2021.
Image: Bigstock
Crude Hits 5-Month High: Is Oil Market Out of the Woods?
U.S. oil prices finished at their highest levels in five months after a weekly report from the Energy Information Administration ("EIA") showed a stockpile draw nearly twice above expectations. Additionally, the dollar-denominated commodity got a boost from a weaker greenback, news of progress on the next coronavirus relief package and an upbeat U.S. factory data.
On the New York Mercantile Exchange, WTI crude futures gained 49 cents, or 1.2%, to settle at $42.19 a barrel, the highest closing since Mar 6.
Analyzing the Latest EIA Report
Below we review the EIA's Weekly Petroleum Status Report for the week ending Jul 31.
Crude Oil: The federal government’s EIA report revealed that crude inventories fell by 7.4 million barrels compared to expectations of a 4.1 million barrel decline. A drop in production and slight uptick in refinery utilization accounted for the large stockpile draw with the world's biggest oil consumer. This puts total domestic stocks at 518.6 million barrels — 18.2% above the year-ago figure and 16% over the five-year average.
But on a slightly bearish note, the latest report showed that supplies at the Cushing terminal in Oklahoma (the key delivery hub for U.S. crude futures traded on the New York Mercantile Exchange) were up 532,000 barrels to 52 million barrels.
The crude supply cover was down from 36.6 days in the previous week to 35.9 days. In the year-ago period, the supply cover was 25.4 days.
Let’s turn to products now.
Gasoline: Gasoline supplies increased for the second week in a row. The fuel’s 419,000 barrel addition is attributable to weaker demand and higher production. Analysts had forecast a decline of 1.3 million barrels. At 247.8 million barrels, the current stock of the most-widely used petroleum product is 5.4% higher than the year-earlier level and is 8% above the five-year average range.
Distillate: Distillate fuel supplies (including diesel and heating oil) increased for the 15th time in 18 weeks. The 1.6 million barrels build reflected rising production. Meanwhile, the market had been looking for a supply increase of 100,000 barrels. Current inventories — at 180 million barrels — are at their highest in 38 years, 30.9% over the year-ago level and 27% above the five-year average.
Refinery Rates: Refinery utilization ticked up 0.1% from the prior week to 79.6%.
Conclusion
Oil markets found support from the massive drop in inventories, even though gasoline and distillates stockpiles rose. In fact, fuel supplies have been going up for most of the time since the coronavirus pandemic struck in early 2020, destroying consumption amid chronic oversupply. Investors remain worried over the continued rise in gasoline and distillate stocks, a signal that demand improvements have been slow.
Again, despite another rise in refinery runs, utilization in the United States remains far below the usual capacity usage at this time of the year. Downstream operators including PBF Energy (PBF - Free Report) , Valero Energy (VLO - Free Report) , and Phillips 66 (PSX - Free Report) have drastically reduced processing capacity to cope with the demand erosion caused by efforts to stem the spread of the coronavirus. Demand has still not picked up to a level where the operators think of restarting/increasing their refinery work. Meanwhile, Marathon Petroleum (MPC - Free Report) has announced plans to indefinitely stop production at its Gallup and Martinez refineries in response to collapsing product demand.
Crude is also being pressured by the fresh wave of coronavirus infections. As several U.S. states experience a spike in new coronavirus infections and hospitalization, there are apprehensions about another set of containment measures — already in place in certain regions — which might force many businesses to close again just after reopening. Moreover, this would create doubts over the trajectory of oil’s demand recovery.
Further complicating things, crude’s rise from the bottom could also encourage the shale patch to ramp up or resume drilling activities. In fact, the sharp gains in the price have already prompted the likes of Continental Resources and Parsley Energy — both carrying a Zacks Rank #3 (Hold) — to plan for a potential revival of production.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
As things stand right now, it appears that the oil market is at a crossroads with serious questions remaining about the future direction of the commodity.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2021.
Click here for the 6 trades >>